DSOs seem to be on the rise these days. These investor-owned, multi-practice corporations have deep pockets and lots of bargaining chips when it comes to buying up private practices.
So what do you, the small, private buyer, have to offer a seller? Why would they choose you? Let’s take on a few truths and misconceptions about DSO offers, and why you’re still extremely competitive as a private buyer.
You can’t offer as much money as the DSO.
True! …Kind of. What the DSO can offer is a huge sticker price. Let’s say you’re offering a seller $1M for their practice—the DSO might come along and offer, say, $1.5M. Or more! The bank won’t back a loan that size for you, so you’re up a creek, right?
Wrong.
That huge sticker price is designed to get the selling dentist’s eyes to pop—and they usually do! But once the seller digs into the offer, they’ll find a lot of strings attached. Your offer is much simpler, as we’ll get into.
The DSO attaches lots of strings to their offer.
A DSO will usually require the seller to stay in the practice for a significant period, often two or more years. The DSO is counting on using the selling dentist’s expertise and hand speed to ensure a big return on their investment.
Because of that, the selling dentist’s time may not be the relaxing retirement they imagined when they sold. They’ll have strict production and sales quotas to keep up with, to keep those DSO investors happy.
You offer a cleaner break.
This is related to the previous point. A dentist may sell a practice for many reasons, but the most common is retirement. And if a dentist is in her 60s and is ready to stroll into her own personal sunset, she probably doesn’t want to sign an agreement to stay on at the practice for another few—very stressful—years.
The DSO topic is big enough, and important enough, that I created a whole new podcast with a dental lawyer friend of mine. We dive deep on how DSOs work, what’s good or bad about them, and how dentists—both buyers and sellers—should approach working with them. Give it a listen:
While you’re at it, check out this video about a different side of this coin: Why I hesitate on deals involving buying from a DSO or multi-owner practice.
