#31: The Build-Up Weekly

Author

Trevor Kimball
January 12, 2024

*Welcome to the 31st edition of The Build-Up, where we deliver insights and inspiration for dentists on every stage of the private practice journey. If this email was forwarded to you, you can click here to subscribe.

Dear friends and colleagues,

Happy New Year! I hope you’re all embracing the beginning of 2024.

My team at Integrity Practice Sales had a fantastic sales meeting last Friday to kick off the year. Here we are after a team-building (and rather tasty) lunch:

don’t look too closely at any one of us…it’s the group effect that counts :)

Here’s what I’ve lined up for this newsletter:

  • Three Practice Sales Models in 2024

  • Securing Your Financial Future in 2024 [Webinar]

  • T-Pain sings Sam Cooke [Video]

Let’s go!

Three Practice Sales Models in 2024

If you’ve been thinking about selling your practice in the next five years (that’s prior to January 2030!), you may have noticed that there are more transition options now than ever before.

In today’s newsletter, I want to provide a brief primer on a few pros and cons of three different transition models.

1. Doctor-to-Doctor Sales

This is your traditional practice sale, and - unlike some other folks in the dental practice sales world - I strongly believe this is a great option for most practice owners.

Pros

  • You can retire immediately. There is no need to continue working for years (unless you want to and your practice can support it).

  • High demand for quality practices. The market is hot for practices with enough cash flow to cover a young doctor’s debt service, student loans, etc. (Some doctors are surprised by how much cash flow they have in their practice - email me if you want me to review your P&L and give you a number.)

  • Great Values $$$ Despite what you might hear from folks pushing corporate-only agendas, the values you can receive from another doctor are very often higher than what you could receive from a DSO, especially when you consider time.

Cons

  • You may miss an opportunity for a higher valuation. IF you’re willing to spend a few years joining other dentists and building towards a private equity sale, there may be an opportunity to receive more for your practice. This isn’t for everyone, but it is an option for doctors with practices collecting over $1 million. See my third transition model below…

2. Acquisition by a DSO

Corporate dentistry is here to stay, and you may have seen some offers from DSOs in your mailbox - even if you’re not looking to sell.

There are many different DSOs and corporate groups out there, with different structures and opportunities and risks. If you’ve met one DSO, you’ve met one DSO. However, here are a few general pros and cons:

Pros

  • Someone else takes over some management duties. It can be very nice to have someone else take over all that admin and HR (though selling your practice to a DSO isn’t the only way to get some help in those areas).

  • Opportunity to invest in the DSO’s future growth. After the sale, you will likely get the opportunity (though, in most cases, it’s a requirement) to invest in the next growth phase. The money you invest here can generate a significant return - assuming everything goes to plan.

Cons

  • It can take 3+ years until you can retire. If you want a corporate deal, the corporate entity almost certainly wants you to stick around for several years.

  • It can lock you in with production targets and unfriendly deal terms. The terms of the deal can make or break it, so it’s critical to engage with the fine print. If you’re thinking you want to sell and slow down, it can be especially difficult with growing production targets tied to compensation for the sale.

  • You are immediately someone else’s employee. This one is tough for some doctors to accept. It’s a very different mindset driving to work as a practice owner vs an employee.

  • Most of the long-term $$$ value generated goes to the DSO founders. The leadership teams of the DSO are generally working to create a single, large, valuable entity by acquiring individual practices and bundling them together. If you sell as one of those

Want to review a DSO offer you’ve received or explore the best DSO options for your practice? Connect with one of our practice advisors for a confidential discussion here.

3. Acquired by Private Equity Directly

Significant amounts of money from outside investors has changed the landscape of dentistry and given rise to the new wave of DSOs.

Once you have a large enough practice, you can receive a much higher value from private equity firms (investment firms focusing on privately held businesses - in other words, businesses that are not listed on the ‘public’ stock markets).

But what is large enough? Typically, they consider a practice more valuable when it is doing $10M+ in EBITDA (the money that the investor would make after paying all the practice expenses and paying the dentists to do the actual dentistry).

That’s a big practice! But don’t worry if you don’t own a behemoth practice - there’s another way to go directly to private equity.

If you have a larger practice (say, collecting over $1M) and you want to capture your share of this investment capital $$$ that’s still flowing into dentistry, we have put a team together that will take a group of dentists through a truly unique, guided process to quickly form a super valuable entity with minimal disruption to your practice.

We are currently subscribing to our 2024 direct-to-private-equity, doctor-led alliance.

This isn’t for everyone (again - I love and see a long-term future for traditional doctor-to-doctor sales). But if this is interesting and you’d like to hear more, contact one of our practice advisors or register for our webinar below.

Pros

  • Maximized practice value. This is the best way I’ve seen to capture the most money for your practice if you’re willing to take the time and go through the process.

  • The guided process provides help at every stage. Similar groups have failed because the execution was lacking. Our proven, guided process (horizontal - I’ll explain this in the webinar) brings these practices together so that they look and smell and feel like a real, professionally-managed DSO with minimal disruption to your practice.

  • As a founder, you receive the $$$ value, rather than the DSO. This is the key idea behind going directly to private equity. It’s your practice, and you should profit.

Cons

  • Can take 3+ years until you can retire. If you want to retire now, I’d love to help you find another doctor to take over your practice. But if you’re willing to put some time into this process, you can really maximize your practice’s value.

  • You will eventually be someone else’s employee for 1 - 3 years. Like the DSO, you will eventually need to work for someone. However, in this case, you have helped build and shape the entity, and have been a part of the sale to private equity - so you know what’s coming.

  • You will have to undergo some changes in your practice to be attractive to investors. While we attempt to keep your practice as much the same as possible, this process will involve some changes to accounting, cash flow, systems, etc.

Webinar Invite: Smart Exit Strategies and Options for Dentists

To kick off the year, we’re hosting an exciting webinar series on “Securing Your Financial Future in 2024.”

As you can see, there are more transition options than ever before.

This comprehensive webinar will help you explore those options and how they affect your practice in today’s market.

Here’s what we’ll be covering:

  • The Market in 2024: Interest Rates, Inflation, and Election Year Trends

  • Surprising Math: Run the Numbers Behind Private Sales, DSOs, and Private Equity (using real deals from 2023)

  • Understanding Practice Value Drivers: What Buyers Want Today

Join us as we explore your transition options in 2024 for any transition before January 2030!

Don’t miss this great opportunity to plan your future.

Three Dates

  • Thursday, January 18th at 6PM

  • Wednesday, January 24th at 6PM

  • Friday, January 26th at 9AM

Presented by Bill Kimball, DDS & Darren Hulstine & Trevor Kimball, PhD

T-Pain…Sings?

Some of you may remember T-Pain, popularizer of the auto-tune and the artist behind some classic mid-oughts hits that I won’t link to here because my mom reads this.

Well, that very same T-Pain put out an album of classic song covers last year, and I thought it was fun and worth sharing. Who knew he could sing?

Here is his cover of Sam Cooke’s A Change is Gonna Come - though, of course, my favorite version remains Otis Reading’s rendition.

And with that, I hope you enjoyed the 31st edition of The Build-Up Weekly!

With best wishes to you and your families,

Trevor Kimball, PhD

p.s. please use the link below to share our newsletter. 🙂 

These Six Mistakes Can Cost You Six Figures

Download our free guide “6 Mistakes to Avoid for a Successful Practice Sale” here. It’s material that I’ve covered in this newsletter before, but - if you’re contemplating a practice sale - the advice in this guide is crucial.

And if you’re ready to have a conversation with a practice sales professional, get connected with your local Integrity Practice Sales broker here.

It’s worth having a conversation, no matter your current transition plans.

You never know what you’ll discover together.