In the previous email I talked about the ‘cash’ category of a DSO deal structure.

Cash is pretty obvious, though there are some important details to realize (so if you didn’t read the previous email, I suggest going back).

Let’s cover “deferred cash” today.

Deferred cash is in the name … cash which you’ll get later.

BUT, it’s NOT a note or a loan.

Last week, I introduced to you the concept of the deal structure with a DSO.

The most common and easiest to understand is the category of transactions, which will probably make up part of your deal …

Is Cash

Cash is typically paid at the time of closing in the original transaction.

What is important for you to understand is how much net cash you will have on an after-tax basis …

You might be wondering how a DSO deal actually looks for you …

Dr. Leighton had a potential buyer (DSO) knocking …

Most private equity firms (funding DSOs) are looking at a 5-year time horizon before they look for liquidity on their investment.

This means that 5 years after buying your dental practice, they are going to look at selling their interest - either to a larger private equity fund or a larger DSO - in order to capitalize on the value increase your practice has gained through being a part of their investment.

I’m going to let this story speak for itself.

It comes from one of my former clients and describes in great detail why a DSO is such a good opportunity.

Only thing I’ll say is …

Don’t wait for a heart attack to get the benefits.

“With over 25 years in business and three practices that net mid-seven figures, I had no interest in the details of how to partner with a DSO.

But things change. And, sometimes they change faster than you expect.

I want to touch briefly on the concept of “multiple” when it comes to calculating your practice’s value using EBITDA.

For years, Dr. Q, an orthodontist, used traditional marketing to attract patients to his practice.

If you’re looking into the valualtion of your practice by a DSO.

You might be wondering a bit more about EBITDA.

EBITDA is an acronym that stands for Earnings before Interest, Taxes, Depreciation, and Amortization.

It is commonly used by the financial and investment community as a measure of a business’s free cash flow on a pre-tax basis.

It allows analysts to focus on the outcome of operating decisions while excluding the impacts of non-operating decisions (like interest, tax rates, deprecation and amortization).

Their goal is to identify operating profitability as a singular measure of performance.

Private Equity funds universally use EBITDA to evaluate the companies they invest in.

Are you interested in learning how YOUR business would be evaluated?

This simple change in scheduling new patients resulted in a DSO offering several hundred thousand dollars higher than the previous.

You might not realize …

But one of the aspects of your business which DSOs are MOST interested in, is the process you use to acquire new patients.

Part of the reason for this is obvious …