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 …

The benefits of a DSO are ultimately simple …

And SO good for dentists as to be completely life-transforming.

How about getting a high cash payment, retaining equity, doing only what you love in the business, having no management responsibility, and far less stress?

Pretty good.

“Working with Stan Kinder has been the best decision of my career.

Besides getting top dollar and a high seven-figure cash payment for partnering with the DSO Stan introduced me to, I retained equity. I work chairside doing the dentistry I love. I earn mid-six figures a year. I have no management responsibility, far less stress, and money in the bank.

My life is better in every way. Thank you Stan Kinder!”

—R. W. DDS

What are you waiting for?

In a previous email, I talked a little bit about how your practice would likely be valued in a dentist-to-dentist transaction …

Where the bank’s capacity to loan is the limiting factor in valuation.

So let’s look at the other primary driver of practice value, especially when a DSO is driving the transaction …

Private equity!

You see, DSOs don’t need banks.

The dentist partners at Sunshine Dental (not the practice’s real name) knew the senior partner wanted to retire in the next few years.

The practice was thriving …

But the junior partner didn’t want to assume the senior partner’s role in running and managing the practice.

Her preference was to spend the majority of her time face-to-face with patients and not at a desk, looking at financials, dealing with staffing, and figuring out marketing.

I bet you’re curious how DSOs will value your practice.

To start off with …

Let’s look at how a BANK may value a practice when a dentist-to-dentist sale happens.

(This is your other option, either you sell to a DSO, or another dentist, these are the only buyers in the marketplace)