I mentioned this before as an aside, but one thing you want to consider when looking at a DSO is their source of capital.

What are they using to fund their growth?

You can think about this in two major buckets …

Bank financed, or private equity financed.

Why is this important?

Well, the ability of the DSO to fund and provide what YOU need to achieve your goals can be heavily affected by the DSO’s financing.

Especially when the macroeconomic market is taken into consideration.

For example,

Access to bank financing often fluctuates with changes in the larger economy. In the Crash of 2008, bank lending came to a halt overnight.

Now,

Private equity is currently the primary source of capital for many DSOs, and especially larger operators.

The benefit is that you’re essentially dealing with investors’ funds (and they get a return on their investment when you do well).

Whether the economy is doing well or not, those investors are going to be looking for a return …

And while macroeconomic problems may make it more difficult for private equity to raise additional funds, they still need to make a return for their investors.

Turns out, dental practices are a GREAT place for a reliable and consistent return regardless of the market.