How Dentists Can Avoid Losing Their Financial Freedom by Selling Their Practice to the Wrong Dental Service Organization (DSO)

By LibertizingDentists and Liberty Group members Matthew Radin and Stephanie O'Brien

If you’re a dentist who is planning to exit your practice during the next 10 years, you will likely be approached by business brokers and transition consultants who want to introduce you to a Dental Service Organization (or DSO) as a potential buyer for your practice.

If you're looking to sell your practice with a view toward creating lifelong financial freedom for you and your family, and ensuring the long-term success of the practice you’ve worked so hard to build, we urge you to be careful!

To ensure your financial security, you should have:

1. Your own income-producing business, which includes a strategy to make money even when you aren’t working.
2. Your own income-producing real estate, so you can build equity and increase your wealth with the rent money that you would otherwise have to pay to a landlord.
3. Your own banking system, so you can convert your liabilities into assets and start using the same lucrative wealth-building strategies that have been used by commercial banks and multi-millionaires for many years.

The bad news is, dental practice brokers are not financial planners. They are usually unqualified to address your concerns about whether the sale of your practice will lead to your achieving lifelong financial freedom.

When you sell your practice, your broker is usually focused on only one thing: their commission check!

An article in the June 28, 2018 edition of Bloomberg, entitled "Private Equity Is Pouring Money into a Dental Empire”, discussed DSOs like Heartland, which has built a dental empire of more than 800 practices. Here's what they said:

"Corporate dentistry has come under fire at times for pushing unnecessary or expensive procedures. But private equity firms say they’re drawn by efficiencies the chains can bring to individual dental practices, which these days require sophisticated marketing and expensive technology. The overall market for dental services is huge: $73 billion in 2017.

"Alan Acierno worked at a Heartland practice until he and his brother started DecisionOne Dental Partners, which now has 24 locations in Illinois. He gets calls from private equity shops every other week looking to invest. Acierno said their pitch is that ‘you can sell it and make a lot of money.’

On his LinkedIn page, Dr. Acierno says that he is "Committed to putting the soul back into healthcare."

LibertizingDentists and its joint venture members (which include a number of dentists) are committed to putting CARE back into Healthcare, from three perspectives: the Dentist, the dental Staff Members and, most importantly, the PATIENT.

Industry insiders have told us that, based on their personal experiences, it is not uncommon for everyone – the dentist, the staff and the patients – to become unhappy soon after a DSO has purchased a practice.

The sale to a DSO may give the dentist a quick and generous cash payment, along with the promise that they will be able to focus most of their efforts on their dental work while the DSO handles everything else. But if you sell to the wrong DSO, this cash can come with a lot of hidden costs.

How dentists can lose their financial freedom by selling to the wrong DSO:

When you’ve sold your practice to the wrong DSO, you don’t have your own business anymore. You are an employee of the practice you once owned, and the equity and recurring after-tax income you might have built through ownership will be lost.

When you become an employee of the practice you once owned, your income is limited to the number of hours you work. If you aren’t working, you aren’t making money… and that is not what we mean by “financial freedom”.

To make matters worse, many DSOs house their dental practices in shopping centers and other rented spaces, which means that you don’t own your real estate. Instead, the practice you once owned is making rental payments to a landlord.

You no longer have all the financial benefits of real estate ownership. You don’t receive ongoing rental payments and the tax benefits of depreciation. And should the real estate appreciate in value over time, you will not participate in that appreciation when the property is sold.

And finally, the wrong DSO will give you no way to own your own banking system. This means you will have significantly reduced your net worth, and you’ll pay excessive amounts of interest to banks and other creditors, as well as unnecessary taxes to the government.

Here are some real-life examples from two dentists who retired 10 years ago:

Dentist 1 sold his practice for $600k and did not own the real estate. Dentist 2, in addition to selling his practice for $600k, sold his small office building for $600k. Over the last 10 years, Dentist 2 invested that $1.2M wisely and doubled it twice. He now has over $4M to fund his retirement. Dentist 1 will probably continue to practice dentistry for the rest of his life.

In another example, Dentist 3 sold his practice for $2M and sold his office building for $18M!

What do Dentist 1, 2 and 3 have in common? They illustrate the importance of real estate as part of the dentist's Financial Freedom Formula!

You might not be the only one who gets hurt when you sell to the wrong DSO

When a dentist sells their practice to the wrong DSO, their patients, team members and employees can suffer too.

DSOs are investors, not dentists. They are primarily concerned about profit.

Dentists are evaluated by the DSO not based on the quality of patient care, but on their ability to make a profit for the DSO.

If you are a dentist whose career has been based on a commitment to quality patient care, the wrong DSO could make you and your staff members very uncomfortable.

With the wrong DSO, you may find yourself pressured to convince patients to get expensive and unnecessary treatments. You may also find yourself spending less time providing quality care to your patients, as you are required to spend more time focusing on increasing practice profitability.

This can frustrate, harm, and drive away not only your patients, but also the team members who originally joined your practice because of your dedication to providing quality dental care to patients.

Even if they don’t leave voluntarily, the DSO may decide to terminate dental hygienists, dental assistants, and other team members whom you considered to be loyal and valued employees. After you sell your practice, you yourself will be an employee of the DSO and practically powerless to help them.

After you sell to the wrong DSO, your teammates could end up having to start over again, either because they were laid off by the DSO, or because the practice you spent so many years building has deteriorated to the point where they couldn’t bear to stay.

Do you really need to sell to a traditional DSO, or are there better alternatives?

If you want to sell your practice, there is a better way. A way that lets you choose your successor, transition out at your own pace, create a financially secure retirement, and make sure that your team, practice and patients will be in good hands after you retire.

LibertizingDentists can help you assemble a collaborative team of professionals who are committed to your financial freedom and personal happiness, while we help you to deliver on your commitments to others.

We look out not only for you, as the dentist who is transitioning out, but also for the younger dentist who is looking to transition into the practice over a period of time.

We help you design and execute a financial strategy that includes creating a bank with high cash value life insurance and a hedge fund that helps you finance your transition plan, which may include both the sale of your business (practice) and the sale of your real estate which receives rent from the practice.

Both the selling dentist and the buying dentist can acquire equity in the dental practice, and they can share in the profits of the right DSO that they help to grow with their collaborative team.

The right DSO will enable them to profit from the nonclinical services required by the dentist, as well as from the management of the real estate and office.

They also can invest in a hedge fund that is dedicated to providing them with the winning combination of their own business, real estate and bank, which leads to their financial freedom.

In addition to real property, you may have an interest in Intellectual Property. You may want to be part of a franchise system for dentists or (dental practice) brokers.

Perhaps you would like to create new software or a device that can revolutionize the practice of dentistry. These are just a few examples of intellectual property that could accelerate your path to financial freedom.

LibertizingDentists, a partnership between Liberty Group and SynergizeDental, is a full-service collaboration and referral network management organization. LibertizingDentists also provides coaching, consulting and management services that help independent dentists achieve financial freedom without having to become employed by a traditional DSO.

We also have coaching and consulting partners who can help you work with other dental practice brokers to protect you from selling your practice to the wrong DSO.

They can help you find the answers to vital questions, such as:

1. Should you buy a practice with or without real estate?

2. Can you use franchising or other business models to create a valuable chain of offices as part of your exit strategy?

3. How can you protect yourself from the wrong type of DSO?

As you can see, these services can help you make well-informed decisions about things that are vital to your financial freedom. You get to maximize the valuation of your business and real estate when you are ready to sell them.

In this relationship, the broker’s commission check is secondary – as it should be.

This system is patient-centric, and will increase the likelihood that your patients stay with the dentist who transitions into your practice and that your team members’ jobs remain secure after you leave.

We also help you to design the life that you would like to live after retirement, so you can spend more time doing what you love, and never be concerned about your financial security as you build a legacy for your family and loved ones.

It’s time to ask yourself some important questions

Do you want to transition out quickly, in as little as 6 months, or do you want to do it over 5 to 10 years and make more than twice as much money?

Do you want to transition out completely, or continue working part-time?

Do you want to help the next generation of dentists provide quality care to the patients you have treated for much of your professional life?

Do you want to make sure your patients and staff are protected from the harm that could come to them if you sold to the wrong DSO?

There’s never been a better time to ask yourself these important questions and get the answers you need from a collaborative team of professionals committed to your financial freedom.

If you would like to learn more about our unique, patient-centric financial freedom system, and take advantage of this booming seller’s market to secure your future and the future of your practice, send us an email at [email protected], and we will schedule a call so we can collaborate and see how we might be able to work together.