We work with a lot of clients in our Blueprints for Scale strategic consulting program as well as those who visit our offices for one-on-one sessions (called “Full Day Deep Dives”) that inevitably want to know:

“What’s the magic formula for building a successful group dental practice or DSO?” 

They know – and we know – that there’s no “magic formula” or “silver bullet” for success. Having said that, there are some metrics you should know to determine if you’re “on track” for building a successful business.

A few weeks ago, my partner, Kevin Arnold, wrote a blog post about “The Reasons DSOs Hit a Debt-Funding Wall” that created a lot of reaction. The subject matter is obviously a hot button for a lot of growing group dental practices and emerging DSOs these days, so we decided to revisit the topic and have a bank weigh in on the topic directly.

Imagine that – asking a real, live banker to share some “inside baseball” on the nuts and bolts of lending in the group practice space! 

If you are even remotely involved in the DSO or Group Practice space, there is a very good chance you were in attendance at the ADSO Summit in Austin. The 2018 Summit set a record for attendance and the buzz around the event was nothing but exciting! 

Education and advice from industry veterans was bountiful. What all did we learn?

Here are some valuable pearls…

Scaling and operating a growing group practice is hard work.  In the early stages, success or failure can often hinge on the consistent revenue produced by your best providers.  You’re not alone.  In fact, “retaining key employees” is the number one challenge of every founder-owner of a group practice. 

But what if you could solve the problem of associate turnover in your business?

Could you turn a weakness into a strength? 

Or even create a competitive advantage?...

It seems like everyone these days is starting a group practice or DSO.  And by now, we all know someone who just sold their business for some ungodly amount of money.  Figure it this way: you’re at 1 location, so you’re only 841 away from being the next Heartland Dental, right? 

I mean, really – how hard can it be?...

Life is good in your early-stage group dental practice.  Revenue trajectory is positive, your growing management team is starting to click, and the culture across your locations is finally gelling.  With this growth, your profitability is down a bit as you have invested in your management team, but this isn’t a surprise – and you know it’s for the best in the long term.  It’s all starting to come together right in front of your eyes! 

Life is good – and it’s about to get even better…

Unless you’ve been living under a rock for a few months, you’ve probably heard that Congress passed sweeping tax reform for 2018.  The impacts of this legislation will be felt far and wide, but the general consensus is that the reform will be good for both companies and individuals.  If that bears out to be true, the economic outlook for the United States should be very favorable for the years to come.

But, what does is mean for the dental industry and for DSOs in particular?  Everybody’s got an opinion, so we asked some friends to share some feedback.

Here’s what they had to say…

In late February, my colleague, Diwakar Sinha, and I were able to escape the blustery weather of the east coast and enjoyed a few days in beautiful Scottsdale, AZ at the Dental Entrepreneur Organization’s (“DEO”) exclusive Executive Edge Workshop.

The event was targeted to emerging group practice owners who are on the cusp of making their first C-level (CEO, CFO, COO, etc.) hire. 

Here are a few gems from an extraordinary two days…

Last week my partner,Kevin Cumbus, and I braved the cold of Chicago to do some networking and educate ourselves at the McGuireWoods Healthcare PE Conference.  The action is fast, and education comes courtesy of a firehose.   

Here are the three main things we learned.

Key Healthcare Business and Market Trends & Opportunities:

Everyone wants to know if we’re “at the top of the overall healthcare market” as it relates to valuations.  The short answer is that nobody really knows, but the good thing is that in our world valuations are driven by earnings – not eyeballs.  2017 was phenomenal and the M&A sell side has been robust for 18-24months.  Equity markets have been strong and debt markets have been very favorable.  The great lending environment has been great for buyers using both debt and equity.

We work with clients all over the U.S. and inevitably hear comments like: “My five-location group generates about $12,000,000 in revenue.  I’d like to build it up over the next five years and sell it for $50,000,000.” 

OK…if you say so. 

Do you want to borrow $49,000,000 to make that happen?  I kinda doubt it.

What do you care more about: the amount of the sale or the amount you put in your bank account?  If your answer is the latter, then you need to pay more attention to the amount of debt you take on and the impact that the tax rate will play because both of those will be paid off before the sale proceeds are deposited into your account.