This illustration of the life cycle of a practice allows us to visualize areas of opportunity. On the front end, there is the opportunity for practice growth and equity. During the later stages, there is the opportunity to acquire a practice for the growing DDSO.
DDSOs incorporate the strongest business systems of DSOs, with modern private practice management and ownership. These systems include passive income, vertical business opportunities, creative mergers and acquisitions, multistate expansion, dual-entity approaches, economies of scale, and continuing education via advanced IT. Many of these systems were previously untapped by private practice dentistry.
In studying these models, I discovered that the most successful transitions have 45 elements that overlap to form the foundation for this success. I believe these elements are the key to predictable success in all types of dental practice transitions. Following 80% of these principles can improve the chances of transition success for a new dentist transitioning into ownership, a solo practitioner transitioning into multidoctor or multilocation ownership, or a private group practice transitioning into a DDSO.
In light of these changes, I recommend strategically planning your future immediately, whether you are a dental student, a solo-practice owner, or an owner of a group of private practices with multiple associates. The dental practice transition is no longer an event but a process—the earlier a dentist engages in the process, the higher the likelihood of success. Let’s dig deeper.
A DSO can be owned entirely or partially by private equity companies, institutional investors, licensed dentists, unlicensed dentists, or executives. In the past, many of these organizations were called corporate group practices. The terminology was not entirely accurate because unlicensed dentists cannot legally own dental practices or professional corporations (PCs) in most states. There is a clear delineation between the PC and the DSO. The DSO provides consulting, business management, vendor relations, and real estate and HR services not directly related to the clinical practice of dentistry. The PC, or clinical entity, provides the direct clinical services to patients and partners with or employs all clinical providers. The DSO and the PC become connected by a simple dental services agreement that explains which services each entity will provide.
The DSO’s dual-entity approach also allows for income that is not directly related to the practice of dentistry. When this approach is integrated with transitions, scalable expansion comes within reach of everyday private practitioners.
At the very core of these business models is the premise of dentists as owners, as opposed to associates. I have found clinical dentist co-owners to be more productive and motivated than associates.
