It’s obvious — the game is changing. Again. Fully functioning DSOs, with unique value propositions; exclusive expressions of culture and values; well-tested systems, structures, and executive performances; DSOs that have reached a certain level of stability, consistent expansion and revenue growth — see that buying functional small group practices is a better game than rolling up individual practices. Why?
Because owners of five to 10 practices now understand the bigger game. They appreciate — at a visceral level — what it takes to build a large DSO. The owners of small groups authentically understand the steps involved in building several-hundred location DSOs. The small group practice owner knows how far a reach it is to get from five to 300 practices. But, they also now realize that with the right people and tools, they could grow their enterprise much faster, better and bigger. An established large DSO could offer them that opportunity.
Dental Group Practice: Knowing the Rules of the Game
The small group-practice owner has shared experiences with the larger DSO. This allows for a relationship of trust and affinity, different from a solo practice, in which the relationship to a large DSO is often one of distrust. Transactions in the space of trust and affinity move much faster, with greater give-and-take. No wonder DSOs are looking for established small group practices.
The small group practices know that the large DSOs have the money to stay on top of new technologies — which can be very expensive. The large DSOs have the funds to stay up-to-date with modern innovation. The large DSOs know how to do it for less money with more profit — and less stress and worry. The large DSOs have what the small DSOs struggle to get.
The large DSOs also know that small group practices that got to a level of five to 10 practices have pretty good leaders, time-tested management, and have successfully interacted with attorneys, loan officers, industry advisors, suppliers, vendors, and consultants. Small group practice owners understand the game, and they also appreciate what it takes to succeed.
Recognizing Drive and Ambition
The large DSOs seek out strong, driven, committed professionals in the small-group space to join forces, recognizing where their resources will be potentiated and not diminished. There’s less resistance and entitlement, which can be seen with many single-practice owners.
With student debt driving down the number of potential buyers, and fewer DSOs seeking to purchase solo practices, more single-practice owners are attempting to create group practices. The dentist-entrepreneur is smart. He can see where the money is going. Small group practices are now highly attractive in the market.
This is a win for the DEO: We empower dental entrepreneurs with the knowledge to build their own group practices. But the climb is steep: not many solo practices will make it. There could be a lot of pain if the dentist-owner of a solo practice fails to build a viable small group practice with her personal assets at stake.
Rather than acquiring and rolling up individual practices, large and midsized DSOs will be competing to buy small group practices, driving the solo practitioners to strive to build their own small group practices.
— Marc
