NMDA Journal Winter 2019

22 New Mexico Dental Journal, Winter 2019 So, what are some of those parameters? The practice should be grossing no less than $1 million per year. It requires essentially the same amount of time to manage a practice grossing $600,000 per year as it does to manage one grossing over $1 million per year, from the DSO's standpoint. A facility that can accommodate two or more doc- tors. Profit margins are higher when utilization of the physical facility can be maximized. A highly visible location with easy access (such as retail centers, strip malls and other locations in high traffic areas). A market/area that has the potential and capacity to provide a significant pool of prospective em- ployee dentists. (Generally, this means cities with a population of no less than 25,000 inhabitants.) A local economy that is stable and growing. If a practice falls within these basic parameters, it may be ap- pealing enough to a DSO to garner an offer for a purchase, and in some cases, those offers can be quite lucrative (more than what a typical private buyer would pay). However, sometimes there are some serious strings attached to the deal, in- cluding but not limited to, a hold back provisions on paying out part of the pur- chase price and how and when the seller will work back after the closing. In many instances, the seller is “paying back” the DSO’s investment by working back and creating those profit margins between what the doctor is paid and what’s left after all the overhead expenses have been paid. There are four points to consider before transitioning your practice over to a DSO: Evaluate the financial compensation and structure. Be sure to carefully review how much after-tax net you will re- ceive from the transaction and how much income and benefits you will receive working back after the transaction is complet- ed. Most doctors are paid a percentage of their respective gross 1 2 3 4 5 Point 1 production. In most markets and most situations, this percent- age is around thirty percent (30%). (Note: Specialty practices/ specialist associates are often paid a higher percentage.) It is not uncommon, however, to see a flat salary paid as well, or variations of the two, such as a base salary applied against fu- ture percentage compensation. In other words, the doctor is paid a monthly salary and/or a percentage, whichever is higher. Then, as the doctor’s production increases, any salary that was taken is paid back by the percentage production. Evaluate your own values, practice phi- losophy, leadership style, and personality type. Then compare these characteristics to those of a prospective DSO. Matching your values with a DSO possessing similar values is very important and there are certain values they should pos- sess if a successful relationship is to develop between you and them. These values are as follows: Honesty. Are they honest in all of their dealings? Integrity. Do they keep their promises? Do they do what they say they will? Consistency. Do they vacillate on issues or do they make a deci- sion and stick to it? Are their actions congruent with your words? Are they effective in communicating their thoughts and expectations? Compassion. Compassion. Do they have a genuine concern for those they work with? Skills & Knowledge. Are you confident in their level of knowledge and skill to lead and guide you and the staff? Conscious. Do they exercise good judgment and make decisions based on what is best for all concerned? Motivation. Do they inspire others to be and do the best they can? Moreover, what if you have evaluated your personality and de- termined that you still like to be the captain. In many cases, if the parties have a strong need to be in control, regardless if the transition is structured fairly, the arrangement will likely not Point 2  continued from page 20