Orthodontic Practice Value Risk Update

You should think about the chart below from the ADA. Adult ortho practice visits dropped over 40% during the recession of 2008-2010. The decline for patients under 19 was “only” a drop of about 20%. Practice values are based upon profitability and growth rate. If your practice is shrinking, your practice value is declining. Should you monetize a part of your practice for millions in cash now at low tax rates? Or wait?

According to the ADA, orthodontic practices are the most consolidated of all practice types. Over 1500 orthodontists have partnered with Invisible Dental Support Organizations (IDSO) in the last 35 years. The majority of ortho practices which have partnered with IDSOs are growing faster and more profitably than independent ortho practices nationally. Do you understand how the ortho practice world is changing and how the economy will impact your wealth?

IDSOs become a doctor’s silent partner by purchasing 51% to 80% of a practice for cash now at low tax rates. Doctors continue to lead their practice as owners for years or decades with full autonomy if they choose their partner wisely. Practices’ benefit from the resources of their larger, silent partner to reduce costs, enhance team recruitment and most importantly today, access expert new patient marketing teams and strategies.

IDSOs are not new, with several over 35 years old and many with over 100+ partners and some with 800+ partners. Their growth is accelerating with billions of new capital from Blackrock, Blackstone, KKR, Bain Capital and Sovereign Wealth funds. It is not just private equity.

Multiple Types of IDSO Bidders for Growing Ortho Practices, None for Declining…

Many doctors are familiar with the ortho only IDSOs of which there are now a dozen, but only four are qualified to bid on LPS clients. The highest values achieved by LPS in the last 12 months were for ortho clients partnering with one of the dozens of Dental Trifecta and Pedortho IDSOs. Their strategy creates new patients for their ortho practice partners, forever!

Pedortho and Dental Trifecta IDSOs Have Built in Referral Networks for Ortho Partners. Value creation or value destruction? Picture your IDSO partner building a new pedo office within referral distance of you to lock in new patient referrals for your practice. Conversely, what happens if a DSO or IDSO buys your existing pedo referral sources? The IDSO keeps those referrals in-house by buying or building an ortho practice nearby. A world without pedo referrals could kill some ortho practices…

But Why Now? Reward vs. Risk…

As a 42-year-old ortho client told me at AAO in Orlando:

“Partnering with an IDSO put millions of dollars of cash in the bank to secure my family’s future. My IDSO partner is helping me grow the 49% ownership of the practice I kept, but without taking any personal risk. I believe my cash will be very valuable in the coming recession.”

Today, growing LPS client ortho practices receive multiple bids from qualified IDSOs. Some ortho practices have recently achieved 300+% of collections and over 8x EBITDA values in an LPS managed process. Shrinking practices must wait to return to growth in what is now a very tough economy. The U. of Michigan Index of Consumer Sentiment just reached an all-time low in the 70 years of the survey. This chart is before the Iranian fun. It is even lower in May.

Learn Your Practice Value in an IDSO Partnership; Confidential, No Cost or Obligation.

Contact us via email at Chip@Largepracticesales.com, call 954-300-2655 or text 972-914-7705 to schedule a 20-minute call with me. I promise you will learn something new including what IDSOs are already in your area. IDSOs create a long-term partnership, not a short-term exit.