The most commonly asked questions about
the Large Practice Sales process.

FAQ

What is Your Practice REALLY Worth?

What is an IDSO?

If you’ve never heard of an IDSO, you’re not alone. It’s a term we’ve actually trademarked, and it stands for “Invisible DSO.” An IDSO is a silent (invisible) partner with an existing private dental practice. The best part is that the dentist gets cash now for a percentage of their practice and receives equity as the business grows.

Let Chip Fichtner explain it to you!

Want to know more about IDSOs?

Common Questions

While there is no stock answer, it is an easy and NO COST process to discover the value of your practice today through LPS. Values are impacted by the size and type of practice, growth rate, location, timing and most importantly the doctor and his/her future goals. Values are also variable depending upon whether a doctor seeks to sell all or only part of their practice. Each buyer has different and changing objectives which may include significant consideration based upon future earnings. (Call us at 844-976-5332 for the Doctor Matters Memo.)

We handle both types of transactions, but most of our clients have an average age of under 50. They are not ready to retire but are interested in monetizing a part of their life’s work in the current value bubble to secure their future. These doctors are interested in gaining a silent partner to accelerate their practice growth without personal risk, but with continued upside via retained equity ownership. With the right partner, their retained equity grows in value for a second liquidation event down the road but locked in at today’s high values. (Call us at 844-976-5332 for the DSO Benefits Memo.)

The primary groups LPS works with are IDSOs which value the local brand and goodwill of the doctor. Their goal is that the community has no idea that the new partner exists. Other, buyers, typically in 100% transactions, believe their nationally consistent brand is most valuable. (Call us at 844-976-5332 for  the Invisible DSO Memo.)

Most importantly LPS is only paid by our clients, the doctor. Other advisors are paid by both the Buyers and Sellers. This is unique to LPS and helps us get the highest values in the industry. LPS focuses exclusively on identifying partners for, or buyers of, larger dental and dental specialty practices. Although there are exceptions, our typical client practice has $500,000 or more after doctor compensation in practice net earnings or EBITDA. We are compensated solely by our doctor clients and LPS is paid nothing unless a transaction is successfully completed.

President Biden campaigned on a very clear and concise message that the RICH must pay their fair share. His definition of RICH is apparently $400,000 or more income. He has proposed eliminating the Long Term Capital Gains tax treatment in which the proceeds from the sale of all or part of your practice would be taxed at a maximum Federal tax rate of 20%. He proposes that the 2022 tax rate on a transaction would be taxed at 39.6%. Whether this will pass or not is an unknown, but it is a multi-million dollar gamble for most doctors. Monetize in 2021 at 20% Federal tax rates, or wait until 2022 and beyond at 39.6% rates. Plus state taxes of course.

In most cases, higher values are achieved with a doctor interested in remaining with the practice to execute a growth plan for several years. Generally, partners/buyers would like the great doctors to stay forever. However, we have completed transactions where the doctor retired the day of closing.

This is dependent upon the doctor’s and partner/buyer’s goals, strategy and pre-transaction agreement. Most partial transactions require the doctor to remain running the practice under his/her brand for at least five years.

Again, this is negotiable, but in most cases the doctor is compensated based on a normal market rate for the area. In an orthodontic transaction, this is typically an annual salary, with GPs and other specialties often compensated by a percentage of their production or collections.

This is 100% negotiable depending upon the doctor’s goals and the particular transaction. We have completed transactions where the doctor chose to work only three days per week and others where the doctor’s time commitment decreased over the ensuing years. It is an important part of the early planning and negotiations. In a typical transaction the doctor commits to working as hard in the future as they have been in the past.

This is buyer/partner specific, but in most IDSO transactions, the team members are still 100% managed by the doctor, and typically receive better benefits.

In theory and by law, the doctor makes all clinical decisions. However, there are certain buyers, who we do not work with, which may have other views of this important element.

This is buyer/partner dependent, and something discussed up front early in the process, but usually not. The IDSO partners goal is to assist your practice in growth, not attempt to break something they just spent millions to buy.

Purchase consideration can be paid in multiple forms including primarily cash plus retained equity in the practice, equity in the parent, or any/all of the above. A typical partner transaction involves the doctor selling 60 to 90% of their practice for CASH up front and retaining a partial interest in their own practice and/or equity in the parent. Each transaction is customized for the doctor’s goals and needs. However, we counsel our clients to have a guaranteed exit option on any non-cash consideration and to understand both the upside and downside of certain equity consideration structures.(Call us at 844-976-5332 for the Structures Memo)

Please consult your tax advisor on this important topic. However, in the $200,000,000+ of transactions LPS initiated in the last 12 months, over 95% of the initial consideration has been treated as Long-Term Capital Gains for the doctor. This may not matter in 2021. assist your practice in growth, not attempt to break something they just spent millions to buy.

It starts with a confidential discussion between you and an LPS principal and the signing of a mutual non-disclosure agreement. We will want to understand the basics of your practice including rough financial performance and practice metrics over three years, your general goals and future practice and area potential. From that discussion and a review of preliminary financials, we can give you an idea of the value potential for your practice.

If this value range is of interest, we will then present an engagement proposal outlining the steps of a sale in detail and the LPS compensation structure. There is no obligation or fee for this process.

LPS has a very unique compensation structure which ties our interests directly to the doctor’s. First and foremost, LPS is paid nothing unless a transaction is completed. LPS fees are only paid when you get paid. There are no valuation fees, retainers, expense reimbursements or compensation other than a percentage of the consideration you receive, when you receive it. The fee usually totals less than 10% of your consideration. LPS is paid zero on your future compensation for providing care. Knowledge of the buyer/partners and multiple transaction experience is LPS’ most valuable currency. We close transactions or we do not get paid a dime.

What is My Practice Worth Today?

While there is no stock answer, it is an easy and NO COST process to discover the value of your practice today through LPS. Values are impacted by the size and type of practice, growth rate, location, timing and most importantly the doctor and his/her future goals. Values are also variable depending upon whether a doctor seeks to sell all or only part of their practice. Each buyer has different and changing objectives which may include significant consideration based upon future earnings. (See Doctor Matters Memo)

We handle both types of transactions, but most of our clients have an average age of under 50. They are not ready to retire but are interested in monetizing a part of their life’s work in the current value bubble to secure their future. These doctors are interested in gaining a silent partner to accelerate their practice growth without personal risk, but with continued upside via retained equity ownership. With the right partner, their retained equity grows in value for a second liquidation event down the road but locked in at today’s high values. (See DSO Benefits Memo)

You Seem to Advocate a Sale of Only Part of My Practice Now. Why?

Under What Brand Will My Practice Operate?

The primary groups LPS works with are IDSOs which value the local brand and goodwill of the doctor. Their goal is that the community has no idea that the new partner exists. Other, buyers, typically in 100% transactions, believe their nationally consistent brand is most valuable. (See Invisible DSO Memo)

Most importantly LPS is only paid by our clients, the doctor. Other advisors are paid by both the Buyers and Sellers. This is unique to LPS and helps us get the highest values in the industry. LPS focuses exclusively on identifying partners for, or buyers of, larger dental and dental specialty practices. Although there are exceptions, our typical client practice has $500,000 or more after doctor compensation in practice net earnings or EBITDA. We are compensated solely by our doctor clients and LPS is paid nothing unless a transaction is successfully completed.

How is LPS Different from Other Advisor or Traditional Practice Advisors?

Why Sell All or Part of Your Practice Now?

Values of businesses including dental practices rise and fall. At the moment, values of larger practices in specific areas are no longer at the historic highs of 2019, but we believe 2020 will be the best time to monetize a practice for the next three+ years given the Covid-19 crisis. We have achieved values of 4X+ collections in 2019 with many over 2X. The laws of supply and demand are kicking in now. More doctors interested in partners and fewer and more nervous partners. Taxes are going up. If the Democrats win, they have made it clear that the taxes on investment gains and business sales will double, reducing your proceeds from a transaction by 20% or more. Doctors also face risks including health/accident issues and unforeseen natural disasters that can impact practice values. Recall hurricanes Michael, Irma, Maria, Nate and the Santa Rosa fires. Buy low, sell high. The first seller in an area often achieves a higher value over the second. (See First Steps and Higher Values Memos)

In most cases, higher values are achieved with a doctor interested in remaining with the practice to execute a growth plan for several years. Generally, partners/buyers would like the great doctors to stay forever. However, we have completed transactions where the doctor retired the day of closing.

What Happens to the Doctor in the Sale of All or Part of the Practice?

Who Runs the Practice After a Sale of All or Part of the Practice?

This is dependent upon the doctor’s and partner/buyer’s goals, strategy and pre-transaction agreement. Most partial transactions require the doctor to remain running the practice under his/her brand for at least five years.

Again, this is negotiable, but in most cases the doctor is compensated based on a normal market rate for the area. In an orthodontic transaction, this is typically an annual salary, with GPs and other specialties often compensated by a percentage of their production or collections.

How are Doctors Compensated?

What Kind of Flexibility Does a Doctor
Have in Working With a New Partner?

This is 100% negotiable depending upon the doctor’s goals and the particular transaction. We have completed transactions where the doctor chose to work only three days per week and others where the doctor’s time commitment decreased over the ensuing years. It is an important part of the early planning and negotiations. In a typical transaction the doctor commits to working as hard in the future as they have been in the past.

This is buyer/partner specific, but in most IDSO transactions, the team members are still 100% managed by the doctor, and typically receive better benefits.

What Happens to My Team Members?

Who Makes the Clinical Decisions After a Partnership or Sale?

In theory and by law, the doctor makes all clinical decisions. However, there are certain buyers, who we do not work with, which may have other views of this important element.

This is buyer/partner dependent, and something discussed up front early in the process, but usually not. The IDSO partners goal is to assist your practice in growth, not attempt to break something they just spent millions to buy.

Will I Be Forced to Use Certain Brands or Vendors?

Do Buyers Pay Cash or Will I Get Equity in the Buyer and Get Paid Out Over Time?

Purchase consideration can be paid in multiple forms including primarily cash plus retained equity in the practice, equity in the parent, or any/all of the above. A typical partner transaction involves the doctor selling 60 to 90% of their practice for CASH up front and retaining a partial interest in their own practice and/or equity in the parent. Each transaction is customized for the doctor’s goals and needs. However, we counsel our clients to have a guaranteed exit option on any non-cash consideration and to understand both the upside and downside of certain equity consideration structures.(See Structures Memo)

Please consult your tax advisor on this important topic. However, in the $200,000,000+ of transactions LPS initiated in the last 12 months, over 95% of the initial consideration has been treated as Long-Term Capital Gains for the doctor. This may not matter in 2021. assist your practice in growth, not attempt to break something they just spent millions to buy.

What is the Tax Treatment of a Transaction?

What is the Process to Initiate and Complete a Partial or Full Sale of Your Practice?

It starts with a confidential discussion between you and an LPS principal and the signing of a mutual non-disclosure agreement. We will want to understand the basics of your practice including rough financial performance and practice metrics over three years, your general goals and future practice and area potential. From that discussion and a review of preliminary financials, we can give you an idea of the value potential for your practice.

If this value range is of interest, we will then present an engagement proposal outlining the steps of a sale in detail and the LPS compensation structure. There is no obligation or fee for this process.

LPS has a very unique compensation structure which ties our interests directly to the doctor’s. First and foremost, LPS is paid nothing unless a transaction is completed. LPS fees are only paid when you get paid. There are no valuation fees, retainers, expense reimbursements or compensation other than a percentage of the consideration you receive, when you receive it. The fee usually totals less than 10% of your consideration. LPS is paid zero on your future compensation for providing care. Knowledge of the buyer/partners and multiple transaction experience is LPS’ most valuable currency. We close transactions or we do not get paid a dime.

How is LPS Compensated?

Why LPS?

Principals Helping Doctors

As principals, we have bought and sold dozens of businesses over the last 30+ years including those in the dental industry. Members of our team have owned and/or operated large practices. As your advisor, we put on our “principal hats” and help doctors realize the highest value (CASH) for their practices. Your practice may be worth more than you think to a specific buyer, at the right moment in time, if you choose LPS.

Money Where Our
Mouth is

Our compensation is based solely upon the sale proceeds achieved by our clients. There are no retainers or expense charges. No fees are ever paid to us by buyers. Our only compensation is tied directly to the successful completion of the sale of your practice; we get paid when you get paid. LPS has the lowest NET fees in the industry due to the higher values we achieve for our clients than any other advisor.

On-Going Education for the industry

You may or may not be ready to partner with an IDSO today, but ultimately you need a short or long term exit strategy. Smart doctors are always weighing the risks, taxes and growth opportunities with an IDSO partner. LPS helps doctors at any phase of their careers understand the pros and cons of an IDSO partnership. As the largest advisor to great dentists in the U.S. we are also a trusted source of intelligence and new partnerships for both existing IDSOs and newly formed IDSOs. LPS’ size and national coverage gives us an edge in knowledge of new opportunities for our clients.

Let Us Help You. We GUARANTEE Two Things:

We have the highest success rates.

After our fee, you will get the highest net proceeds possible than from any other advisor.