In this episode of The Dental Boardroom Podcast, Wes takes a break from his discussion of The Five Types of Wealth to tackle an important topic for dental practice owners: buying and selling dental practices.

Drawing from years of experience as a dental CPA and financial advisor involved in hundreds of practice transitions, Wes explores why dental practice sales remain an inefficient marketplace, the critical role brokers play in successful transitions, and the challenges buyers and sellers face throughout the process.

He also shares the vision behind Practice Orbit, a technology platform designed to modernize and streamline dental practice transactions while supporting brokers, buyers, sellers, lenders, attorneys, and advisors.

Key Takeaways

• Dental practice transitions are complex, emotional, and financially significant events.
• A skilled broker can provide tremendous value by finding buyers, coordinating the process, and helping avoid costly mistakes.
• Dentists should carefully evaluate broker experience, incentives, and transparency.
• DSO offers should be analyzed beyond the headline purchase price.
• Technology can improve efficiency, transparency, and communication throughout the transition process.
• The future of dental practice sales may involve a combination of experienced brokers and modern marketplace technology.

Transcript:

Yet again, welcome back everybody to another episode of The Dental Boardroom Podcast. I'm taking a small break in this episode from the book I've been tracking with you called The Five Types of Wealth by Sahil Bloom: Time Wealth, Social Wealth, Mental Wealth, Physical Wealth, and Financial Wealth. I'm pausing that.

We were through chapter four. I'm gonna continue on to chapter five here in an upcoming episode. But I wanted to discuss something that's been on my mind a lot lately. Recently, I was at the California Dental Association here in Anaheim, California, this month, May 2026, and there were a lot of people there, and I spoke to a lot of dentists.

I did a speaking engagement on financial planning for dental practice owners, and I also spoke to a lot of dentists looking to both buy and sell a dental practice. There were also, were also a lot of brokers, dental practice brokers there, and was able to connect with them and learn more about their world and what they're trying to accomplish in helping dental transitions.

So I would just wanna dedicate a, a short episode here on something that I believe the industry needs desperately. It is a very inefficient marketplace, not because of brokers. I think brokers are doing their absolute best to, uh, help doctors s- uh, list their practice, do so effectively and anonymously, and ultimately find the highest bidder for that practice, and then to quarterback or help navigate the flow of all the parties involved through the finish line.

And for that purpose, I find brokers to be deeply valuable. Now, a lot of people have some mixed views on brokers, as a lot of people have mixed views on financial advisors and CPAs like myself. So if you're a broker out there, don't take that the wrong way 'cause you probably acknowledge there are some people in your space who are out to get a big buck at the lowest amount of effort possible.

And there's brokers who really want to do a great job. They care. They care about the seller, they care about the seller's experience, and they care about the buyer, and they want to navigate that smoothly. There's a lot of them, and I commend those brokers who have the right intention and the client's interests at heart.

Well, let me just tell you that since I started Practice CFO, I have been involved in hundreds of dental practice sales. Not as a broker, I'm not a licensed broker in California. I'm a, I'm a dental CPA, a dental CFP, financial planner, and I'm licensed a Series 65 to, uh, provide investment advice for our clients.

Those are my credentials. I have a bachelor and master's degree in accounting from Brigham Young University, and, uh, but I don't have the credential allowing me to sell a dental practice and be compensated in the form of a commission for that sale. Now I have been involved as the CPA or financial advisor representing both buyers and sellers and am intimately aware of all of the milestones, nuances, complexities, et cetera, of a dental practice sale.

And I've been working with dentists since 2009, and in fact, when I started Practice CFO, most of my new business came from representing buyers. I was younger at the time. I was in my early 30s, right around 30 or so, and a lot of the clients were around my age, and they were looking to buy a dental practice.

And so I helped them buy into a dental practice and develop a really, um, a r- a really specific process to help doctors evaluate a practice, determine if the cash flows after overhead, debt, and taxes are sufficient to justify, uh, the purchase of that practice, taking on debt and taking on the risks and all of the owner-- all of the responsibility of ownership.

And then, as time went on, a lot of my clients aged, and we started to help doctors who were on the other end of the career timeline and were looking to sell. And so from about 2019 to about 2023 or '4, we had a broker on staff. His name was John, John Hale, and he would help our doctors who were looking to sell by helping them list their practice and would charge a fee, usually somewhere around six to, to nine percent is what he would charge.

Some brokers are at the full ten percent, and then every once in a while, you'll get a broker who will be a little bit lower than that. I do think this is an area where, as with a lot of specialty advice, you sort of can get what you pay for. Now, that said, if there's a broker out there charging five percent or less, I'm not trying to claim that they are a, an inadequate broker.

They may be great. Really, I stay out of the conversation with brokers about what they charge. That's not my area. I let them charge, and I let them earn the reputation that allows them to charge the fee that they charge. As you know, there are some outstanding dentists who charge premium prices for, let's say, cosmetic dentistry.

But you get, your p- patients can potentially get a phenomenal outcome. Well, the same is the case here. Now, in representing, um, dental practice buyers and sellers over the years, I often had a thought, which was, "Wow, this industry of dental brokers appears to me it hasn't changed very much in essence over the past thirty years as technology has come in and introduced efficiencies into different industries.

Think about your industry and what technology has done for you. My industry of accounting and financial planning and CPA work, new softwares, the advent of the spreadsheet as opposed to old ledger books. Technology has an incredible way to enhance everyone's experience in that space, and I was surprised to see how little technology has been introduced in this area of buying and selling dental practices.

For example, there is no centralized marketplace like the MLS, if you're familiar with real estate, the multiple listing service. The MLS is what feeds Zillow. It's what feeds Redfin, if you've heard of either of those. You can... If, if you're looking to buy a house, you can simply go onto zillow.com or go onto Redfin.

There's others, Trulia. There's more of these, and you can see virtually all listings in a given geography, and it's cr- it creates such a easy, transparent map to look at different neighborhoods and see what's available. Before the MLS was posted through these online technologies, people had to rely on their broker who would sort of take them on a Saturday drive and go and visit various houses and do open houses and, and do all of that because there was no single place where a person could see all of the listings.

It was sort of like a private Rolodex, so to speak, that the brokers had. Well, technology came on the scene, and it created a lot more transparency, and with that transparency came a lot more efficiency, and by efficiency, I mean, number one, making the match between a buyer and a seller could happen faster.

And two, navigating the flow Of the transaction could occur quicker. Now, the unique thing about Zillow, and I'll stick with Zillow, most people have heard of Zillow, is that you go onto Zillow, you find your house, and then what do you do? You click enter email. You see who the broker is for the listing, and then you bounce outside of the listing of the website, and now you're talking to them manually over the phone, in, in person, and it's a manual process.

That makes Zillow what is called a listing site. That's what it is. It is a single listing site. However, it is not a marketplace. It is not a marketplace. A marketplace is where the interaction after the match is made between buyer and seller occurs and stays within the login of that technology. For example, we've all heard of Airbnb, we've all heard of Amazon, we've all heard of Uber.

These are all what are called multi-sided platform technologies. For example, uh, Airbnb, the company, does not own a house. Unlike the Hyatt or Hilton, which own buildings, Airbnb doesn't. It's simply a digital place for homeowners and travelers to, one, find each other, and two, consummate that transaction.

And so you don't find the house you wanna stay in, let's say here in San Diego, and bounce out and call the owner and say, "What days do you have available?" No. You log in and you interact through chat rooms, through calendars, through checkout rooms, all of that inside of the, of the, of the technology. That is a true marketplace platform.

A true marketplace platform Well, in dental right now, if you're looking to buy a practice, you sort of gotta keep track of the different brokers in the area that you're targeting, maybe ask around. There's probably listings that aren't even on the market. They're sort of private, and it's who you know, who's got the Rolodex, talking to your supplier, maybe talking to your dental CPA.

I mean, I can't tell you how many times a buyer's come to me and said, "Hey, West, do you know of any practices for sale down in San Diego?" And sometimes we do, and sometimes we don't. But there's nothing systematic in the way that that marketplace is managed. So what I have done is I've spent about four years, and I've dropped a good amount of money, and I'm not gonna tell you how much, but let's just say it's a good amount of money, probably could have bought me a house, put it that way, into this technology called Practice Orbit, www.practiceorbit.com.

This is not an advertisement. I mean, it partially is. I mean, it's my podcast. I do a lot of free content. Every once in a while, I like to tell you a little bit about what I got my hands into. What am I trying to do for the industry? Well, I'm, number one, trying to protect the private practice right now. I'm really trying to protect the private practice or at least where the doctor maintains majority ownership and control of the practice.

I still believe that is the number one pathway toward wealth accumulation. And Practice Orbit is providing support for private practice doctors to find each other and to navigate a sale. Now, in the beginning, I had a lot of doctors say, "Can you try to set it up so that we don't necessarily have to go through brokers?"

So brokers, don't be mad at me. Just, just park your, your thoughts for a minute and just follow the history on this. And I said, "Well, do you think the market is ready for this?" And so I sort of built out a, what's called an MVP 1, a minimum viable platform 1, a first iteration. And I sort of tested it out there, not because I was trying to put any brokers out of business.

I just wanted to see to what extent could dentists understand how to use technology. And you know what I realized in that? Very quickly, I realized the value of a broker. I did. Incredibly valuable because what happened was, guess who was recruited to act as if I were a broker? Yeah, the seller and the buyer were constantly tapping into me for broker-like responsibilities, and I had put a lot of time into a technology that tried to guide them through the process.

But you know what? This is a large amount of money. The practice is like a child for the seller. It's near and dear to their heart. They put probably decades into building this thing known as their dental practice. They care about it a lot, and they don't want to be taken advantage of, and they want a proper price for selling that thing, as they will need those proceeds to step into that next stage of their life.

They want to maximize that value. And on the buyer side, they don't want to make the wrong choice. They are taking on a large amount of debt. They're about to step into ownership, setting up a corporation, getting their vendors in place. Now they've got payroll. Now they've got corporate taxes. Now they've got higher financial consulting needs, all that stuff.

Nobody wants to do it wrong. And so what I ended up telling them is, "Look, you need a broker. You need a broker." And what do I get? "Well, I don't wanna pay 10%, Wes." Well, here's my response to that. Number one, if you go out in the broker business world, or just small businesses in general, not just dental, it's very common that brokers are charging 10 to 15%.

There are some areas where a commission of 20% isn't unheard of. 10% may feel steep, but y- but, uh, what you wanna do is not look at it as an ex- just a pure expense, but ask yourself, "What am I getting out of that relationship and what the broker's going to receive?" And it's true, it can be a lot of money. If your practice sells for a million dollars, that's $100,000 for 10%.

Now, a lot of brokers these days are doing somewhere, I find, around seven, seven to 8%. The smaller it is, the more they stick to that 10%. And if it's below a certain amount, let's say a 350, $400,000 practice, they might even charge a minimum of $40,000 or so. Because whether it's a $500,000 practice or a million dollar practice, the same amount of work typically goes into it.

And to be honest, a $500,000 practice is generally harder to sell than a million dollar practice. That's the irony about that And so I quickly said, "Hey, brokers, I wanna work to support you in this effort." And so Practice Orbit, uh, has become a tool for the industry, which includes brokers to use to, A, create that match efficiently between buyer and seller, and B, to navigate the sale.

So a few things I wanna mention. If you are thinking about selling your practice or you're looking to buy a practice at all, whether it's a first practice, second practice, whatever, uh, I want you to hear me out for a little bit as I talk about how to evaluate a broker's value and how to select a broker, and how to make sure that your experience with that broker is a successful one.

And for all you brokers, reach out to me if you feel I erred anywhere in my attempt to guide dentists through this decision. Just, uh, just know... I want you to know that I am a believer in the proper value of a really good practice broker. Here's how they can help. Number one is they can really help you through that initial thought process.

Are you ready to sell? What will you sell it for? How likely will you be able to sell your particular practice? How can you stage your practice to maximize the sale? Should you sell now or should you ramp up a little bit for a year so that you stick the landing on a high note? And how are you gonna find buyers?

They can help you understand trends. They typically have data on what practices are selling for. They can help you understand what lenders would lend on your practice because generally speaking, at the end of the day, it's how much a lender is gonna loan on your practice that's going to drive the price of a buyer.

Not always, and there's nuances to that, but it is absolutely a major factor in determining how much you could sell your practice for. Brokers are intimately involved with the lenders. Bank of America, Huntington Bank, US Bank, um, First Citizens Bank There is BMO, Bank of Montreal. There's Fifth Third Bank, also known as Provide a little bit.

Um, there's a number of other banks. Any banks listening, if I left you out, sorry. But there's a lot of healthcare-specific lenders, and the brokers really know the differences between those lenders. Even though they're similar, they are absolutely nuanced, each of them. Which one has the lower rate? Is it all about the lower interest rate to the buyer?

What about the other terms there? So the broker can help navigate what lenders would be willing to loan on your type of practice to frame for you expectations properly. Because it is usually the case that a dentist enters the scene, says, "I'm ready to sell," and they have a, an inflated concept of what they may be able to sell their practice for.

And unfortunately, they typically have an inflated concept of what they're gonna take home after paying off debt, taxes, and selling expenses. Okay. Also, they will really help vet qualified buyers. Here's the thing. If you try to sell your practice on your own, you're gonna get a lot of buyers, and you're gonna have all these conversations, and you're gonna have a lot of people just kicking the tires, and you're gonna get really frustrated about the lack of, uh, sincere intent from a lot of these buyers, and it ends up being a major waste of time.

And so they will advise you on finding dentists. They will do that initial filter. Um, they will look at, uh, the different types of buyers out there and make sure that anyone who sort of surfaces to o- to, to submit an offer on the practice and move into due diligence is someone who is properly qualified.

I cannot tell you how many times a buyer and a seller have got deep into negotiations, attorneys have been hired, accountants have been hired, banks are contacted, only to find out that that buyer was not properly vetted. And remember, in most states, an offer letter, known as a letter of intent, is not necessarily binding.

Neither is the NDA. I mean, the NDA is binding in that it... the buyer has to keep private the content of the seller and their practice, but buyers can back out quite easily. If a buyer can put some earnest money down, that may create a little bit of security, but a lot of attorneys will say, "Not really," 'cause they can get that back.

That's why doing the initial vetting is so critical when a doctor goes to sell their practice. And a good broker is also a good, a, a good filter a- among all of those buyers, especially if you have a really good practice doing north of a million in a desirable area, you're gonna get a lot of buyers looking for that practice Here's the one challenge with brokers is sometimes brokers will inflate the price that you could sell it for.

Why? Because they want the listing. And guess what? Once you sign their listing agreement, generally speaking, it's exclusive. You can't go hire another broker. It's usually 6, 12, and sometimes even 18 months, and you're locked in. And if you look back with seller's remorse and say, or I guess in this case, buyer's remorse as you're, you're buying their services, you can't change that.

It's very hard to get out of a broker contract or listing agreement. That's why a lot of brokers sometimes will elevate unreasonably the price to get you excited to sign on the dotted line. A good broker is going to be really honest with you. Like, there's a broker here in, in town, Sean Sullivan with DDS Match, I find him to be very honest, and he will, he will give you an honest assessment of the value.

I've noticed that in a few of the listings that we've represented the buyer and the seller on. He, he's very honest. And I don't mean to, to, to elevate one broker or the other, but that's a little shout-out to somebody who I did see as very honest. And I've seen plenty of brokers overpromise, get the listing, and then the listing just sits there because the seller's mind is pegged on that overpromised price.

And then guess what happens? They start to get one foot out the door mentally. Collections start to decline, and if collections start to decline at all, 5%, the value of that practice is gonna drop 10, 15, 20%. That's just the way it is. You do not want to sell your practice when your practice collections are declining.

Ideally, your practice collections are inclining or increasing a l- at least a little bit going into that final year into your listing. Other things that the dental broker will do They will help maintain confidentiality and manage these NDAs, help the buyers, uh, maintain discretion. They'll protect against staff anxiety of your practice as the seller.

They'll help guide you through the communication with your team and patients, and they will then also help negotiate with buyers as they come in, and this is probably where a broker can more tangibly earn their benefit, their value, is that they, uh, assemble a larger line of buyers. So the more buyers lined up to buy the practice, the more offers, the higher the bid, and oftentimes buyers will try to lower the, the value or the price from its listing price.

A good broker knows how to go and just round up a lot of buyers, and then because of that demand, and this is basic economics, the higher the demand, the higher the price. That is one of the most valuable things that a good broker can do. Here's a few other things, and these are not insignificant. They act as an emotional buffer.

Brokers have to have incredibly thick skin because these deals get very emotional for both the buyer and the seller. The buyer is already sitting on $500,000 of student debt, and they're about to take on a million-dollar loan or a $500,000 loan and step into ownership, something that they've never done before, and they're feeling really nervous about this.

Emotions are high. Seller is thinking, "This is my baby. I'm gonna hand over my baby. Am I ready to do that? What's gonna happen when I no longer have control of this practice? How do I make sure I get the highest price out of my practice? How do I make sure that my patients are taken care of?" All of those thoughts create this very emotional experience, so a good, a good broker will be an emotional buffer as they manage that deal, almost acting as a quarterback and reducing those emotional decisions that oftentimes do actually derail deals.

It happens a lot. Trust me on that one. They will also, and this is critical, they will coordinate the deal team. There are many people involved. There's an attorney on the buy side, attorney on the sell side, CPA on the buy side, CPA on the sell side, lenders on the buy side. There's the landlord, a huge one.

Landlords are often the biggest culprits for preventing a deal from closing timely. Also, there's getting credentialing in place for the buyer. Most failed deals collapse on coordination, not valuation. It's the coordination. And as much as I love my dental CPAs out there and dental attorneys out there, they can be remarkably slow to respond.

They aren't, no offense, I'm a dental CPA, so I'm talking to myself here. They can be very disorganized at time. And unless they do this a lot and they have a really good process around helping doctors buy and sell, they are oftentimes very unplugged. And I've been in deals before where there's no broker and I'll lift my head after a busy, you know, week and I'll say, "Where are we, attorney?

Where are we, banker? Where are we, landlord?" And nobody knows. They're like, "Oh, well, the ball was here. Uh, we're waiting on this email. We're supposed to be getting a commitment letter from the bank. We're still waiting on the landlord." And it just sort of sits there in no man's land, not getting proper attention, and therefore not moving forward.

Everything languages, languishes, buyer and seller get impatient, emotions get higher, and the deal breaks. This happens with some frequency. So a good broker will quarterback That sale and everybody in that team on both sides to make sure that everyone is on the same page and moving forward. All right. So those are the value propositions of a good broker.

Now, when do you not need a broker? Well, sit down, brokers. Don't be worried. I think you would acknowledge this, that there are certain cases where the seller knows intimately the buyer, and the buyer may be family, and there is a good dental, I emphasize dental specific, CPA and attorney. Good dental specific CPA and attorney who have been through a lot of deals, and the buyer seems-- is qualified.

Their f- credit score is good. Their production ability is good. They can get a loan from the bank. They know the practice at some level. Who knows? Maybe even the staff know them. Maybe they're an associate. Maybe it's, it's a son or a daughter of the seller. In some of those cases, navigating the sale may be done either without a broker or at a lower cost.

And if you say, "Well, what am I paying a broker for?" It's really the two things. It's to find a buyer, and it's to navigate the sale effectively. How much value goes on one or the other, I think it depends on the practice. A rural practice may be harder to find a buyer, and maybe a lot of the reason why you're paying a broker is to find the buyer.

In other cases, if it's a million and a half dollar practice in San Diego, you're gonna have a thousand buyers. You don't need a broker to find the buyer. But navigating that sale is incredibly challenging, uh, in certain areas and with certain buyers, and that's where the broker really earns their money.

But by and large, you step back, and the broker can earn their money in both of these areas, just to different degrees in each one of those, those, those two. Um, but I've seen a number of deals, and I think brokers would be honest about this, there have been a number of practice transitions that occurred without a broker and were successful and were smooth.

However, I would say that those are the exception and not the norm, and therefore, most sellers should be using a broker. Now, when you go to choose a broker or how to choose a broker, number one, obviously make sure they're dental specific. You don't need a general practice broker off bizbuysell.com. I'm sorry, if they're selling a Mediterranean restaurant down the street here and a, and a local gym down the street there, this is not the broker you want to sell your dental practice.

You want a dental specific broker. Now, if they sell some vet practices, you know, or maybe some medical practices, that may be okay, an optometry practice. As long as they have a lot of experience in healthcare, and specifically a lot of experience in dental. Um, they should have a proven track record. Have they sold practices before?

What has been their experience? Did they come from the supplier world? As you know, a lot of dental brokers come from the supplier world, like Patterson. Uh, most of DDS Match brokers, I believe, have come from Patterson. There's a lot of brokers who also come from the CPA and attorney world. There's a number of dental attorneys who have opened up shop as a broker, and a number of dental CPAs who have opened up shop as a broker as well.

There's a number of real estate professionals who have just converted over to selling dental practices. So they come from different areas. Look at their resume and background and see, are they well-versed in this industry of dental practice brokers? Meet with them. Ask them the questions. Just ChatGPT a list of questions to ask your broker to get a feel for their experience.

Do they answer those questions effectively, or are they, are they struggling? Um, they will have a strong buyer network. Ask them, "How do you source your buyers? Do you have a, a big Rolodex? And how many buyers do you think you might have in the early stages of selling my practice that could be good candidates for the practice?"

And then are they good, clear communicators? Do you feel you can trust them? Transparency on their fees as well, and fluency in both doctor-to-doctor, uh, and DSO deals. Now, I do wanna spend a moment talking about DSO deals. There are a lot of people out to gain income to gain benefit at the expense of the dentist.

Now, that said, does-- uh, um, my default is that most people have the right intention in mind, that brokers are trying to do right by their sellers and even right by the bro- by the buyers. They're trying to do right by their clients. However, we are highly incented as humans by the financial rewards of our efforts.

If option A and option B have the same input, but option B gives me more return, I'm gonna go with option B for obvious reasons, and that is generally okay unless it distorts the fiduciary obligation that I believe brokers have to their clients. Just like I, as an investment advisor, have a fiduciary obligation, I legally literally do, to put my clients' interests ahead of my own when investing their assets for them.

Whether or not brokers actually have a fiduciary obligation and the level of that fiduciary obligation legally, I don't even know. But what I'm saying is that they should have built into their moral compass the way that they approach their business is to put their clients' best interests first. Now, that doesn't mean doing their work for free, but it does mean being very transparent about the way that they are paid and the way that they will run that sale.

And when it comes to the DSO world, the DSOs are really testing people's integrity. That's my personal opinion. I deal with this almost-- on, on an almost daily basis. DSOs are testing service providers' integrity to the dental community. Why? Because a lot of people are making money off this. And why is that?

Because private equity really, which is behind a lot of the DSO roll-ups, not all of them, but private equity, cheap commercial bank lending, et cetera, is fueling the capital that is going to buy dental practices. It's a roll-up. It's a consolidation trend that has been happening over the past fifteen years fairly aggressively.

And these institutional buyers, known as PE, or even lending-- lenders providing, uh, capital, borrowed capital to, uh, DSOs Have deeper pockets, and deeper pockets will pay more for the transition specialists or consultants helping the dentist to sell their practice. The commissions received by dental brokers for selling a private practice to a DSO typically are higher, and in some cases substantially higher than selling to a private practice.

And so brokers are motivated naturally, at least financially speaking, they're motivated oftentimes especially if it's a larger practice, doing 1, 1.2, 1.5, 2 million plus, especially you get up to three and four, to really sell to a DSO because the commissions on these things can be hundreds of thousands of dollars.

And what I want dentists to do is to be aware of that. And this isn't to throw shade on the brokers. Not at all. I do think that they should ask them th- themselves the question always, "Am I doing right by the client by trying to channel them to a DSO sale?" In my opinion, it's shortsighted if they're channeling a seller to a DSO sale when they know that It is not the best buyer for that particular practice.

And why isn't it the best buyer? Well, it's because every time I do a present value analysis of buying-- of selling to a DSO versus not selling to the DSO, working for the three to five years that the DSO is gonna require you to stay on and lean in, and then selling at a lower price after five years and you, you do what's called a, a discounted cash flow back to today, and you say, "What is the total lump sum value I'm gonna get from selling to option A, the DSO, and option B, a private buyer?"

In almost every single case, I'm talking north of ninety-five percent, the dentist is better financially to not sell to the DSO. If you really think about it, what's happening? Yeah, you're getting more money on day one when you sell to a DSO. And I could do a whole another podcast on this. You could get more money by selling to a DSO on day one, and that's very enticing.

Then you have to work back for three to five years, and you're getting paid a lot less. Why? 'Cause now you're just paid on your production, and you're not getting the profit of your practice. And let's say your practice is netting five hundred thousand after all of the overhead. And if you're paid, let's say, two hundred thousand as an associate, then you're getting two hundred thousand and you're giving up three hundred thousand for that.

Well, you're giving up three hundred thousand and now you're working for five years. That's one point five million of profits that you just gave up to the DSO. And at the end of five years, you don't have a practice anymore. So if you think about it, it's almost like you're getting a loan from the DSO.

It's like they're giving you money, and then you're paying that back over five years in the form of surrendering your profits of your practice to pay back that loan. And at the end of five years, who's holding the equity of the practice? Not you. So that down payment on day one and that promise of equity rollover that's gonna turn into a bazillion dollars, which rarely pans out, by the way.

I've seen it a few times. Under rare circumstances have I seen that actually pan out to be what the DSOs promised it to be. In most cases, there's nothing, there's no capital event, or it's a lot less than what they thought. And the thing that a lot of DSOs will do is they'll give you this offer letter, and it's gonna show you every dollar that you receive once you sell the practice to that DSO.

And that's gonna be in the form of your down payment that they're gon- or the money down on day one that they're gonna give you The form of your compensation as an employee of the DSO over that three to five-year period, and any potential rollover equity that returns money to you in the form of a capitalization event from the DSO.

So if your practice was worth a million dollars and you rolled over 20% into the DSO, you get ... Let's say you get $600,000 now, $200,000 is an earnout over, let's say, a one or two-year period if you keep your, your collections high. And the other remaining 200,000 is in the form of equity of the DSO, which may turn into, as they will say, a million dollars in five years.

And so they'll give you this huge number that during that time you're getting paid 32% of your own production, and it's this big fat number. The thing is, you have to see that number in context because some of those numbers are irrelevant. And what I mean is, by irrelevant, is that is that if you keep your practice and you're producing, you're still being paid money, or if you sell your practice and getting paid as an employee, in both cases, you're getting paid for h- having your hands in a mouth.

And whenever you do that, that's called irrelevant. If the income i- if the variable is the same on both sides of a decision, it is, by debate theory, it is an irrelevant factor in the equation. So what you have to be looking at here is what is the value you're getting from the equity of your practice, not the earned income during the next three to five years after selling to a DSO.

So when I do that analysis and I say, "Hey, Doc, if you keep all $500,000 of your, of your practice profits through W-2 and profits every year by not selling, and then at the end of it, you sell for, let's say, $700,000 instead of the million dollars being offered to you by the DSO, guess what? You're better off.

You are better off. And what happens a lot of times after you sell is you regret selling to that DSO. Your job sucks now. You don't look forward to coming in. They've changed a lot of stuff. Your employees aren't happy. You're questioning their decision-making. You gotta change your practice management software.

You gotta change your payroll. You lose the Delta Premier. I don't know. All of these different things change, and now you're like, "What did I do?" But guess what? You can't go back on that. It's contractually done. And there's this non-compete where you gotta go, if you wanna leave, you gotta surrender a bunch of stuff if you leave early, and you gotta now start up or buy a practice 15 miles away or more, huge inconvenience, and you're regretting that decision, called seller's remorse.

I cannot tell you how often I see that. When it comes to DSOs, I feel like I see that a lot more often than I see somebody being very happy with the sale to a DSO. Now, that said, there are different shades of DSOs out there. There are some that I think are truly trying to be doctor-friendly, and, you know, a number of my clients, uh, formed one called, um, Saving Private Practice Dental Management, SPP Dental Management.

I'd say of all of those I know, theirs has the b- I, I would say the most sincere intent. It's doctor-founded, doctor-led, and they're really trying to provide a benefit, uh, without sort of selling out, so to speak, to corporate dentistry. I don't wanna say that they are all the same, but I'm just saying, generally speaking, when I look at analysis from a lot of these DSOs, like Imagen or I mean, there's, there's a number of these small and medium-sized DSOs out there.

Aspire, I think is one. Whenever I get these, there's so many I'd- I've never heard of before, and I do the analysis on the offer letter, I'm like, "What is this seller thinking? This is a terrible decision." And I talk them off the ledge simply by showing them the numbers and creating transparency around that.

So this isn't an absolute statement about selling to a DSO or not selling to a DSO. It is a more than usual statement about selling to a DSO. And the reason I bring it up in this context of brokers is because brokers tend to be incentivized to lead you to a DSO because the compensation to the DSO tends to be higher.

I think it's marginal thinking because if you sell all practices to DSOs, eventually there's no more practices to sell. Now that's sort of in theory, maybe not in concept. In my personal opinion, there's been way too much over-leverage among these DSOs, too much money going into it, too high valuations, too much loose t- uh, terms in the contract, and too much seller remorse.

And as soon as interest rates go up, as soon as capital tightens in the PE space, which is going to happen, it always does, it's cyclical, you're gonna see the music stop. There's gonna be a lot of DSOs who have too much debt, their revenues aren't covering all their expenses, and they have to do a fire sale.

They go into receivership, bunch of practices come on the market for sale, bringing prices down, only exacerbating the problem for the DSOs. That is my crystal ball, at least my attempt at seeing in the crystal ball. So all you DSOs out there, you may not like my advice and my thoughts on this, but this is my take on the industry as I am getting a front row seat involved in so many of these transitions.

So ask if your broker's trying to send you to a DSO, ask the hard questions. "How long do I have to work for? What is the net present value of my, of all my income if I sell, and what is it if I don't sell?" Now, frankly, you're gonna need probably a, a finance analysis or a good CPA to run those numbers in Excel, uh, like Practice CFO, we do that all the time.

Uh, but ask those questions. How are you compensated? Are you compensated differently by selling to a DSO than a private buyer? All of those questions should be, should be asked with the broker, and a good, honest broker is gonna give you a good, honest response. But you gotta do your due diligence here, is what I'm saying.

And you brokers will probably acknowledge that some of your counterparts probably aren't as ethical as you are, and that's in any industry, so I hope you don't take that the wrong way. Uh, I am always, always gonna try to channel my clients to a good broker that I believe in, that I trust, who will do the honorable thing.

All right. Lastly, let me, uh, discuss what this software that I developed called Practice Orbit. Practice Orbit is doing two things. It's helping create a single place for dental practices to be listed. It launched formally just a few months ago in January. We've got 10 brokers coming on the site, and we're moving all their listings on the site.

We've got more brokers to come, and in my perfect world, where this is gonna go is every broker is gonna say, "Hey, I wanna be like the auto dealership on the auto dealership street," where they all come together on the same street. Why? Because they benefit from an efficient marketplace. You get all the buyers coming sort of in the same pool, in the same place, and it creates faster matchmaking.

Faster matchmaking. So that's number one, a centralized marketplace consolidating the supply and demand of buying and selling dental practices. That's number one. Make it easy for the buyers. Make it easy for the buyers. Everybody benefits by doing that. That's number one, and Practice Orbit currently has about 700 buyers in the software, and those buyers are increasing by the day.

Number two is once the buyer is found for a given practice sale, it provides tools for the broker, attorney, accountant, and the d- and, and the bank, and of course, the dentist to navigate that sale. For example, there's a digital NDA, which makes it very easy for a buyer to click Sign NDA to learn more about the practice.

Who's the doctor's name? What's the address? Let me see the pictures. All of those are behind the NDA wall, and buyers can see anonymous detail with a login, but they cannot see the identifiable details in order to maintain anonymity. Once that NDA is signed digitally by the buyer, which literally takes a couple seconds, then the broker will be able to see it, vet that buyer, because in the system, in the Practice Orbit system, the buyer is going to have their profile filled out.

What's their credit score? How long have they been out of practice? Where are they trying to buy? What is their production level? All of these things, these things that help a broker identify is this a legitimate buyer? 'Cause we don't wanna go leak information about the doctor selling the practice unless we have a legitimate buyer, uh, to provide that information to.

So that's an example, a digital NDA. Number two is a secure way of sharing documents with the buyer. So the buyer is found and vetted, and an offer letter is submitted. Now, buyers can submit an offer letter through the Practice Orbit system, or their attorney can, uh, give them a custom offer letter, which can be uploaded as a PDF inside of the system.

Once that is done, now the system knows we are, we are in escrow. Now we move into du-due diligence and the, the, the flow of work from offer letter being signed by the buyer and the seller to ultimately closing on that practice and ownership transferring hands During that process, there are built-in digital chat rooms.

In fact, when the NDA is signed at that first point, every buyer that submits an NDA in the system and is approved by the broker, a digital chat room opens up for the broker and that particular buyer to ask questions across each other. This is what a good marketplace platform does, is the transaction occurs inside of the login, not outside, and it keeps everybody using a common set of tools.

For example, everybody who, um, gets a, a place to stay on Airbnb follows the exact same process. Everybody does. Everybody who gets an Uber follows the exact same process. Everybody who checks out on Amazon follows the exact same process. These are incredible tools that create efficiency and same-pageness, so to speak, among the people involved in that transaction.

Now, a dental practice sale is a little more complicated than buying a pair of shoes. That is true. But also, who would have thought that people would rent out their home to complete strangers through a technology platform with people that they never met before in their life? In fact, Reed Hastings, the founder of Netflix, or one of the founders of Netflix, originally told the founders of, um, of Airbnb, "There's no way I'm gonna invest in this.

Who's gonna let strangers in their house?" And of course, he didn't invest. Fast-forward a year when he realized that a home is people's greatest asset and they don't monetize it. He's like, "Actually, this is gonna unlock people's biggest asset to monetize. This is huge." And he changed his mind, and he learned that people felt comfortable actually signing up and going and staying in a stranger's house, and owners letting strangers stay in their house.

And so it's incredible the amount of trust that actually can be introduced into a complicated private transaction through good technology, and that's what Practice Orbit is doing. It's, it's renovating or introducing new technology to create efficiencies and trust to benefit everybody in this marketplace.

All right, other tools is when that LOI is signed, buyers in the system can get pre-qualified with banks, and this is actually how Practice Orbit makes its money, and I'm very transparent about this. Sellers don't pay Practice Orbit anything. They don't pay Practice Orbit anything, and brokers don't. Now, if Practice Orbit feeds a broker a listing, there might be a little bit of a, of a technology referral fee, which is very common in technology companies, but the seller doesn't pay that, the broker does.

Buyers need to set up their vendor stack when they step into ownership. They need to get a loan. They need to get a CPA. They need to get certain other technologies and services, and Practice Orbit helps them vet and find and get discounted rates for those different things, and those vendors provide compensation to Practice Orbit as a technology.

For example, maybe you've heard of Rocket Mortgage, very popular online program to get home loans quickly. Rocket Mortgage essentially is a marketing platform for home lenders and banks, and in this, in a way, that's what Practice Orbit is as well. There's gotta be a way to monetize. It's called a business model.

What is the business model? Well, that's it right there, and I'm very transparent with you about that. I think that's the right thing to do So those other tools that once the LOI is signed, now the broker, attorney, banker, accountant, they can all log in and guess what? There's a single transaction room with a checklist that says, "Here's what the attorney does.

Here's what the accountant does. Here's what the broker does. Here's what the lender does. Here's what the CPA does." And you can see in one place where we are in the flow from LOI to closing, and it creates incredible organization. Documents are released when and only when they should be released. For example, bank statements, payroll reports, tax returns.

These are not si- these are not transferred until the letter of intent is signed. You don't wanna transfer such personally identifiable documents before that LOI is signed, and the system will automatically hold, reserve, and protect those documents until the proper point in the transition flow to release those documents, making it easy for everybody.

And we have so many cool tools. Brokers can upload their PDF of their prospectus, and it will automatically populate the digital prospectus using an AI tool, an AI tool that is built to be secure and not feed any of that data to the AI companies. All of this has been taken into account. And that is the mission of Practice Orbit.

Centralized marketplace for the buying and selling of healthcare practices in the private space with high-integrity brokers helping doctors to navigate that sale efficiently and timely and helping everybody maximize the value out of it. I truly believe in it. I'm excited about where it's going, and I'm always in need of feedback of the market to know how to make that even better.

All right. Lastly, uh, my bottom line here is this: Brokers remain critical because transitions are high stakes, emotionally, financially, and they are complex. And Practice Orbit, the technology, practiceorbit.com, is an opportunity to unify and modernize the ecosystem around these brokers, making brokers more effective, sellers more visible, and the whole market more connected.

And it is true, as with all technologies, there will be early adopters, there will be late adopters. There will be people who wanna reject it. There will be people who wanna stay in the old way of doing things. And the people who get on board and adopt it and use it and create it as a useful tool to empower them are the ones who really benefit.

And just wait. Eventually, our brokers are gonna have reviews, and you'll be able to see reviews on those brokers, starred reviews and comments and reviews and things like that to help it be easier for sellers to choose the right broker. All right. If you're a seller thinking about selling anytime soon Y- uh, again, you can create a free a- anybody can create a free account on Practice Orbit.

Anybody. But if you're a seller and you say, "Hey, Wes, I'd like to have an initial assessment and conversation before I go choose a broker," Practice CFO and I will offer to do that. There's a really cool tool in the system. It's called a price assessment, and all you need is your tax return for your most recent business year.

If you're an S corp, that's your 1120-S. If you're a C corp, which I hope you're not, but maybe you are, that's an 1120. If you're sole prop, that is your Schedule C. And if you're a partnership, that is your 1065 tax return. And you can click a button, and it will sh- show you exactly which page, and you take about six boxes off of that tax return.

Extremely easy. You type 'em in, you ask... You answer a single question about how much personal stuff you run through the practice, and then it will give you a reasonably good low, medium, and high valuation or price estimate of the practice. And if you put in an estimated broker fee, and you put in the amount of debt you have left on your practice, it will calculate after debt, selling expenses, and taxes, including your state tax if you put in your state, how much is left that you'll actually be able to take home once the dust settles.

How valuable is that tool? And I will run that tool with you. You don't need me. You can do it on your own. You can have your CPA do it, but we will run it. We'll have that conversation, and then I'll try to guide you in the right direction to choosing a broker and listing and successfully selling your practice.

And that is my take on the incredible value of a good dental practice broker and what I hope to be the incredible value of a great technology to support the broker and the ecosystem of dentists buying and selling their practices and their teams. Thanks, everybody. Until next time.