Previous, we shared Part 1 of our DSO Crash Course featuring Dr. Mark Costes, Dr. Bill Keith, and Dr. Ben Kacos. In that session, they covered the big-picture strategy behind preparing your practice for partnership.
In Part 2, they went into the tactical side of preparation. If a DSO or private equity group evaluated your practice today, what would they actually see in your numbers?
When the due diligence process begins, buyers are not just looking at production. They are analyzing every line of your financials, your systems, and your operational structure.
Here are some of the most important insights from the conversation:
Key Takeaways
1. Clean up your books before the process begins
Many dentists run legitimate personal expenses through the business to reduce taxable income. Things like travel, continuing education, phones, and other lifestyle expenses are common.
When preparing for a partnership, these items need to be clearly documented and separated so they can be properly “added back” during valuation. Clean financials make the process faster, smoother, and often lead to higher valuations.
2. Separate business entities and avoid co-mingling funds
One of the biggest red flags buyers see is messy accounting. Separate LLCs, separate credit cards, and separate bank accounts make it much easier to understand the true performance of each individual business unit.
Clean structures allow buyers to clearly see your EBITDA and growth potential.
3. Track capital expenditures properly
Large purchases like CBCT machines, implant motors, and major equipment should be categorized correctly as capital expenditures rather than routine expenses.
Why does this matter? Because it helps buyers understand the real operating profitability of the practice instead of confusing growth investments with operating costs.
4. Small expenses can have a huge impact on valuation
Every dollar of expense reduction can translate into five to seven dollars in practice value during a partnership deal. Something as simple as credit card processing fees can dramatically impact valuation if left unchecked.
5. Structure debt intelligently
Debt can be a powerful growth tool, but the structure matters. Practice loans and real estate loans should be separated so the real estate can remain an income-producing asset after a partnership transaction.
Want to Talk About Your Practice Strategy?
If you’re thinking about scaling, transitioning, or eventually partnering, our team would love to talk with you.
Schedule a free call with DSN and we’ll help you understand where your practice stands and what your next smartest move might be. Inside DSN we have more webinars like this as well as a network of actual practicing dentists that can share their own practice valuation experiences!
For your success,
The DSN Team
