Partnerships & Affiliations Takeaways | Page 2

Valuation trends before , during , and after COVID : Separating the “ players ” from the “ pretenders ”
DSO panelists called last year ’ s pandemic “ an unprecedented time in dentistry ,” as well as a galvanizing moment that brought together field and support services and strengthened existing bonds . The early days of the pandemic were defined as , “ Everyone in the foxhole together .” But those months also separated the players from the pretenders , with many DSOs emerging as true value-added partners . As one participant noted , “ When the tide is rising , everything ’ s good . But when times become challenging , a partner ’ s true colors show .” If they have a steady hand at the tiller , they will help make decisions — even those that aren ’ t easy .
Nearly everyone worried at some point during the pandemic about responsibly supporting their practices and patients , so discussions about growth were sidelined for a bit . Now , as George Radigan noted , “ You have a mass pool of buyers who need to make up for the lost year to hit their plan .”
Selecting new markets
The panelists who participated in the discussion represented more than 600 locations across dozens of states . The depth of their collective experience was evident as they shared their thoughts on how to thoughtfully expand into new cities and states . Some key considerations :
• Proximity to other practices — if you ’ re thinking of expanding into other states , look at states that are contiguous to existing locations , to make it easier to support them
• Proximity to dental schools
• Ability to recruit dentists quickly
• Medicaid environment
• Ease in licensing — It takes three days to receive a license in South Carolina ; in Texas it takes three months
• Fee schedules .
Maximizing values of multiples
Dental groups considering expansion should consider the two main fundamentals of a practice — cash flow and the risk associated with maintaining it . Multiple practices with multiple providers naturally have more cash flow and less risk . But inside that cash flow are three critical considerations :
• Revenue
• Facility ’ s “ fixed overhead ” costs
• Staffing costs
Those thinking of adding a practice would be wise to look at the potential addition from both a quantitative and qualitative standpoint , as both are needed for success . As David Pegg noted , “ Even if a practice has attractive cash flows , if it has a poor marketplace reputation , we ’ ll most likely steer away from it .”
The best candidates are those with strong historical evidence of growth , favorable market location , positive patient experience based on online reviews , clinical quality , and strong opportunities for growth . And
www . faef . com / dental