The Critical Difference
By Bob Septak, MBA
UPBA President & Broker
Many specialists are often presented with “high-multiple” corporate offers that look attractive on paper, but they frequently overlook the long-term personal and professional commitments required to achieve those numbers.
Two Critical Strategy & Timing Considerations
The 5-Year Head Start: If you are leaning toward a corporate buyer, you must start your search up to 5 years sooner than you would for an individual sale to account for the mandatory post-sale employment contract.
The “Foot on the Gas” Factor: While many periodontists naturally begin to slow down as they approach retirement, a DSO sale requires you to maintain peak surgical pace for likely five years post-sale to hit your incentives and earn-outs. You must honestly assess if you have the stamina for that marathon.
The “Sprint” to Sell: Conversely, selling to an individual buyer is often a “sprint”—a faster transition (6-12 months) that allows for total liquidity on day one and a much shorter path to true retirement.
Download the UPBA “Check vs. The Clock” executive summary, which compares payout structures, income changes, and the true “work-back” reality for each path OR continue reading below. I’d love to schedule a 10-minute call to discuss your current energy levels and long-term goals to see which strategy might be the best fit for you.
Executive Summary
The “Check vs. The Clock” — Choosing Your Exit Path
When a periodontal practice hits the market today, sellers are often presented with two wildly different offers: a “clean” exit from an individual specialist or a “high-multiple” partnership with a DSO. While the corporate number is usually higher, it comes with a longer timeline and more strings attached.
Here are how the two paths compare when you look past the initial offer.
1. The Payout: 100% Upfront vs. Tranches
Individual Buyer: Typically, these are 100% cash-at-close deals. Once the keys are handed over, the financial risk shifts entirely to the buyer.
Corporate (DSO): You will likely receive 60% to 80% in cash up front. The remainder is often held back in “rollover equity” or structured as an earn-out. This means a portion of your sale price is essentially “at risk” and depends on the practice hitting specific performance milestones over several years.
2. The Timeline: The “Work-Back” Reality
Individual Buyer: These transitions are built for speed. You are usually looking at a 6-to-12-month period to introduce the new doctor to your referring GPs before you sail into the sunset.
Corporate (DSO): Because the DSO is buying your clinical hands and referral “stickiness,” they typically require a 5-year work-back commitment. If you aren’t ready to commit to five more years of full-time surgery, a corporate deal may not be the right fit.
3: Take-Home Pay: Owner vs. Employee
Individual Buyer: You keep 100% of your profits until the day you close.
Corporate (DSO): Post-close, you become an employee. Most sellers see a 25% to 40% reduction in personal income because they are no longer collecting the practice’s profit (EBITDA)—they are simply being paid a percentage of their personal production (typically 25-30%).
Beyond the financials, the “readiness” of the doctor is the most important factor.
The 5-Year Head Start: If you are considering a corporate buyer, you need to start your exit search up to 5 years sooner than you would for an individual sale to account for the mandatory employment contract.
The “Foot on the Gas” Factor: Often, when a periodontist starts considering a transition, they have naturally begun to take their foot off the accelerator.
With an Individual: This “coasting” is generally not a problem.
With a DSO: You must keep your foot on the accelerator for likely the next five years to hit your incentives and earn-out. You must honestly assess if you have the stamina to maintain that peak surgical pace.