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Show Notes

Are you relying on the sale of your practice to fund your retirement? Before you accept an attractive offer from a DSO, it’s critical to understand what those numbers really mean — and what alternatives exist.

In this episode, Kirk Behrendt interviews Dr. Bob Margeas, founder of Iowa Dental Group in Des Moines, Iowa, about how he evaluated multiple DSO offers, broke down EBITDA and earn-outs, and ultimately chose a different transition strategy. They discuss adjusted EBITDA, recap risk, associate buy-ins, creative ownership structures, and why equity matters more than a headline purchase price. If you’re considering selling your practice — or simply want to understand your options — listen to Episode 1010 of The Best Practices Show!

Main Takeaways

1. EBITDA is calculated differently than a dentist’s net income and often includes add-backs that significantly change a practice’s valuation.
2. Most DSOs evaluate practices on an accrual basis rather than cash basis accounting, which affects perceived profitability.
3. Earn-outs and recapitalization payouts are tied to performance and market conditions and are not guaranteed.
4. Selling to a DSO typically requires the dentist to stay for several years, effectively replacing future EBITDA with the sale proceeds.
5. Structuring an associate buy-in based on trailing three-year profits can allow debt to be serviced without increasing production.
6. Ownership equity creates long-term wealth potential that an associate-only model does not provide.
7. Dentists who are financially independent have more flexibility and leverage when evaluating transition options.

Snippets

1. 00:00 Intro
2. 03:00 The difference between a DSO and a DPO.
3. 05:00 Understanding EBITDA and common add-backs.
4. 08:00 Why DSOs prefer accrual accounting over cash basis.
5. 10:00 How earn-outs and clawbacks work.
6. 13:30 Hiring an associate based on personality and communication skills.
7. 15:00 Structuring a 20% buy-in using trailing three-year profits.
8. 17:00 Reducing clinical days while maintaining profitability.
9. 21:00 Merging practices into a holding company model.
10. 24:00 Why saving early creates flexibility at transition.
11. 30:00 “I’m just a referee” — communicating treatment without pressure.
12. 34:00 Why equity ownership is essential for long-term wealth.

Guest Bio/Guest Resources

Dr. Bob Margeas is the founder of Iowa Dental Group in Des Moines, Iowa. He is a nationally recognized…