10 Concepts We Can Learn About DSO/MSO From How2Exit's Interview W/Eric Gall - Watch Here
Here is what my team and I learned from this interview: (These are notes from team members, writers, sometimes AI, and even listeners who submitted what i learned loosely edited and shared here) - If it seems a bit unrefined, you're reading our notes, so. yeah. -Ron
Concept 1: Buy and Sell Businesses
The process of buying and selling businesses is complex and requires a great deal of knowledge and experience. This is why it is important to have the right resources and guidance when going through the process. The How to Exit podcast is an invaluable resource for those looking to buy or sell a business. On the show, we interview business owners, industry leaders, authors, mentors, and other influencers to provide insight into the process.
The process of buying and selling a business typically involves a number of steps. First, it is important to identify the right business to purchase. This involves researching the industry, the company, and the market. Once the right business is identified, it is important to understand the financials and legal aspects of the business. This includes understanding the financials, such as the revenue and expenses, and the legal aspects, such as the contracts and agreements.
Once the financials and legal aspects are understood, it is important to negotiate the terms of the purchase. This includes understanding the value of the business, the terms of the purchase agreement, and the terms of the financing. It is important to ensure that the purchase agreement is fair and equitable and that the terms of the financing are favorable.
Once the purchase agreement is finalized, it is important to complete the due diligence process. This involves examining the financials, legal documents, and other aspects of the business. This is to ensure that the purchase is a good investment and that the business is in good condition.
Finally, it is important to complete the closing process. This includes ensuring that all documents are in order and that the transaction is completed in a timely manner. It is also important to ensure that the business is transferred properly and that the buyer and seller are both satisfied with the outcome.
The process of buying and selling a business is complex and requires a great deal of knowledge and experience. Fortunately, the How to Exit podcast is an invaluable resource for those looking to buy or sell a business. Through interviews with industry leaders, authors, mentors, and other influencers, we can gain insight into the process and ensure that the purchase and sale of a business is a successful and rewarding experience.
Concept 2: DSOs and MSOs Buy Practices
One of the topics discussed on the How to Exit podcast is the purchase of dental and medical practices by Dental Service Organizations (DSOs) and Medical Service Organizations (MSOs). These organizations are set up to purchase and manage practices, allowing the dentist or doctor to focus on the core aspects of their profession, while the organization handles the administrative and financial aspects. The podcast explains that the goal of these organizations is to provide a stable and reliable source of income for the dentist or doctor, while also allowing them to focus on providing the best care to their patients.
The podcast also outlines the benefits of DSOs and MSOs for buyers. Because these organizations are often well-funded and have access to a variety of resources, they are often able to purchase practices at a lower cost than individual buyers. Additionally, they are able to offer a variety of services to the practice, such as marketing, financial management, and operational support. This allows the seller to focus on the core aspects of taking care of patients while the DSO or MSO takes care of the other aspects.
Finally, the podcast explains that DSOs and MSOs are a great option for those looking to buy a practice. They provide the buyer with access to resources and expertise that would otherwise be unavailable, as well as the ability to purchase a practice at a lower cost. Additionally, they provide the buyer with the assurance that the practice is being managed properly and that the practice is being run in accordance with all applicable regulations.
Overall, DSOs and MSOs are a great option for those looking to buy a practice. They provide access to resources and expertise that would otherwise be unavailable, as well as the ability to purchase a practice at a lower cost. Additionally, they provide the buyer with the assurance that the practice is being managed properly and that the practice is being run in accordance with all applicable regulations. For those looking to buy a practice, DSOs and MSOs are a great option.
Concept 3: Buy Vs. Build
DSOs and MSOs can be quite expensive to set up if you plan to acquire across state lines, each state has fees and rules, the legal and set up of an MSO or DSO can be into 5 figures.
According to the podcast, DSOs typically look for practices with at least half a million dollars in EBITDA.
Additionally, the cost of setting up a dental office can be quite high, with estimates ranging from $60,000 to $80,000 per operatory. This makes it difficult for younger dentists to purchase a practice since they are often competing against DSOs with deep pockets.
There is no requirement to set up an MSO or DSO for the licensed medical professional. Dentists, doctors, and veterinarians can buy and/or sell practices they wish to operate. In the majority of the states to buy one of these operations as a non licensed individual you must form an MSO/DSO.
Concept 4: Operate a Business, not Create One
For those looking to own a business but not create one from scratch, there are other options. Many entrepreneurs come out of college wanting to own a software company, video game company, or e-commerce store. However, many of these businesses can be difficult to start and maintain. As an alternative, entrepreneurs can purchase an existing business. This can be a great option, as it allows them to make money from day one without having to build a business from the ground up.
The majority of businesses that are sold are done so by operators, or people who have experience running a business. These individuals are usually in their late thirties or early forties and are looking to move on from their current boss. They are looking to buy an existing, functioning business and make it better, rather than starting one from scratch. This can be a great option for those who want to own a business but don’t have the experience or resources to start one.
In addition, purchasing an existing business can be a great way to invest in a community. Many manufacturing companies, lawn services, and other small businesses employ dozens of people and can have a significant impact on the local economy. For this reason, it is important for these businesses to change hands and not close down.
Overall, purchasing an existing business is a great option for entrepreneurs who want to own a business without having to create one from scratch. Not only does it provide an opportunity to make money from day one, but it can also have a positive impact on the local community.
Concept 5: Takeover Businesses To Save Them
Takeover businesses are a great way to save businesses that are struggling or in decline. This is especially true for businesses that have been owned by the same family for multiple generations. As the family ages, they may not have the energy or motivation to continue running the business. In this case, a takeover can be a great way to save the business, keep it in the family, and ensure its success for years to come.
Takeovers can also be beneficial for businesses that are in decline due to lack of innovation or lack of interest from the current owners. In this case, a new owner can bring new ideas and energy to the business, allowing it to become profitable again. This is especially true for manufacturing businesses, which often require specialized knowledge and experience to stay competitive. By bringing in a new owner, these businesses can become profitable again and continue to provide jobs and economic stability to the local community.
Finally, takeovers can be beneficial for businesses that are in need of a fresh start. This is especially true for businesses that are facing ethical or legal issues. In this case, a new owner can bring in a new set of values and ethical practices, allowing the business to move forward in a positive direction. This can be a great opportunity for entrepreneurs who want to make a positive impact on the community and the world.
Overall, takeover businesses can be a great way to save businesses that are struggling or in decline. Not only does it provide an opportunity to make money from day one, but it can also have a positive impact on the local community. By bringing in a new owner, businesses can become profitable again and continue to provide jobs and economic stability to the local community. Furthermore, it can be a great opportunity for entrepreneurs who want to make a positive impact on the community and the world.
Concept 6: SBA Changes Open Opportunities
Recently, the Small Business Administration (SBA) announced changes to their rules that could open up more opportunities for takeover businesses. In the past, if a buyer used an SBA note to purchase a business, the seller had to fully exit the business and sell 100% of the company. Now, the SBA has allowed fractional ownership, which means the seller can retain a portion of the ownership and stay on longer term.
This opens up a world of possibilities for businesses in the seven to eight million dollar range. Sellers can now sell a portion of their company to employees, family members, or even outside investors. Furthermore, the SBA loan can be used to provide working capital for businesses that need to purchase new equipment or expand their operations. This opens up opportunities for entrepreneurs who don’t have the capital to make these investments.
Overall, the SBA changes are a great opportunity for businesses that are struggling or in decline. Not only can it provide a way to save these businesses, but it can also open up opportunities for entrepreneurs who want to make a positive impact on their community. The SBA changes are a great way to make sure these businesses continue to thrive and provide economic stability to their local communities.
Concept 7: Take Chips Off The Table
One of the most important aspects of the SBA changes is the ability to “take chips off the table”. This term refers to the ability for business owners to take some of their equity out of their business and use it for retirement or other investments. This is especially beneficial for business owners who have put all their money back into their business and not built an outside portfolio that will sustain them once the business is sold.
The SBA changes provide business owners with the opportunity to sell to their kids or other third parties. This allows the business owner to leverage an SBA loan and purchase 80% of the company over 10 years. As the parents exit, they can take some of the equity out of their business and use it for retirement or other investments. This is especially beneficial for business owners who have put all their money back into their business and not built an outside portfolio that will sustain them once the business is sold.
The SBA changes also provide business owners with the opportunity to train their kids to operate the business and slowly back themselves out as they feel confident and comfortable with them running the business. This is especially beneficial for business owners who have four or more kids in the business and are not ready to totally leave. The SBA changes give them the opportunity to take some chips off the table and use it for retirement or other investments.
Overall, the SBA changes are a great opportunity for businesses that are struggling or in decline. Not only can it provide a way to save these businesses, but it can also open up opportunities for entrepreneurs who want to make a positive impact on their community. The SBA changes are a great way to make sure these businesses continue to thrive and provide economic stability to their local communities.
Concept 8: Train Employees for Success
One way that businesses can take advantage of the SBA changes is to train their employees for success. Training employees can help ensure that they have the necessary skills to help the business succeed. Training can range from leadership and management skills to technical skills. It is important to make sure that the training is tailored to the specific needs of the business. This will ensure that the employees are well-equipped to handle the tasks that are necessary for the business to thrive.
In addition to training employees, businesses should also consider investing in resources to help them bring their employees up to speed. This can include bringing in outside resources to help the employees learn new skills and develop their existing ones. It is also important to find the right people to lead the training. Some people are great leaders but not necessarily great trainers, while others may be great trainers but horrible leaders. It is important to find the right person to bridge the gap between the two.
Finally, businesses should consider offering fractional ownership to their employees. This can be done through the SBA and can be a great way to give employees a stake in the business. This can also be a great way to ensure that the employees are invested in the success of the business.
Overall, training employees for success is an important part of any business. It can help ensure that businesses are well-equipped to handle the tasks necessary for success. It can also help create a sense of ownership and investment in the business among employees. By taking advantage of the SBA changes and investing in resources to bring their employees up to speed, businesses can ensure that they have the necessary skills to help the business succeed.
Concept 9: Let Go To Succeed
However, it is also important for business owners to understand the importance of letting go. It can be difficult to let go of the reigns, especially when a business has been built on the owner’s hard work and dedication. However, by allowing employees to take on more responsibility and learning to delegate, business owners can create a stronger team and a more successful business.
By allowing employees to take on more responsibility, business owners can create a sense of ownership and investment in the business. When employees are given the chance to take on more responsibility, they become more invested in the success of the business. This can lead to increased productivity and better performance. Additionally, by allowing employees to take on more responsibility, business owners can free up their own time to focus on other aspects of the business.
In addition, business owners should also learn to delegate. It can be difficult to let go of the reigns, but it is necessary for the success of the business. By delegating tasks to employees, business owners can ensure that the tasks are completed efficiently and effectively. Additionally, by delegating tasks, business owners can free up their own time to focus on other aspects of the business.
Overall, letting go is an important part of business success. By investing in resources to bring their employees up to speed and learning to delegate, business owners can create a stronger team and a more successful business. By allowing employees to take on more responsibility and learning to delegate, business owners can ensure that the tasks necessary for success are completed efficiently and effectively.
Concept 10: Close With Confidence
When it comes to selling a business, close with confidence is key. It is important for sellers to be comfortable with the process and the decisions they have made. To ensure this, sellers should have conversations with potential buyers about their plans for the future. This can help sellers feel more secure in their decision and ensure that they are getting the best deal possible.
Sellers should also think about what their plans for the future are before making any decisions. Thinking about retirement, traveling, spending time with family, and other bucket list items can help motivate sellers to make the best decision for their future. It can also help them remember why they wanted to sell in the first place and keep them focused on their end goal.
Finally, sellers should be aware of their target market and how to reach potential buyers. Knowing the industry they are in and the geographical area they are targeting can help sellers find the right buyers and make sure they are getting the best deal possible. By being aware of their target market, sellers can ensure that they are getting the best deal possible and that they are making the right decision for their future.
Overall, close with confidence is essential for success when it comes to selling a business. By having conversations about their plans for the future, thinking about their bucket list items, and being aware of their target market, sellers can ensure that they are getting the best deal possible and making the right decision for their future.
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