DSO Partnership Considerations for Owners
While a DSO partnership with a doctor can help grow your business, there are several important factors to consider. Learn about how to choose the right partner, how to compensate them, and more.
A version of this article was originally published in DEO Magazine.
Choosing the Right Partner
As a business grows, it can be tricky to scale culture, work ethic, and patient care. And business owners can’t be everywhere at the same time. As you grow, you could consider including someone else in a DSO partnership.
A partnership is a long-term investment in the growth of your business. You’ll need to evaluate the personality, professionalism, and patient care that can help you retain value in your practice when you’re not there. While a DSO partnership can keep a valuable doctor in your business, you want to be sure it’s the right individual.
Mitigating Risk in Your DSO Partnership
Partners will want a seat at the table and a sense of control. So be proactive and set the boundaries at the beginning of the partnership.
Define a partner’s limits of control, responsibility, and financial commitment. All will impact the quality of your DSO partnership. If imbalance is felt by either party, it will deteriorate the relationship. Ask yourself: Is this someone I can work with, depend on, and respect for years to come?
Duties & Responsibilities
When providing an opportunity for someone to share in the profitability of your organization, consider an increase of their obligations.
Welcoming input from the partner will help them feel fully invested in the direction and growth of the organization. The new partner can be used as an ally to implement change.
There are several choices available when keeping a provider vested in the business. Some are equity-based, while others are focused on increased compensation rates, with or without a buy-in. Here are a few types of DSO partnerships:
Collection Rate Partner
Award a collection rate partner with a higher rate of compensation in exchange for a buy-in. The amount paid by the prospective partner will not be refundable. But in exchange, they will be guaranteed a higher compensation rate. Since the break-even of the payment vs. the pay-out would extend over multiple years, this binds the partner to the practice.
Profit Sharing Partner
Gift a profit sharing partner a share of profits earned by the business. This method offers a baseline profitability percentage or dollar amount. It also pays a portion of the practice’s profits over the stated amount.
Consider debt obligations when configuring this method. Debt reduces the profits of the business, thus reducing the payout a new partner would receive. You want to be sure the partnership is equitable.
Stock Purchase
Finally, you can choose to sell shares of your practice. This method is typically limited to the single location where the partner would operate. It’s also a “forever” deal and requires the long-term commitment of energy, time, and financial resources to be successful. A fully vested partner can be a major asset, but all assets have corresponding liabilities. Consider this option carefully—it can provide a huge incentive, but also create major headaches.
Skytale Can Help With Your Partnership Strategy
If you would like help with partnership strategy, acquisition, de novo growth, or financial consulting, contact us today.
