DSO Calculator

Hey everyone, thanks for taking the time to read this. You might have seen a previous version of my DSO calculator, but I've made some updates to incorporate more details. This tool helps determine if selling to a DSO is financially better than continuing with traditional practice.

This all started because I love private practice, but I also want to do what's best for my family. If there’s an opportunity to create generational wealth, I’m open to considering it, even if it means giving up some ownership. However, from everything I’ve seen, traditional practice still seems to be the better financial option.

Initially, I compared simple variables like multiples and ownership retention over five years, and it seemed like a no-brainer with traditional practice showing over a million dollars more in returns. But I hadn’t considered important factors like tax advantages and investment opportunities, particularly long-term capital gains, which can provide significant tax benefits.

In my recent calculations, I also accounted for longer-term investments, extending the period from 5 years to 20 years. I looked at various variables such as collections, overhead, EBITDA, years of work, ownership retention, salary, living expenses, and recapitalization potential. I realized that if you sell your practice, you often have to reinvest a portion of the sale price and consider potential market returns on those investments.

What I found is that while selling to a DSO has some short-term advantages, traditional practice tends to be more profitable in the long run. For example, in a scenario where you sell 100% ownership, traditional practice ends up being better by around $8 million over 20 years. Even when considering above-average practices and typical overheads, traditional practice still generally comes out ahead.

It’s important to consider all factors, including how much you need to withdraw from savings for living expenses if you sell. If your living expenses exceed your post-tax salary, you’ll need to dip into your savings, affecting your long-term financial stability.

In conclusion, maintaining ownership of a traditional practice offers better long-term financial benefits. This updated calculator incorporates various factors and scenarios to help you make an informed decision. I encourage anyone interested to dive into the numbers and provide feedback. I hope this helps you decide what’s best for your situation.

Thanks for watching, and good luck!