The DSO landscape is ever-evolving, and rising interest rates have directly impacted the deal structures DSOs most commonly offer. To explain what’s happening and what dentists can do about it, Kevin Cumbus joins the Prosperous Doc® podcast. Host Shane Tenny, CFP® presses into the history of DSOs and what has changed since the pandemic.
Owning a dental practice is hard work. After years of serving the community and dealing with insurance companies, many dentists are ready to sell to the first person who gives them an offer. Kevin Cumbus says to wait.
Kevin is the founder and president of TUSK Partners, a firm specializing in selling successful dental practices to dental support organizations (DSOs). TUSK has closed $850 million of deals in the past seven years, and Kevin wants every dentist in independent practice to know they have options.
Many dentists have only heard outdated advice from financial planners about how and when to sell a practice, leading them to bite too early when they receive their first offer from an interested DSO.
“I felt like there was too much value being left on the table for dentists and underrepresented groups,” Kevin says. TUSK exists to help hardworking dentists realize the full value of the practices they’ve given their lives to build.
Dentists have more options than ever, but they should be careful to choose the right partner. “Who you partner with really, really matters,” Kevin explains. “You will certainly be rolling equity into their business.” That equity could secure financial independence, but a bad deal could postpone a dentist’s retirement.
Name: Kevin Cumbus
What he does: Kevin is the founder and president of TUSK Partners, an M&A firm that exclusively represents sellers in transactions with DSOs. He has valued and sold over 120 dental practices, managed over $100MM of revenue in a DSO, and is the co-owner of a startup dental practice, Mundo Dentistry.
Company: TUSK Partners
Words of wisdom: “Today, there is more opportunity, more buyers for dental practices than there ever have been. And that's a really good thing if you own a dental practice because you have more options than you've ever had … I would encourage everyone to at least get the information about what their practice would be worth in an exit to a DSO compared to an exit to a dentist so they can make an informed decision.”
Connect: LinkedIn
Top takeaways from this episode
[2:14] Family dentistry full circle: Kevin’s father is a pediatric dentist. After Kevin’s career in finance and investment banking, he found himself back in the dental world, this time with a new perspective. TUSK now helps dentists understand the value of their practice and prepare for an exit.
[07:32] Life before DSOs: Just 15 years ago, there weren’t many options for dentists looking to retire. Unless a dental school graduate came along to buy it, many had no choice but to close up shop and get no value for their practice.
[10:19] Addressing the need: Early DSOs such as Heartland Dental solved two big problems in the industry. Not only did retiring dentists have an exit path, but new associates now had an easier time finding work. Kevin explains how these benefits unfolded.
[13:56] The rise of corporate dentistry: Today, more than 150 DSOs exist in America. Kevin says they vary across culture, operational efficiency, and — most importantly — how they structure equity deals for dentists.
[15:58] The legal fine print: A DSO is a “regulatory-compliant structure that allows non-dentists to enjoy cash flow from clinical operations.” Kevin explains why this definition matters.
[19:22] Supply and demand favors the dentist: The dental industry has become more consolidated in the last few years. Even with rising interest rates, Kevin’s firm has still seen an increase in valuations for dental practices because the demand is so high.
[22:17] Let’s make a deal: From EBITDA to closing costs and equity, Kevin breaks down all the financial components of a deal structure using real-world examples. “Structure is so important,” he says. “It drives the total lifetime value of the transaction.”
[30:05] What to do when you get a knock on the door: Kevin shares his advice for dentists who’ve received an offer from a DSO. It’s tempting to take it right away, but a valuation could go much higher with the proper preparation.
[32:59] Choose the right partner: TUSK helps clients make informed decisions about partnerships with DSOs. There are dozens of pathways forward. The doctors who regret selling their practice to a DSO are the ones who didn’t do their financial planning upfront.
Have you found that your income is near its peak potential, and yet you’re still not sure where the money is going or what to do with the surplus? Do you have cash piling up in your checking account because you don't have the time to figure out where else to direct it? Are finances a source of confusion or even conflict in your marriage?
Disclaimer: Prosperous Doc podcast by Spaugh Dameron Tenny highlights real-life stories from doctors, dentists, and those whose work can help them to encourage and inspire listeners through discussions of professional successes and failures in addition to personal stories and financial wellness advice. Spaugh Dameron Tenny is a comprehensive financial planning firm serving doctors and dentists throughout the U.S. To find out more about Spaugh Dameron Tenny, visit our website at http://www.sdtplanning.com . You can also connect with our host, Shane Tenny, CFP®, at shane@prosperousdoc.com.
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