The DSO Bubble – Part 3 of 3

Written by: Dr. David Phelps, DDS, and Alastair MacDonald
dental practice, dso, dso boom


Emerging Undercurrents Threatening The DSO Boom

dental practice, dso, dso boom

You’ve sold your practice… Now what?

The sale of your practice not only marks the end of a significant professional chapter but also the transition into a period where financial dexterity and the management of the proceeds becomes paramount. What is your plan for utilizing and safeguarding that equity after the sale? How will you replace your income from the practice with investment income post-sale? Do you have a plan for shielding that capital from market volatility or a potential crash?

The stakes are much higher once you step away from the economic engine of your practice. A young practitioner can fall back on one’s ability to earn significant income in the event of investment setbacks, but no longer once one sells the practice. This shifts the emphasis to meticulous planning and informed decision-making. It’s imperative to preserve the “nest egg” and avoid exposure to unnecessary risk, especially given the potential for a major correction.

This juncture demands a plan and strategy. With a practice sale comes the responsibility to navigate the new realities of capital preservation, income generation, and financial self-advocacy.

Are we entering a new “lost decade” era in the stock market?

There are some concerning correlations between the market conditions of today, and the stagflation of the 1970s. Stagflation happens when the GDP has stagnated or dropped, inflation has risen, and employment is low (higher unemployment).

As in the 1970s, an era which ended with a global recession and a series of financial crises, economists and policymakers today are battling the consequences of inflation, credit tightening, and a contracting economy.

Correlations between the 1970s and today:

  • Vietnam war – which correlates with Russia/Ukraine and Israel/Hamas.
  • Great Society programs (LBJ) = massive spending similar to Inflation Reduction Act spending today.
  • High budget deficits, the oil embargo, and the collapse of managed currency rates, all contributing to stagflation.
  • Middle East war (Iran) could lead to oil and natural gas price shocks today.
  • Under Federal Reserve Board Chair, Paul Volcker, the prime lending rate was above 21% to reduce inflation. Powell cannot afford to be that aggressive today.
  • After the Volcker rate hikes, inflationary pressures eased as oil prices and union employment fell, limiting the growth of wages and the economy. The problem today is that Powell doesn’t have the same margin as Volcker – national debt and deficit spending is uncontrolled and works against the inflation fight.

Current economic realities:

  • 70% of the GDP is consumer spending.
  • The wealth “gap” is more than double the gap seen in the 2008 Global Financial Crisis.
  • U.S. mortgage applications are 25% below the lowest levels seen at 2008.
  • Credit card delinquencies rising at fastest pace since 1991 – up almost 60% since 2022.
  • Auto loans delinquencies highest since 2012.
  • All excess savings (from Covid stimulus) set to run out by end of 2023.
  • Student loan repayment began October 2023 – average payment = $500 per month.
  • Keeping interest rates higher for longer will cause immense pain to the U.S. economy.
  • Core inflation is still running at 4% which is double the Fed target (and is misconstrued by government stats).
  • Oil and natural gas prices have spiked in the last 60 days (= inflation stronghold).
  • National debt on the move to $34T with $2T deficit spending in 2023 alone.

The 1970s became known as the “lost decade” for stocks. A recent article in InvestmentNews, “Strategists see lower returns as economy mirrors 1970s,” summarizes the reality that investors faced in that era.

“For those too young to remember, the Dow Jones Industrial Average, which was just above 800 at the start of the 1970s, had only advanced to about 839 by the end of the decade, an overall gain of 5% over this 10-year period. When adjusted for inflation, stock market investors were down about 49% over the course of the decade.

Can you afford a 49% reduction in your nest egg over the next decade? How would that affect your financial security after selling your practice?

The loss of regular income resulting from the sale of your practice necessitates a shift in financial strategy toward generating replacement cash flow. Investing in assets that offer sustainable and predictable income becomes essential to ensure that you do not deplete your nest egg prematurely during retirement.

A major correction—not if, but when.

The stock market is more overvalued than it has been since the dot-com crash. The growth we have experienced in the last two decades came at the cost of fundamentals that cannot be ignored (massive stimulus, bailouts, inflation). There will be a price to be paid. Unparalleled stimulus and debt have created an artificial sense of prosperity and security. But the sword of Damocles hangs by a thread.

The memory of severe market downturns, like the 54% plunge of the Dow from 2006 to 2009, is too soon forgotten. Are you willing to stomach the years that it takes to recover from such losses? Are you betting that the Fed and those in power can continue to kick the can down the road indefinitely? Do you have a plan or alternative for reducing your exposure and taking back control of your financial destiny?

Becoming your own financial advocate

In the aftermath of selling your practice, you will likely find yourself the target of financial advisors, asset managers, and others selling financial products. Your newfound financial liquidity can attract attention, making it a time for heightened caution and the need for self-education. Building a long-term plan is crucial, and you should be wary of rushing into investments without thorough understanding and reflection.

No one else will prioritize your interests with the same dedication.

Critical safeguards post-sale:

  • Limit major pivots or decisions in the first 12 months after the sale. Take a breath.
  • Surround yourself with guides who don’t have a financial incentive to sell you investment products.
  • Invest in your skills and ability to orchestrate your own investments.
  • Reduce exposure to major losses due to market volatility.
  • Focus on investing for cash flow and multiple streams of income vs speculation.
  • Seek clarity and a financial plan that provides specificity, one that gives you direction and peace of mind. Hope is not a strategy.

You will need the same level of skill and knowledge to succeed in investing that you developed as a business owner. This is the next significant re-investment phase of your life. Just like going to dental school or the investment you made in yourself when building or acquiring a practice. It’s your future at stake, and stepping away from your practice affords you the opportunity to refocus your life’s next chapter toward financial self-reliance and the cultivation of investment income.

Finding your “Next”

Some people work hard, build a business and accumulate assets and capital. Unfortunately, they have worked so hard for so many decades that they haven’t (or couldn’t) develop any other interests.

Many self-sabotage their ability to go free when they don’t know what their “next“ looks like.

They’re thinking “I don’t know who I’m going to be. I have no significance, no place to go.”

There is a lot of identity tied into running your business, having a team, and customers that depend upon you. That role can provide a lot of meaning and purpose to your life. If you don’t have an identity or interests beyond your business, selling that business will bring a major shift in identity.

Yes, you need a strong financial foundation. But that is only the beginning. Don’t be afraid to begin the process of exploration, renewing your curiosity for the world around you. It is important to find opportunities to create impact and meaning in your life. That can be achieved in many ways – family, community, passion projects, philanthropy, and new pursuits and frontiers. Begin that journey of exploration now.

Remember, the only people who will know how hard you worked throughout your life are those who pay a price for it (your family).

Selling your practice is not merely a transaction but a transformational event. It is a portal to a new horizon. A new frontier. New opportunities for impact, meaning, and legacy.

Life expands on the other side!


When his young daughter was hospitalized with leukemia, Dr. David Phelps, DDS, could turn to his alternative investments, step away from his dental practice and be by her side. From this experience, he created Freedom Founders in 2012. This community helps dentists and other professionals take control of their retirement investments to produce passive cash flow, security and live life on their terms. To contact Dr. Phelps, visit

Alastair Macdonald is an ex-safari guide, African expedition leader, TEDx speaker, former co-founder and CIO of The Parallax Fund, a private investment fund, former veterinary clinic owner, and multi-location dental practice owner, investor, BJJ blackbelt, suit-loathing peregrinator, terminal optimist, spreader of stoke, student of everyone and mentor to some.