by Simplified equity management: The key to retention and growth
By Nicholas Mahalec, Founder and CEO of Pulse Equity
The recent FTC rule banning non-competes has many DSOs worried about retention. While work culture adjustments and salary bumps might inspire some temporary loyalty, there’s another avenue DSOs should consider if they want to keep their top talent engaged and loyal for the long term.
That solution? Equity.
Research has shown that equity can be a powerful tool for attracting and retaining top dentists. In fact, a recent Morgan Stanley at Work report found that offering equity to employees has become the second-most popular method for reducing turnover and attracting new hires, second only to higher pay. It’s why 80% of leaders believe equity compensation programs will increase over the next five years.
However, while equity can be a powerful tool for attracting and retaining top talent, it’s only valuable if your clinicians understand it. As Dr. Roshan Parikh, founder of DSO Strategy and former Head of Dentistry at Walmart, recently said in a piece, “Equity retains dentists, but only if they understand it.”
The reality is that equity can be quite complex – especially in organizations like DSOs where share classes aren’t standardized. And if your clinicians don’t understand what their equity is worth or how it ties into their overall value, it isn’t going to inspire much of anything.
That’s where Pulse Equity comes in.
Watching dentists leave money on the table
While serving as a co-founder at Tend, Pulse Equity’s co-founder, Michael Stenclik, watched numerous dentists leave money on the table mostly because they didn’t fully understand the true value of their equity. So, he set out to learn more.
He realized this issue wasn’t just happening at Tend. It was affecting DSOs and practices across the board. Too often, dentists were leaving or underperforming because they didn’t understand their equity value. As it turns out, equity alignment has the potential to influence better recruitment, retention, and performance.
Research shows that better patient outcomes are generally connected to higher doctor retention and increased value. In fact, organizations with high clinician retention can expect a 10% to 20% premium on their EBITDA multiple when they sell.
Stenclik quickly realized that, unlike tech companies, dental practices didn’t have a software solution for equity management – even though many dentists hold ownership stakes. Without a streamlined solution, CFOs and finance teams rely on manual processes and Excel spreadsheets to update doctors on equity values – an administratively burdensome task. This often results in either infrequent or unclear communications, leaving doctors confused about the worth of their equity.
Recognizing the gap, Stenclik co-founded Pulse Equity with co-founder and CEO Nicholas Mahalec and co-founder and Head of Product Jeet Chakrabarty with a simple goal: Create a platform that makes it easier for clinicians to have a clear picture of their value while aligning incentives with the broader needs of a company.
Developing the first equity management platform for multi-member partnerships
While building the platform, Pulse Equity called around 150 dental groups, advisors and other growing businesses to better understand the challenges related to equity management and dentist recruitment and retention.
“We’ve met some amazing leaders and are working with customers who altogether generate billions in revenue across hundreds of locations,” Mahalec said. “Our product was built alongside early adopters who helped guide our development efforts. That ensures what we’re building resonates for management and dentists alike.”
Many of their early adopters have already begun to see how simplified equity converts to greater retention. Mahalec shared some of these results. “We had a pilot partner whose clinician was considering leaving because they were offered a 10% stake in another company compared to a 3.5% stake our pilot partner offered. What the clinician didn’t understand was that even though it was more equity, it resulted in roughly $150,000 less per year because they were getting a bigger piece of a smaller pie.”
Increasing retention and growth amidst a non-compete ban
With the recent FTC ruling banning non-competes, Pulse Equity’s platform’s promise of better retention is a powerful one.
“Dentists don’t have a financial background, so equity can feel inaccessible to them,” Mahalec said. “But equity in an organization is probably a clinician’s largest asset.”
Pulse Equity makes it easy for clinicians to see what their equity is worth in an easy-to-understand, visually appealing dashboard. When a clinician can visualize their potential earnings, it often improves performance and encourages them to stick around – even if they aren’t contractually obligated to do so anymore.
If you want to see how Pulse Equity’s platform can help your clinicians visualize their value while minimizing your administrative burden, visit www.pulseequity.com and schedule your demo today.
For more information on equity in dental organizations, follow Pulse Equity on LinkedIn or Click Here to check out their whitepaper, “Demystifying Equity for DSOs.”
