Dr. Michael Torres sold his Phoenix practice to a regional DSO in 2022 for 85% of collections—a number that seemed excellent at the time. Two years later, he describes the experience as "the worst decision of my career." His production is up, but his take-home is down. He has no control over materials or staff. He can't retire when planned because of earnout provisions.

Contrast this with Dr. Lisa Pham, who sold her San Diego practice to the same DSO for a lower multiple but negotiated terms that preserved her autonomy and created a clear exit path. "The headline number matters less than the details," she advises. "I spent $30,000 on legal and financial advisors. It was the best investment I've made."

Understanding DSO Valuation Models

DSOs typically value practices using EBITDA (earnings before interest, taxes, depreciation, and amortization) multiples, collection multiples, or hybrid approaches. Current market multiples range from 5-9x EBITDA or 70-100% of collections, depending on practice characteristics and buyer type.

But headline multiples are misleading. A "90% of collections" offer might net you 65% after adjustments for working capital, equipment depreciation, and earnout structures. Always model the actual cash you'll receive at closing and over the earnout period.

Strategic buyers—large DSOs building regional density or platform capabilities—pay premiums for practices in target markets or with unique specialties. Financial buyers applying cookie-cutter models offer lower multiples but may provide more operational flexibility.

The Earnout Trap

Most DSO deals include earnout provisions requiring the selling dentist to continue working for 3-5 years post-sale, with a portion of the purchase price contingent on hitting production targets. This is where deals go wrong.

Dr. Torres's contract based his earnout on maintaining 95% of historical production—a target that seemed achievable. But the DSO's fee schedule changes, staff turnover, and referral pattern shifts made the target impossible. He's now working harder than before the sale for uncertain compensation.

Negotiate earnout provisions carefully: base targets on factors you control, include DSO performance guarantees, and ensure targets account for market changes. Better yet, negotiate more cash at closing with a shorter earnout period.

Life After the Sale: What to Expect

Every DSO promises "you'll still run your practice." The reality varies enormously. Some DSOs truly operate as management services organizations, handling billing and HR while leaving clinical autonomy intact. Others implement rigid protocols covering everything from materials to appointment lengths.

Due diligence should include conversations with other sellers—not references provided by the DSO, but dentists you find independently. Ask specific questions: What changed about your daily schedule? How are material and lab decisions made? What happened to your long-term staff?

Also understand the DSO's exit strategy. Most private equity-backed DSOs plan to sell within 5-7 years. Your practice will be sold again, potentially to a buyer with different philosophies. Provisions protecting your interests should survive ownership changes.

When to Walk Away

Not every practice should sell to a DSO. If you're within five years of planned retirement, a private sale or associate buy-in may yield better total returns with more control. If your practice has unique characteristics—specialty focus, exceptional patient loyalty, premium positioning—DSO standardization may destroy value.

The best DSO candidates are practices with strong systems, transferable goodwill, and owners seeking immediate liquidity while remaining clinically active. The worst candidates are owner-dependent practices where the seller is the primary patient draw.

Whatever you decide, engage experienced advisors early. Dental-specialized CPAs and attorneys pay for themselves in improved deal terms and avoided pitfalls. This is likely the largest financial transaction of your career—treat it accordingly.