In August, we looked at the differences between independent ownership and DSO affiliation. The response told us something important. Many of you are not asking whether DSOs exist. You are asking what to do with the letter already sitting on your desk.

Interest from DSOs in endodontic practices is real, and some offers look very attractive at first glance. A large number at closing can make any doctor pause, especially one who is tired of running the business side of the practice.
My goal here is not to tell you whether to sell. That decision depends on your goals, your stage of career, and your family. My goal is to help you compare the offer on the table with the value you already own, so you decide with clarity rather than pressure.

• How DSO offers are typically structured and valued

• Why your operational value often matters more than your sale price

• Eight questions to ask before you sign anything

• What to do before December 31, whether you sell or not

Most DSO offers are based on a multiple of your practice's adjusted profit, often called adjusted EBITDA. That means the buyer is paying for your earnings, not your equipment or your square footage.

Two things follow from that. First, you should know your own adjusted profit for the last three years before any conversation about price. Second, every improvement you make to profitability before a sale can increase your value by a multiple of that improvement.

This is exactly what our free Transition Coaching is designed to do: help doctors increase EBITDA, reduce risk, and position the practice for whatever comes next, whether that is a sale, a DSO partnership, or a staged retirement.

When doctors evaluate an offer, they often compare it to nothing. The real comparison is between the offer and what the practice will earn for you if you keep it.

I call this the difference between exit value and operational value. Consider a doctor earning about $330,000 a year, which is close to the average for owner endodontists. Over 30 years of ownership, that is roughly $10 million of operational value. Add just one more case per day and the practice produces about $300,000 more each year, with most of it flowing to profit.

Doctors near retirement often focus on squeezing a few hundred thousand dollars more from a sale. Doctors at the peak of their skill have an opportunity worth millions by improving the practice they already own.

Most DSO transactions include an employment agreement. Your compensation after the sale is often structured much like an associate's, typically a percentage of collections. For context, associates are commonly paid in the range of 40% to 45% of their collections.

For a highly productive owner, the gap between current owner income and an associate-style percentage can be several hundred thousand dollars a year, every year of the agreement. That gap belongs in your comparison.

Eight questions to ask before you sign

• How much is cash at closing, and how much is equity rollover or an earnout?

• What are the conditions of any earnout, and who controls the factors that determine it?

• How long is the employment agreement, and what is the non-compete radius and term?

• How exactly will I be paid after closing? A percentage of what, calculated how, and paid when?

• Who will control scheduling, fees, supplies, and hiring once the sale is complete?

• What happens to my team? Their pay, benefits, and roles.

• What is the rollover equity worth, and when and how can I sell it?

• How will my referring doctors experience the change, and how will those relationships be protected?

Review every answer with an attorney and CPA who understand dental transactions. A buyer's explanation of their own terms is a starting point, not a final answer.

• Clean up your financials. Ask your CPA for three years of adjusted profit and loss statements.

• Measure your trend. Buyers pay closer attention to direction than to any single year.

• Talk to your CPA about timing. Whether a transaction closes in December or January can matter for taxes.

•  Do not decide under a deadline. Exclusivity periods and year-end pressure are real, but a decision this large deserves time.

• Invest in operational value now. Every improvement makes the practice worth more, whether you sell next year, in ten years, or never.

TRY THIS BEFORE FRIDAY
Pull your last three years of profit and loss statements and write down your adjusted profit for each year. That trend is the first story any buyer will read, so it should be the first story you understand.

• DSO offers are typically based on a multiple of adjusted profit

• Compare any offer with your operational value, not with nothing

• Post-sale compensation often resembles associate pay, and that gap matters

• Ask eight specific questions and review the answers with your attorney and CPA

• Increasing profitability now improves your options whether you sell or not

More on this topic

• Independent vs DSO (Part 1)  

• The Dual Pillars of Practice Value  

• The Ownership Mindset: Achieving the Full Value of Your Practice 

Download the free DSO Offer Decision Framework to organize your numbers, lay the offer side by side with staying independent, and keep track of the answers to all eight questions.

Book a free Discovery Call. We can help you increase profitability, reduce risk, and understand your options before you make a decision that will shape the rest of your career.