How DSOs actually underwrite your practice

Most advice written for selling dentists explains your side of the table. This piece explains the other one, because you negotiate better against a model you understand. One of us spent years inside DSO leadership; this is how the sausage is actually made.

The model starts with your EBITDA, then attacks it

A deal team does not price your practice; it prices the earnings it believes will exist after you slow down. Every line of your adjusted EBITDA gets stress-tested: add-backs need receipts, related-party rent gets marked to market, and revenue that depends on your personal production gets a haircut before it earns a multiple. What survives that scrub is what gets multiplied. This is why a clean, documented EBITDA bridge is worth real money: contested dollars get discounted, proven dollars do not.

Then it prices the risk you cannot see from your chair

Three discounts recur in nearly every model. Doctor dependence: if you produce most of the collections, the buyer is buying you, and buyers price people risk hard. Payor concentration: heavy dependence on one payor or program compresses the multiple, because a single contract renegotiation can move the whole practice. Durability: hygiene reactivation rates, staff tenure, lease length, equipment age, all the things that decide whether year three looks like year one. None of this is secret; published buyer guides say the same. The difference is that sellers hear it for the first time at the LOI table, with their bargaining power already spent.

The buyer is not paying for your past. They are underwriting your practice’s future without you at the center of it.

Fit decides more than quality

Here is the part that surprises sellers most: a strong practice can draw a mediocre offer for reasons that have nothing to do with the practice. Every platform has a thesis: a geography they are densifying, a payor profile they underwrite well, a clinical model they can support. Land inside a buyer’s thesis and their model stretches, because your practice makes their next recapitalization story better. Land outside it and the same practice gets their courtesy number. This is why one offer is an anecdote. The spread between the best-fit buyer and a poor-fit buyer on the same practice is routinely worth more than every operational improvement you could make in a year.

The offer is built backward from their return

The deal team models what your practice contributes to the platform’s value at the next recapitalization, subtracts their required return, and works backward to what they can pay today. Structure is how they manage the risk in that math: earnouts shift performance risk to you, rollover keeps you invested in their outcome, and holdbacks insure their downside. None of it is sinister; it is competent buying. The seller’s counter is competent selling: multiple prepared buyers, a defended EBITDA, and terms negotiated while the bargaining power still exists, which means before the LOI is signed, not after.

Related reads: the six LOI terms that matter most and the two years before you sell. And if an offer is already in front of you, the free offer second read shows where it sits against the market bands.