What a DSO Offer Really Includes (and What It Leaves Out)

Most dentists who receive a DSO offer focus on one number. It is usually the largest number in the document, it arrives early in the conversation, and it is the figure they repeat when they call me. After 30 years of dental consulting, I can tell you that the headline number is rarely the part of the offer that determines whether the deal was good.

The purchase price is a conclusion. The terms underneath it are the argument. If you do not understand the argument, you cannot tell whether the conclusion is fair.

The Multiple Is Applied to a Number You Have Not Seen Yet

DSO offers are built on a multiple of adjusted EBITDA, which is a recalculated version of your practice’s earnings. It is not your collections, and it is not what you take home today.

The most consequential adjustment is usually to owner compensation. The buyer removes what you currently pay yourself and substitutes what they would pay an associate to do your clinical work, often a percentage of production. Whatever is left after that substitution, and after normalizing other expenses, becomes the earnings figure the multiple is applied to.

This means two offers at the same multiple can produce very different prices. It also means a practice owner who has been paying themselves generously will see a larger adjustment than one who has been paying themselves conservatively. The adjustment is not necessarily unfair, but it is negotiable, and it should be itemized. If a buyer describes the adjustments without showing you the arithmetic, ask for the arithmetic.

Not All of the Price Is Cash

A purchase price is a total, not a payment. Depending on the structure, that total may include:

• Cash paid at closing
• Rollover equity in the parent organization
• An earnout tied to future production or collections
• A holdback released after a defined period

Cash at closing is the only component whose value you know on the day you sign. Rollover equity is worth what someone eventually pays for it, on a timeline set by the organization rather than by you. It may turn out to be the most profitable part of the transaction, and it may not. Either way, it is a different kind of asset than cash, and it deserves to be evaluated as one.

Before comparing any two offers, work out what percentage of each is cash at closing. That single calculation reorders most comparisons.

The Employment Agreement Is the Part You Will Actually Live In

Most DSO transactions require the selling dentist to keep working for a period of years. That arrangement is governed by an employment agreement, and it frequently arrives later in the process than the purchase terms.

It defines your compensation formula, which is usually a percentage of production or collections rather than ownership income. It defines production expectations. It often defines schedule, clinical protocols, lab and supply sourcing, and the degree of say you retain over hiring.

For most sellers I work with, this document has more effect on daily life than the purchase price does. A strong price attached to an employment agreement you cannot live with is not a good outcome. Ask to see it early, and read it as carefully as you read the offer itself.

What the Offer Does Not Tell You

An offer describes what the buyer will pay. It does not describe what the practice will become. The operational changes that follow a transition are rarely written into the purchase document, but they are usually predictable:

• Supply and lab vendors are standardized to the group’s contracts
• Scheduling templates and hygiene protocols are brought in line with the group’s model
• Insurance participation may expand to drive patient volume
• Staffing decisions move to a regional structure
• Software, reporting, and clinical documentation requirements change

None of these are inherently bad. Some of them will make the practice run better than it does today. But if your team, your patient relationships, or your clinical autonomy are part of why you value this practice, you should know which of those things survives the transition before you sign, not after.

The Asymmetry Is the Real Risk

The organization making you an offer has done this many times. They have analysts who model practices for a living, attorneys who have drafted this agreement repeatedly, and an operations team that already knows what they will change. You are likely doing this once.

That imbalance, more than any single term, is where sellers lose value. It is also the easiest thing to correct. Bring in people who work only for you: an attorney for the legal terms, a CPA for the tax structure, and an independent operational review of whether the earnings figure reflects how your practice actually performs.

A good offer will survive that scrutiny. An offer that cannot survive scrutiny was telling you something.

Work with JoAnne for an independent, operations-first review of a DSO offer, before you sign a letter of intent.