For many dentists, “value” is a simple equation. If collections are high, the practice must be worth more. It feels intuitive. After all, more revenue should mean more profit, and more profit should mean a higher sale price. But when it comes to selling to a DSO, this assumption can be dangerously misleading.
DSOs do not base their valuations on top-line revenue alone. They look deeper. They analyze the quality of earnings, operational systems, growth capacity, staffing stability, payer mix, and dozens of other factors that most practice owners rarely think about. Two practices can have identical collections but sell for vastly different prices. One might command three times its profit, while the other struggles to get a competitive offer.
The difference lies in what DSOs truly value, and if you understand those drivers in advance, you can position your practice to command a premium.
DSOs Buy Earnings, Not Collections
At its core, a DSO valuation is driven by EBITDA, which stands for earnings before interest, taxes, depreciation, and amortization. This is a measure of true operating profitability. DSOs pay a multiple of EBITDA, not collections.
For example, two practices may each collect three million dollars annually. Practice A runs lean, has a strong hygiene department, efficient scheduling, stable staff, and excellent case acceptance. It produces one million in EBITDA. Practice B has bloated overhead, inconsistent systems, staff turnover, and weak hygiene production. It produces five hundred thousand in EBITDA.
If a DSO is paying six times EBITDA, Practice A could be worth six million dollars. Practice B, despite identical collections, might only command three million. Top-line revenue matters, but it is only the starting point. What matters more is how that revenue translates into sustainable, repeatable, transferable profit.
Operational Systems Drive Multiples
DSOs are not just buying your numbers. They’re buying your systems. They want to know whether the practice can continue to perform at a high level after the selling doctor steps back.
A practice with standardized protocols, a strong leadership team, and documented systems is less risky to acquire. A practice where everything depends on one doctor’s personal oversight is a riskier proposition. DSOs reward reduced risk with higher multiples.
I have seen practices increase their valuation by millions simply by shoring up operational systems 12 to 24 months before going to market. They invest in leadership development, streamline scheduling, tighten financial controls, and document processes. Those improvements do not just increase profit. They make the practice more attractive to buyers who want predictable performance.
Hygiene and Staffing Matter More Than You Think
One of the most overlooked factors in practice valuation is the hygiene department. A strong hygiene program is the backbone of sustainable production. It feeds restorative work, maintains patient retention, and provides recurring revenue that buyers value highly.
DSOs look closely at hygiene metrics. They examine the percentage of revenue generated by hygiene, recall effectiveness, and patient retention. A weak hygiene program signals operational gaps and revenue volatility. A strong program signals stability and growth potential.
Staffing is equally critical. High turnover or reliance on temporary workers raises red flags. DSOs want to see a stable, experienced team that will stay post-sale. Retaining key staff reduces risk and protects revenue continuity. In some deals, staffing stability has been the deciding factor between two otherwise similar offers.
Growth Capacity Changes the Game
DSOs pay premiums for practices with untapped growth potential. If you have strong collections and high profitability, that is good. If you have that plus room to expand hygiene, add operatories, extend hours, or introduce new services, that is even better.
Buyers want to see a clear path for growth after acquisition. A practice that is maxed out operationally will still be attractive, but one with expansion capacity often commands higher multiples because it allows the buyer to grow revenue without starting from scratch.
Strategic Positioning Creates Real Equity
The good news is that many of the factors DSOs value most can be improved strategically before you sell. Unlike top-line collections, which take years to build, operational systems, hygiene programs, and staffing stability can often be optimized within 12 to 24 months with focused effort.
I’ve seen practices add hundreds of thousands of dollars to their EBITDA and millions to their valuation by focusing on these hidden drivers. They didn’t simply work harder. They worked smarter, aligning their operations with what DSOs actually value.
Why This Matters Now
By the end of 2025, the DSO consolidation wave is well underway. Strategic buyers are competing for top-performing practices. Valuations are strong, but DSOs are becoming more selective as they refine their acquisition strategies.
High collections alone will not set your practice apart in a competitive market. Sophisticated buyers are looking for well-run, scalable businesses with predictable earnings. If your practice has the numbers but lacks the structure, you risk being overlooked or underpaid.
The smartest practice owners are positioning now. They’re tightening operations, strengthening hygiene, stabilizing staffing, and documenting systems so that when they go to market, their practice checks every box a DSO wants to see.
I’ve been directly involved in over two hundred million dollars in dental transactions and indirectly involved in over two hundred million more. I’ve seen practices with strong collections but weak structure leave millions on the table. I’ve also seen practices with similar revenue secure offers that far exceeded expectations because they understood and acted on the real value drivers.
If your practice is generating more than one million dollars in revenue, now is the time to get a clear, strategic valuation. My team and I offer a comprehensive appraisal and positioning report, valued at $2,743, at no cost to qualified practice owners. This report shows exactly where your practice stands in the eyes of a DSO buyer and where targeted improvements can dramatically increase value.
Collections are important, but they are not the whole story. The real equity is in the structure beneath the numbers. If you want to maximize the value of your life’s work, now is the time to build it strategically.
To your unstoppable success,
Your Team at Everything DSO