Dear Reader,

In a traditional doctor-to-doctor sale, the ultimate driver of the transaction is simple: how much a bank is willing to loan to the buyer. And here’s where the problem lies: banks are conservative. They’re not looking at the future potential of your practice or its true profitability. Instead, they’re looking at risk—how much risk they’ll have to take on when financing the sale.

What does this mean for you? It means that when you sell your practice to another dentist, the value is typically undervalued. The buyer has to rely on a loan, which is based on the current revenue and assets of the practice, with little to no consideration of its long-term growth potential or profitability. Banks simply don’t take those things into account—they care about protecting themselves, not maximizing the value of your practice.

So, in a doctor-to-doctor transaction, you might be forced to accept less than what your practice is truly worth, based on what the buyer can borrow from the bank. For many dentists, this can be a frustrating reality—you’ve spent years building a thriving practice, and now you’re boxed in by what the bank says it’s worth, not what it could actually generate in the hands of a savvy buyer.

Now, let’s look at how DSOs value your practice. The difference is massive—and it’s why selling to a DSO often results in a far larger payout.

Unlike a doctor-to-doctor sale, a DSO doesn’t rely on a bank loan to buy your practice. DSOs have access to significant capital, often from private equity firms, investors, or other financial sources. They’re not constrained by how much money a bank will loan. And more importantly, the value of your practice isn’t based solely on its current revenue—it’s based on EBITDA.

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. In simple terms, it’s a measure of your practice’s true profitability—how much money it generates after all the operational expenses are accounted for, but before any financial or accounting factors like taxes or loans come into play.

For DSOs, EBITDA is the ultimate driver of value. They look at your practice and ask: How profitable is this business right now, and how profitable could it be if we apply our economies of scale, reduce costs, and increase efficiency? They see the potential to grow your practice, improve its margins, and boost its overall profitability. That’s why they’re willing to pay a premium.

And here’s the kicker: DSOs don’t just pay you based on today’s EBITDA. They often pay you based on a multiple of EBITDA. In many cases, this multiple can be anywhere from 4 to 8 times your EBITDA—or even higher in competitive markets. Compare that to the limited valuation you’d get in a doctor-to-doctor sale, which is often capped by how much a bank will loan, and you can see why DSOs offer far more attractive deals.

Think about it: in a DSO sale, you’re being valued based on your practice’s profitability and its potential to grow—not just its current revenue. DSOs have the resources to invest in your practice, streamline operations, and boost efficiency. They know how to leverage economies of scale to make your practice even more profitable, which is why they’re willing to pay such a high multiple.

This is why so many dentists are turning to DSOs—because the valuation in these transactions is based on true business value, not what a bank says the buyer can afford.

When a DSO looks at your practice, they see an opportunity to build on what you’ve created and maximize its profitability in ways that go beyond what a single dentist can do. This approach allows them to offer you a significantly higher payout than you’d get in a traditional sale.

So, here’s the reality: when you sell to a DSO, the valuation of your practice isn’t limited by what someone can borrow. Instead, it’s based on what your practice can earn—and what it could earn under optimized management. This means you’re getting paid what your practice is really worth, not just what the bank will loan a buyer.

The difference can be staggering. If you’re serious about selling your practice, you owe it to yourself to explore what a DSO can offer. The potential payout, based on EBITDA and future growth, could be far greater than anything you’ve imagined.

If you want to know more about how DSOs value your practice and how much you could get, contact Everything DSO today.

Sincerely,

Your Team at Everything DSO