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The DSO offer letter lands in a dentist's inbox and the number looks remarkable. Significant upfront cash, a salary for the next few years, and the promise of equity that could multiply several times over in a capital event. It is designed to look transformative. And for most dentists, it is — just not in the direction they expected.
After running these analyses for hundreds of dental practice owners as a CPA and financial planner, the conclusion is consistent: in over 95 percent of cases, a dentist is financially better off selling to a private buyer than to a DSO. Here is why that number is so high — and why it is not obvious until you actually run the math.
Every DSO offer letter includes a projection of total earnings over the transition period. This projection typically includes three components: the upfront payment, the employment compensation during the 3-to-5-year earnout period, and any projected equity rollover value. The total looks impressive.
But there is a fundamental flaw in how most dentists read that number. The employment income — what you earn for performing dentistry during those years — is what financial theory calls an irrelevant variable. Whether you sell to the DSO or not, you are going to be working during those years. In both scenarios, you earn income for putting your hands in patients' mouths. That income belongs on both sides of the comparison and therefore tells you nothing about which option is better.
What matters is the equity of the practice. If you keep your practice and net $500,000 per year in profit, and then sell it privately for $700,000 in five years, you have captured both the operating profits and the exit value. If you sell to a DSO for $1 million today but receive only a clinical salary — say $200,000 per year — for five years, you have surrendered $300,000 annually in practice profit. Over five years, that is $1.5 million in profits given to the DSO in exchange for an upfront payment.
DSOs typically offer equity rollover — a percentage of the practice value that converts to DSO equity, which will allegedly multiply at some future capital event. This is positioned as the part of the deal that makes the economics work.
In practice, meaningful equity events are rare. Most dentists who rolled over equity have seen it return substantially less than projected, or nothing at all. Private equity cycles tighten. Debt loads on DSO roll-ups become unsustainable. Revenues do not hit projections. A capital event that was 'three years away' keeps moving. And when it does happen, the actual payout is a fraction of what the offer letter implied.
This is not speculation. It is a pattern that shows up across the dental CPA and financial planning community consistently enough that it should be treated as the baseline expectation, not the exception.
Beyond the financial analysis, there is the lived experience of the sale. The changes that follow a DSO acquisition are real and immediate: practice management software, payroll systems, vendor relationships, and insurance contracts are restructured. Staff often feel unsettled by the ownership change and begin looking elsewhere. The seller — now an employee — no longer has control over clinical decisions, staffing, or how the practice is run.
These are not edge cases. They are the near-universal experience, and they are why seller remorse is so common after DSO transitions. The challenge is that by the time a dentist realizes the decision was a mistake, it is contractually irreversible. Non-compete agreements typically prevent the dentist from starting or buying another practice within a meaningful geographic radius for the duration of the employment term.
There are circumstances where a DSO offer deserves serious consideration. A rural practice with limited private buyer demand. A seller with health issues who cannot commit to a multi-year earnout. A practice with production challenges that a private buyer would heavily discount. In specific situations, the DSO premium on day one can be the right financial choice.
The point is not that DSO sales are always wrong. The point is that the default assumption should not be that they are good deals, and the burden of proof falls on the DSO offer to demonstrate — through rigorous discounted cash flow analysis, not pitch deck projections — that it beats the private sale scenario. In most cases, that burden cannot be met.
The decision framework is straightforward, even if the numbers take time to run: identify the total equity value of your practice under private sale conditions. Model your practice profits across the same time horizon. Discount both scenarios back to present value. Then compare them side by side.
If your broker, DSO representative, or financial advisor cannot or will not run that comparison for you in clear terms, that itself is important information. The best advisors in this space will put the numbers on the table and let them speak. The numbers almost always tell the same story
Listen to Episode 161 of The Dental Boardroom Podcast: https://podcasts.apple.com/us/podcast/161-the-trusted-transition-dental-practice-brokers/id1518344747?i=1000771176803
Wes knows what's best for dental practices. He's been doing this for a long time and he sees lots of practices. He can tell me how our practice is doing, and what we can do to increase our productivity. With past CPA's, there were no ideas. It was all coming from me, saying "I think I can do better, but I don't know how." I come in to meet with Wes and he says "You CAN do better, and I know how."
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PracticeCFO helped me develop a plan for the future. I have colleagues that work with other accountants that don't have a plan - they just look at the numbers of the practice and that's it. There's no plan for 10, 20 years from now. But with PracticeCFO, you get that. PracticeCFO makes you feel like you're they're only client.
(In reference to his practice sale) What could've been super stressful, wasn't! When picking John and Wes, it was from word of mouth recommendations and other people's experiences from the past that really did it for me. And it turns out that those recommendations were right on the line.
Wes knows the business side of dentistry. His comprehensive plan will organize your personal and professional finances so you can focus on taking care of patients. Massive ROI.
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