You see DSOs expanding everywhere and it’s easy to believe the common narrative: they’re just better at business, armed with some secret operational genius that private practitioners can’t match.
Having seen their model from the inside out, I can tell you that’s not the whole story. Their biggest advantage isn’t operational skill; it’s a specific financial trick they use to get rich.
Today, we’re pulling back the curtain on the entire DSO playbook. Once you understand their game—how they really make money—you’ll realize that you can not only compete with them, but you can win. This is your guide to deconstructing their model, stealing their best ideas, and exploiting their biggest weaknesses.
The Secret Financial Engine: EBITDA Multiple Arbitrage
Most dentists think DSOs win on efficiency. That’s part of it, but it’s not the main engine. The real secret is a concept called EBITDA multiple arbitrage. Once you understand this, you will never look at the business of dentistry the same way again.
Here’s how it works:
- You, as an independent owner, sell your practice for a valuation of, say, 3-4x your annual profit (EBITDA).
- A DSO, often backed by a private equity firm, buys 50 practices just like yours, each at that same 3-4x multiple.
- They bundle all that profit together into one large entity.
- Because of the massive scale of that bundled profit, they can then sell the entire group to an even bigger private equity fund for a much higher valuation, often 8-12x the total profit.
The entire game, the engine that powers this industry, is capturing the spread between the low multiple they paid you and the high multiple they get when they sell the group.
This engine is then fueled by other powerful levers: negotiating higher insurance reimbursements, leveraging debt for acquisitions, and securing massive volume discounts on supplies. But the core of the money machine is that multiple arbitrage.
Watch the full, in-depth breakdown of the DSO playbook.
Steal These 3 DSO Strengths for Your Private Practice
The DSO engine is powerful, but it runs on specific operational strengths that you can—and should—replicate in your own practice.
1. Steal Their Obsession with Systems
Do you have a written, replicable playbook for every key process in your practice, from answering the phone to reordering supplies? If not, you don’t have a business; you have a job that you own. DSOs can scale because they have a predictable engine. You must build that same engine for your own practice, even if you only ever have one location.
2. Steal Their Use of Leverage
DSOs get better pricing because they buy for 100 offices at once. You can’t do that alone, but you can join a Group Purchasing Organization (GPO) to instantly access better pricing. DSOs also relentlessly renegotiate their insurance fees. How long has it been since you demanded a fee increase from your biggest PPO providers? You have more leverage than you think.
3. Steal Their Recruiting Power
DSOs attract young associates by offering clear career pathways. You must do the same. Stop thinking of associates as temporary employees. Start thinking of them as future partners. Create a clear, written path from associate to junior partner or even full partner. When you offer a vision for the future, not just a paycheck for today, you will attract and retain the best talent.
Exploit Their Weaknesses: Your Unbeatable Advantage is Trust and Culture
You can’t out-spend or out-scale a DSO. But you can absolutely beat them in the one area where they are most vulnerable: genuine human connection.
Private equity is great at optimizing spreadsheets but terrible at building culture. This is where you win.
- Their Weakness: The commoditization of care and a “revolving door” of associate dentists who burn out from production pressure.
- Your Strength: A stable, family-like culture led by you, the owner who is in the trenches with the team every day.
A patient in a large DSO is often just a number on a spreadsheet. A patient in your practice is Mrs. Jones, whose kids you’ve watched grow up. This deep, personal, community-based bond is something a private equity fund can never replicate. It is your single greatest competitive advantage.
The goal is to compete by combining the best of both worlds: take the systems and efficiency of a DSO and merge it with the unbeatable trust and culture of a great private practice. When you do that, you become unstoppable.
