Search this question and you will find the same checklist on every broker’s site: collections above some threshold, five or more operatories, a doctor willing to stay, modern equipment, good location. The checklist is not wrong. But it is the output of the buyer’s process, not the process itself, and if you only know the output you will spend your preparation time on the wrong things.
I spent a little over four years running the M&A team at one of the country’s largest DSOs, through more than 50 transactions and over $500 million in deal value. Hundreds of practices came through that pipeline, and I watched which ones the model liked, which ones it passed on, and which ones it liked at first and walked away from later. What follows is the logic behind the checklist. If you are earlier in the process, start with our complete guide to selling your dental practice and come back to this when you want to see your practice the way a buyer will.
A DSO Does Not Have a Wish List. It Has a Risk Model.
One reframe makes everything else make sense: a DSO is not shopping for practices it likes. It is underwriting a stream of future earnings, usually with borrowed money, and every item on the public checklist is a proxy for one underlying question.
Will this practice’s earnings survive the owner leaving?
That is the whole game. With illustrative numbers: a practice collecting $2.5M where the owner produces 80% of it, knows every patient by name, and holds the referral relationships personally is, to a buyer, a $2.5M practice that might be a $1.2M practice in three years. A practice collecting $1.8M across two associates and a strong hygiene program, with systems that run when the owner takes a month off, is a smaller number the model can actually believe.
Sellers consistently prepare for the first version of the question, how big are the numbers, when the buyer is asking the second, how durable are the numbers. Everything below follows from that.
The Screen Happens Before Anyone Calls You
Most owners assume the evaluation starts when they respond to an outreach letter or list the practice. It starts much earlier. Any mid-size dental group and up is looking at hundreds of practices a year, and no acquisition team can diligence hundreds of practices. So there is a screen, and the screen runs on information that exists before you ever pick up the phone: geography relative to the platform’s existing footprint, number of operatories, estimated size, payor environment in your market, and whether the practice type fits the platform’s clinical model.
This has a practical consequence. By the time a DSO contacts you, it has already sorted you into a category and formed a rough thesis about what your practice is and what it might pay. The conversation that follows is the buyer testing that thesis, not starting from a blank page. Knowing this changes how you should treat an unsolicited approach: the flattering letter is not an evaluation of your practice. It is evidence that you passed a screen hundreds of other practices also passed.
What the Model Actually Prices: Durable, Transferable EBITDA
Collections get the headlines. EBITDA gets the offer. But even that undersells it, because the buyer does not price your EBITDA as your CPA calculates it. It prices normalized EBITDA, your earnings after the buyer’s team has adjusted owner compensation to what they would pay a replacement dentist, moved rent to market rate, and stripped out the add-backs that do not survive scrutiny. I wrote a full post on why DSOs reject add-backs, and the short version is that every dollar of claimed earnings has to be a dollar the buyer will actually receive after close.
Then the model asks how confident it can be in that number, and this is where the checklist items reveal what they really are:
Provider dependence. The single heaviest factor. If the owner is the practice, the earnings walk out the door on the owner’s last day. Associates who stay, a hygiene program that produces on its own, and patients attached to the practice rather than the person all make the earnings transferable. This is why buyers want the doctor to stay on for a period after close, typically three to five years in DSO deals. It is not sentiment. It is a bridge while the earnings are transferred from a person to an institution.
Trend direction. A practice growing 5% a year and a practice shrinking 5% a year can show the same trailing EBITDA and be worth very different amounts, because the buyer is purchasing the future, not the trailing twelve months. Declining recent performance is one of the most common reasons buyers walk away from deals they had already priced, and it is far more damaging than a smaller but stable number.
Payor mix. Heavy dependence on one payor, or on reimbursement rates that could reset, is concentration risk in the earnings stream. Buyers do not necessarily avoid it, but they price it, and they will map your payor mix against contracts they already hold.
Capacity. This is what the operatory count is actually about. Four-plus operatories is not an aesthetic preference. It is room to add a provider and grow the earnings after close, which is where the buyer’s return comes from. A three-op practice producing at capacity has no room for the buyer’s growth plan, however healthy it is today.
Team stability. Tenured staff, low turnover, and documented systems mean the practice’s knowledge lives in the institution. High turnover means it lives in whoever has not quit yet.
Notice what is not on that list: your equipment. A scanner is nice. It is also a purchase order. Buyers can add technology in a quarter; they cannot add earnings durability, and they know the difference even when the checklist articles do not.
What Kills Deals Is More Instructive Than What Wins Them
The screen decides who gets a call. The diligence decides who gets to close, and deals die in diligence for a much shorter list of reasons than sellers expect. Overwhelmingly it is some version of the earnings not being what they appeared: a decline in the months between first look and close, an owner producing more of the revenue than the initial numbers suggested, add-backs that fell apart under scrutiny, or financials messy enough that the buyer could not get comfortable with any number at all.
Messy books deserve a special mention because the damage is quiet. Disorganized financials rarely kill a deal outright. They shrink it. Every number the buyer’s team cannot verify gets treated conservatively, and conservative treatment always runs in one direction. The practices that command the strongest offers are the ones where diligence is boring.
The other pattern worth knowing: the people who court you are not the people who approve your deal. The development person who took you to dinner reports to a committee that has none of the relationship and all of the veto power, and that group evaluates your practice on the risk factors above, not on how well the dinner went. I wrote about what a DSO investment committee actually asks because it is the least understood room in the entire process, and it is where “what DSOs look for” stops being a marketing question and becomes an underwriting one.
What This Means If You Are 12 to 24 Months Out
The useful part of seeing the model is that it tells you where preparation actually pays. Three things move the needle, and they map directly onto the risk factors above.
Reduce owner dependence. Every patient relationship, referral source, and clinical hour you move from yourself to the institution makes the earnings more transferable. This is the slowest lever, which is exactly why it rewards starting early.
Clean up the financials. Not window dressing. Verifiable books, personal expenses separated, add-backs you can document rather than assert. You are not making the practice look better; you are making the earnings easier to believe.
Run on systems. Documented processes, a stable team, and performance that does not wobble when you take time off. Consistency is what lets a buyer underwrite the future instead of discounting it.
None of these are quick, which is why the strongest exits start well before the owner feels ready. If you want the month-by-month version, the timeline for selling a dental practice walks through it.
Start With the Buyer's Answer, Not Yours
Every owner has a number in their head. The buyer has a model, and the model’s answer is the one that shows up in the offer. The most useful thing you can do, whether your exit is next year or five years out, is find out what the model says about your practice now, while there is still time to change the inputs.
That is what our free practice valuation is built to do. It reads your practice the way a buyer’s screen does, and it tells you where you stand and which levers are worth pulling. No obligation, and no listing pitch. If a DSO has already reached out, it has a thesis about your practice. You should have one too.