Why Are DSO's Failing? What's Happening Inside Dentistry with Jake Berry
You might not be thinking about selling your dental practice. You might even be totally against it. I get it. But the DSO space is reshaping the future of dentistry whether you like it or not. Practices are being bought, leveraged, flipped, and in some cases abandoned, and that creates ripple effects for every owner dentist who is running a dental practice and trying to protect their future. On this episode of the Dental Practice Heroes podcast, I sat down with Jake Berry, Chief Development Officer at MB2, because I wanted a real behind the scenes explanation of what’s actually happening. Not Facebook forum hot takes. Not fear mongering. Just clarity.
This is about more than “should I sell.” This is about dental practice management, dental practice growth, and the reality that a practice built with strong systems is more profitable, easier to run, and gives you the freedom to work less if you want. That’s the whole point of the Dental Practice Heroes podcast and why I do dental coaching, publish books on dental practice management, and obsess over dental practice operations systems. Whether you ever partner, sell, or stay private forever, your goal should be the same. Build a healthy business that can handle pressure, grow predictably, and support your life.
The Old DSO Playbook: Buy Practices, Bundle Them, Flip the Company
Jake explained that from roughly 2018 through 2020, a lot of DSOs popped up because institutional capital was flowing like crazy. The thesis was simple. Acquire a bunch of dental practices at six or seven times EBITDA, then sell the combined platform for twelve or thirteen times EBITDA and cash in on the arbitrage. In a low interest rate environment, that strategy can work. Debt is cheap, buyers are plentiful, and capital is easy to raise.
Then COVID accelerated everything. More owners realized just how hard ownership can be when the world gets weird, and many also realized DSO valuations were much higher than the old “70 to 80 percent of collections” rule of thumb. Transaction volume went up, valuations climbed, and a lot of DSOs bought too fast. They overpaid, didn’t integrate well, and suddenly the market changed.
Why DSOs Started Collapsing After 2022
Jake described what changed. The private credit markets tightened, the debt available to fund acquisition strategies dried up, interest rates climbed, and inflation hit labor and supplies. All those headwinds that private practice owners feel also hit DSOs. The difference is that many DSOs were built to flip fast, not to operate long term.
The result is that a lot of DSOs went to market looking for recapitalization and investors simply passed. Jake shared that dozens of groups went out and could not secure a good outcome. Some ended up in receivership, meaning the lender took control of the company. That is the DSO version of foreclosure.
If you want the takeaway as a practice owner focused on dental business management, it’s this. Buying practices does not guarantee profitability. A DSO is still a business. If it cannot operate efficiently and grow sustainably, the model breaks when money gets expensive.
The Harsh Reality Dentists Miss About DSOs: Leverage Leaves Almost No Margin for Error
One of the best parts of this conversation was Jake getting specific about leverage. Many DSOs are highly levered businesses, meaning they carry a lot of debt on the balance sheet. That is the nature of a leveraged buyout. The risk tolerance becomes razor thin, because even a small decline in earnings can create massive pressure.
As a private owner, you can have an up year and a down year and the main consequence is your take home income changes. In a leveraged model, a two to three percent earnings decline can push the business toward default. That’s why in the DSO world, consistent operations are not a nice to have. They are survival.
And honestly, this is also why private owners should take systems seriously. If you want dentist work-life balance, if you want to reduce clinical days for dentist, if you want real freedom, you cannot wing it. You need structure, leadership, and numbers you trust. That’s what prevents chaos and helps with dentist burnout solutions.
What Investors Want Right Now: Doctor Alignment and Organic Growth
Jake said investors are asking a very telling question. “How do you make the lives of your doctors better?” That question matters because it points to long term alignment. Investors don’t want a DSO that’s just a pile of practices bought at high valuations with disengaged owners who sold into a dream. They want proof that doctors are still incentivized to lead, grow, and operate healthy practices.
The second big priority is organic growth. Investors place a premium on DSOs that can grow without just buying more practices. Acquisitions are one lever, but the real test is whether the business can grow same store revenue and earnings year over year. That is the same concept we teach to owners who want to grow your dental practice without working themselves into the ground. If your growth only happens when you add another location, another provider, or another loan, you are exposed.
Why MB2 Focuses on Autonomy and Long Term Fit
We also talked about MB2’s recap and how investor alignment is a two way decision. It’s not just MB2 pitching investors. It’s MB2 choosing the right partner for the next phase, because deal terms are not only dollars. They are control and values. Jake emphasized MB2’s focus on doctor autonomy. The goal is not to tell doctors how to run their practice. The goal is to provide support and business resources that make them a better version of themselves while protecting what matters to them.
He also explained their selectivity. MB2 talks to thousands of dentists a year, makes hundreds of proposals, and closes on about 100. The framework is simple. Is it a quality business? Is the doctor a good partnership fit? Do the deal terms work for both sides? That matters because autonomy only works when the right partners are in the room. This is marriage. Contracts only go so far if the relationship is wrong.
What “Year One Improvements” Actually Mean After a Partnership
Jake broke down what many DSOs can do quickly in year one. Cost savings on supplies, labs, merchant services, technology, and payer strategy efforts to improve fee schedules. Those improvements can create an early profitability boost.
The difference is what happens after that first pop. Long term success requires continued value creation, year after year, not just the first year. And that point applies even if you stay private. If you want sustained dental revenue growth and improved dental practice profitability, you need a repeatable operating system. That includes dental patient management, capacity planning, and strong leadership habits.
What This Means for Your Practice Even If You Never Sell
I want to bring this back to you as the owner. Even if you never sell, this DSO environment affects hiring, wage pressure, patient expectations, and the overall market. The solution is not to panic or take sides. The solution is to build a real business.
A healthy practice is one that knows its numbers, has systems that hold the standard, and can operate without the owner being the bottleneck. That is how you protect your future and create options. Options to partner. Options to stay independent. Options to work fewer days. Options to grow. That is the path toward dentist financial freedom and the reason I keep talking about being intentional about ownership.
If you want help implementing this, that’s what we do through dental practice coaching, dental business coaching, and the frameworks inside our dental practice guide style training. It’s also why I wrote dental practice books and books on dental practice management. The goal is simple. Build a practice that supports your life instead of consuming it.
Final Thoughts: Build the Practice That Survives Any Market
The DSO space is changing, and it will keep changing. Some groups will thrive. Some will disappear. As an owner dentist, your best move is to stop treating your practice like a job and start treating it like a business. Build leadership. Build systems. Track the numbers that matter. Create a culture that keeps good people. That is how you grow dental practice performance, improve dental practice management, and set yourself up for a future where you are in control, not the market.
If you want to hear the full conversation, go listen to the Dental Practice Heroes podcast. And if you are curious what a partnership conversation could look like, you can reach out through the MB2 link or the show notes number mentioned in the episode.
