Group Practice vs Solo: The Pendulum Swung Again

Two dentists graduate the same year, earn the same money, and retire twelve months apart. One walks away with a pension-sized check from a buyer; the other walks away with a LinkedIn profile. The median dentist earned $176,110 in May 2025 according to the U.S. Bureau of Labor Statistics, which means the terminal value of a practice is frequently worth four to six years of that income, collected in one wire transfer. That is the whole argument about group versus solo, stripped of the conference-stage theater.

Here is the claim we will defend, and plenty of smart owners will hate it: group practice won the last decade on access to capital, not on operating economics, and for a dentist making the decision in 2026, single-location or small-partner ownership is now the better financial bet than affiliating with a platform. The ownership slide you have been reading about for ten years is real, but it is a financing story wearing a clinical costume, and financing stories reverse.

34% Solo, and the Number Stopped Falling Off a Cliff

Start with what is actually measured. In 2024, 34% of U.S. dentists practiced solo, defined as a single dentist at a single location, with the rest in some flavor of group setting, per the ADA Health Policy Institute's 2025 workforce report. Practice ownership overall fell to 72.5% of dentists in 2023 from 84.7% in 2005. DSO affiliation more than doubled, from 7.2% of dentists in 2015 to 16.1% in 2024, and among dentists up to ten years out of school it hit 26.5%.

The generational numbers are sharper. Among dentists aged 30 to 34, ownership fell from more than half in 2005 to roughly one third by 2021, and fewer than one in ten dentists under 30 owned a practice as of 2021, according to ADA News reporting on HPI data.

Read those two paragraphs the way a lender reads them. Ownership did not collapse because dentistry stopped working as a small business. It fell because a generation came out with student debt, met a buyer class with cheap money and no requirement for the buyer to hold a license, and took the certain paycheck. Every one of those conditions is a market condition. None of them is a law of nature.

Colorado Just Told DSOs They Cannot Be the Owner

The clearest signal this cycle is not a transaction multiple. It is a rulebook. New Colorado Dental Board regulations under SB25-194, effective January 1, 2027, bar a DSO from serving as the "proprietor" of a dental practice and confirm that only a licensed Colorado dentist may own one, as Marti Law Group details.

Management agreements will be redrafted and the platforms will keep operating in Colorado. That is not the point. The point is that a state regulator looked at the dominant ownership structure in dentistry and drew a line at the one thing the model depends on: control that sits with capital rather than with a license. When one state writes that down, the compliance cost of every multi-state platform goes up, and the diligence question on every future deal changes from "what is the multiple" to "what survives the next statute."

Our view: regulatory risk has quietly moved from the seller's side of the table to the buyer's side, and sellers have not repriced for it yet.

What Most Owners Get Wrong About the Affiliation Offer

The specific mistake, and it is concentrated among solo owners aged 55 to 62 running one location at $1.2M to $1.8M in collections: they treat the DSO letter of intent as a valuation, when it is a compensation restructure with a down payment attached.

The headline number in those letters is usually a multiple of adjusted EBITDA, and the adjustment is the trick. The buyer replaces your current owner compensation with a market associate rate, typically a percentage of your own production, then pays you a multiple on what is left. So part of the "purchase price" is money you were already going to earn, handed back to you more slowly and taxed differently. Add a rollover equity slice you cannot value, a three to five year employment agreement, and a production target that assumes the hygiene schedule stays full after the long-time hygienist meets her new regional manager.

The second version of the mistake is worse. Owners at 45 take the same deal because the number is larger than anything they have seen, then discover they have sold the compounding asset and kept the job. You can sell a practice once. You can collect its cash flow every year you own it.

We would not take that deal at 45. At 62, with no successor, a lease expiring, and equipment past its useful life, it can be the right answer, and we would still make the buyer compete against a private sale to an associate before signing.

The $1.2 Million Gap Over Ten Years, On a Practice That Never Grows

Run it with plain numbers. Two dentists, same hands, same ten years, no growth assumed anywhere, because growth assumptions are how bad deals get sold.

Dentist A, associate in a group. Produces $750,000 a year, paid 30% of adjusted production, so $225,000 in annual compensation. Over ten flat years that is $2,250,000 in cash. At the end: no equity, no asset, no buyer.

Dentist B, buys a single location. Purchase price $900,000, financed in full at 8.5% over ten years, so annual debt service of roughly $133,900. The practice collects $1,000,000. Operating overhead excluding owner compensation and debt runs 60%, or $600,000. That leaves $400,000 in pre-debt owner earnings. After debt service, Dentist B takes home $266,100.

So the annual cash advantage to ownership is $41,100, which is real but not life-changing: $411,000 across the decade.

The decade-end balance sheet is where it stops being close. Replace Dentist B with an associate at 30% of $800,000 in doctor production, or $240,000, and the practice shows $160,000 in adjusted EBITDA. At a 5x multiple, that is an $800,000 asset, owned free and clear because the note is retired.

Total gap: $1,211,000 on a practice that grew zero percent in ten years. That is roughly seven years of the median dentist wage, created by signing a loan document instead of an employment agreement.

Now the honest other side. Dentist B signed a personal guarantee, a ten-year lease, and payroll for eight people. If overhead runs 68% instead of 60%, pre-debt earnings drop to $320,000 and the cash advantage over the associate turns into a $38,900 annual deficit. That eight-point swing is the entire thesis. Ownership is not a wage premium. It is a management job that pays in equity, and owners who will not manage should not buy.

Why the Rollup Math Is Getting Harder, Not Easier

The U.S. DSO market was USD 155.65 billion in 2025 and is projected to reach USD 302.54 billion by 2035, a 6.87% CAGR, per Precedence Research. That is a growing market. It is not an arbitrage.

A roll-up needs two things: a spread between what it pays for practices and what the platform is worth in aggregate, and a supply of clinicians to staff what it buys. The spread was manufactured by borrowing costs that no longer exist at those levels. The clinician supply is the part nobody models honestly. BLS counts about 161,400 dentist jobs with 6% projected growth from 2025 to 2035 and roughly 4,800 openings a year, most of them replacements. There is no wave of new dentists coming to fill a doubled platform footprint.

Scarce labor is a problem that scales badly. One owner-dentist needs to keep one chair productive and one hygiene column full. A platform with 400 locations needs to recruit, pay, and retain hundreds of associates in a market where the associate knows exactly what the practice down the street is paying. Every point of associate compensation inflation comes straight out of the EBITDA the platform was built to multiply. The owner-operator absorbs the same pressure and keeps the residual.

The Three-Location Trap

If you are going to grow, do not stop in the middle. Two to four locations is the worst structure in dentistry. You have taken on the overhead of a management company, a second rent, duplicate equipment, and an associate you must keep busy, without the scale to justify a real operator, a credentialing team, or any purchasing advantage worth the name. You are now a regional manager who also does molar endo on Thursdays.

One excellent office with 60% overhead and an owner in the chair four days a week beats three mediocre offices almost every time, on cash and on sanity. If you want the platform economics, commit to the infrastructure that produces them and go past eight locations with non-clinical leadership you actually pay for. Our call: if your plan tops out at three, drop the plan and put the capital into the chair that already prints money.

What We Would Do With an LOI on the Desk This Week

Three things, in order. Strip the offer down to cash at close, after tax, with rollover equity valued at zero, and compare that number to five years of your current take-home. Second, price the private alternative: what would a 32-year-old associate with an SBA loan pay you, and what would seller financing on 20% of it do to your total proceeds? Third, model the year you stay. Specifically, model the quarter the production target is missed and the earnout evaporates.

If you are earlier in the arc and renting your hands to someone else's balance sheet, the move this week is smaller: ask your CPA what debt service a $900,000 note carries at today's rates, and ask a broker what the practice you would want actually collects. The gap between those two numbers is your career.

What we are tracking next: whether other states follow Colorado's proprietor rule into statute, and whether DSO affiliation among dentists within ten years of graduation climbs above 26.5% in the next HPI workforce release or finally flattens. What would change our mind: platforms offering associates genuine, valued, transferable equity instead of rollover paper, or single-location valuations sliding toward 50% of collections. The first would make affiliation a real wealth path. The second would make ownership cheap enough that this argument gets settled by anyone with a loan officer and a pulse.

Before you respond to any letter of intent, price the asset yourself. Our valuation tool takes your collections, your overhead percentage, and a market associate rate and shows you the adjusted EBITDA a buyer will actually multiply, which is almost never the number in the teaser. Run your own numbers, then go back to the table knowing what you are selling.