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Over the past decade, dental service organizations (DSOs) grew by acquiring struggling practices, consolidating back-office operations, and expanding their networks. That model was effective, but it’s showing its limits.
Margins are thinner now, and adding locations no longer automatically makes a business more valuable.
The strongest operators have shifted their focus to what they can actually control: what they spend.
Specifically, how they buy supplies.
Digital spend management tools give DSOs a clear view of where money is going, cut out waste, and drive down prices, all of which flows directly to the bottom line.
The purpose of DSOs (dental support organizations) is to handle the business side of running dental offices. This model has grown for three reasons:
Running a solo dental office has become extremely expensive and difficult. Joining a DSO gives independent dentists access to resources they could not afford on their own.
Outside investors have poured money into dental groups, pushing them to grow faster and run leaner. As a result, there have been efficiency and process improvements made to meet those goals.
Joining a DSO means a practice has more buying power. After all, buying supplies for 50 offices instead of one means practices can buy supplies at the best negotiated rates. Moreover, shared systems and processes also cost less per location than building everything from scratch.
In short, yes, the model still works. However, those DSOs pulling ahead are the ones turning that scale into reliable, repeatable profit even amidst other market pressures.
Digital spend management refers to software that tracks and controls everything a company buys. Instead of each office manager ordering supplies however they want, a spend management system sets approved prices, approved vendors, and creates a record of every purchase across every location.
This includes a few different functions:
The full process of finding, negotiating with, and buying from suppliers. Spend management platforms can help measure and control that process from within a single place, as opposed to being within multiple different spreadsheets.
The portion of total purchasing that flows through the controlled system. More spend under management means more of the budget is being watched and enforced.
Software that checks whether invoices match what was actually ordered and received, catching billing errors before money goes out the door.
A dental group can have purchasing policies without actually enforcing them. Spend management is the enforcement layer.
EBITDA remains the number investors use to measure how profitable a business is before accounting and financing costs.
Supply costs typically run 4 to 6 percent of revenue, with 5 percent being a gold standard for a dental group. Here is how those costs connect to company value:
Here is a simple example. A group doing $20 million in revenue spends about $1 million on supplies each year. If better purchasing controls recover just 10 percent of that, it is $100,000 back in profit. At a 10x valuation multiple, that is $1 million added to what the company is worth. All from buying smarter.
Knowing you have a spending problem is step one. These are the tools that actually fix it:
The system finds the lowest valid price available and locks it in as the standard. Every order gets checked against it automatically. Overcharges get caught before payment, not months later.
Leadership can see what every location is paying for the same item. If one office pays 15 percent more for a filling material than another, that shows up immediately and gets corrected.
Keeping two or three active suppliers in play creates ongoing price competition without having to run a formal bidding process every time.
The system cross-checks every invoice against the original purchase order and the delivery confirmation. Duplicate bills and overcharges get flagged before they are paid.
Clean, consistent product data means you can actually compare prices and spending across locations. The purchase order is what makes all of this work. Groups that skip the purchase order step and just order through online checkouts have no way to enforce prices, catch errors, or audit what was spent.
You cannot fix a problem you are unaware of. The first win from digital spend management is usually just finding out what is actually happening, because the answer is almost always worse than expected.
When purchasing is decentralized, individual office managers make their own decisions. Prices vary across locations. Off-contract purchases happen regularly. Invoices get paid twice. None of this shows up clearly in financial reports. It just quietly eats into profit.
Getting control of that spending starts with measuring it. Once the numbers are clear, the case for fixing them makes itself.
The question is whether a CFO can walk into a board meeting or an investor review and actually defend what the company spent on supplies.
With marketplace ordering, the answer is usually no.
Treat supply spend as a profit lever, not a purchasing department problem. Get visibility into what each location is actually paying, enforce the prices already negotiated, and measure the results. Every dollar recovered drops straight to the bottom line and gets multiplied at valuation. For a growing dental group, purchasing discipline is one of the few margin gains that is entirely within leadership’s control and fast to show results.
Method gives DSO operators the visibility and enforcement infrastructure to make that case with real numbers.
Supply costs come directly out of profit, so paying less for supplies raises EBITDA by the same amount. Digital spend management recovers that margin by enforcing prices, catching billing errors, and exposing price differences across locations. Because EBITDA gets multiplied at valuation, savings in purchasing are worth more than they appear on a single invoice.
Multiples depend on the size of the group, how fast it is growing, and how clean the financials are. Mid-market dental platforms have historically transacted in the {{verify current range}} range. Groups with tighter controls and higher spend under management tend to land at the higher end.
Procurement is the process of buying things. Spend management is the system that tracks, controls, and enforces how that buying happens. A group can have purchasing policies on paper without any real enforcement. Spend management is what closes that gap.
PE investors buy companies based on EBITDA and sell them the same way. Supply spend is one of the few cost areas management can move quickly, without waiting on revenue growth. It also signals to buyers that the business is well-run, which reduces risk in the sale process and supports a stronger valuation.
