1. Why Is the Owner Selling the Dental Practice?

The reason why a dentist is selling their practice reveals a lot about its current condition and future outlook.

Dental practice owners typically sell for several reasons:

• Retirement: Retirement is the most common reason for selling. For many dentists, effective retirement planning includes the sale of their practice as a key component.

• Consolidation pressures: Many smaller practices face growing pressure from larger competitors offering broader services with bigger marketing budgets.

• Financial considerations: Some owners recognize that the current market for dental practices is strong, with significant capital chasing well-performing practices.

• Regulatory burden: Dental practices face heavy regulation, second only to aviation in healthcare. The stress of maintaining compliance can push owners to sell.

The seller's reason for exiting can affect your potential success. A practice being sold due to retirement generally presents fewer concerns than one selling due to financial struggles or compliance issues. An underperforming practice might need substantial investment to turn around. When a practice is on the market because the owner hasn't invested in necessary upgrades, you should assess the cost of bringing operations up to standard.

2. How Healthy Are the Practice's Finances?

A dental practice’s financial health determines its profitability and long-term viability. Reviewing at least three years of financial records reveals revenue trends, expenses, and potential red flags. Analyze dental KPIs to understand the practice's performance.

Start with the Profit and Loss (P&L) Statement, which provides a clearer picture of operational profitability than tax returns, where income is often minimized for tax purposes.

Revenue vs. Profit

Beyond total collections, assess net profit—the amount remaining after expenses. Low profit margins may indicate high overhead, inefficient billing, or underpriced services.

Overhead Efficiency

An organized practice maintains reasonable overhead, with staff wages around 25% of revenue in general dentistry. Other expenses include supplies, equipment, technology, marketing, and professional services. Identifying inefficiencies can reveal cost-saving opportunities. To gain deeper insights, performing a detailed practice overhead breakdown can help identify areas for improvement.

Accounts Receivable

Aged receivables impact cash flow. Accounts overdue by 60+ days become difficult to collect, signaling a need for stronger billing policies or payment plans. You can implement effective dental payment programs to help improve collection ratios and reduce uncollectible accounts.

Outstanding Debts

Inherited liabilities—loans, leases, or other financial obligations—affect future cash flow. Confirm the practice’s revenue can support debt repayment while maintaining profitability.

Practice Valuation

Valuation considers collections, EBITDA, and discretionary earnings. Multiples vary by location and specialty. Consult a CPA specializing in dental practices to confirm the asking price aligns with industry benchmarks.

For a thorough valuation, consult with a CPA who specializes in dental practices.

3. What Does the Patient Base Look Like?

The patient base can be divided into lists of active and inactive patients.

The definition of an active patient has changed since the pandemic. Today, an active patient has their next appointment scheduled. Tracking active patients should happen daily. Monitor:

• How many patients have their next appointment scheduled

• How many patients are overdue

• How many patients were contacted and converted to scheduling today

Establishing strategies to handle patient cancellations can help maintain steady patient flow. Practices with enough active patients do well, as a robust patient base generates enough income to support your lifestyle and retirement plans.

Patient Demographics

Another important factor is patient demographics; two critical demographic factors are age distribution and geographic location.

Patient age distribution reveals how patients might respond to new providers during ownership changes. A balanced age distribution typically indicates less resistance to new ownership.

Geographic analysis through zip code breakdowns helps you understand where your patients come from. This information becomes vital when considering non-compete clauses.

New Patient Acquisition

Most practices want to increase new patient flow. While the average practice brings in about 10 new patients monthly, aiming for 20-30 new patients per month can dramatically boost growth.

Ownership Transition Considerations

When planning an ownership change, patient retention becomes the primary concern. A good transition strategy should include:

1. Clear communication with existing patients about the change

2. Proper introduction of new providers to patients

3. Maintaining consistent care protocols where possible

4. Making sure non-compete clauses protect the practice's patient base

Implementing these strategies can help boost patient retention during the transition.

4. What Services Does the Practice Offer, and Can It Be Expanded?

The scope and diversity of services directly impact your practice's value and growth ceiling.

Asses Current Services

Document all procedures and treatments the practice currently provides. Categorize these by:

• Preventive care

• Restorative dentistry

• Endodontics

• Oral surgery

• Periodontics

• Prosthodontics

• Orthodontics (if applicable)

• Cosmetic procedures

Track production metrics for each category. A comprehensive dental production report will show which procedures generate the most revenue and where there might be gaps.

Expansion Potential

Check whether expansion is truly necessary based on patient demand. Meaningful expansion should address specific needs like:

• Reducing patient wait times

• Creating space for advanced technology

• Accommodating additional associates or specialists

Before committing to physical expansion, consider alternatives:

• Extending office hours to maximize your current space

• Hiring an associate dentist to increase appointment availability

• Adding high-value services that require minimal additional equipment

Technology Assessment

Modern dental technology significantly impacts your ability to expand services. Evaluate if the practice has:

• Digital radiography

• CAD/CAM systems for same-day restorations

• 3D imaging capabilities

• Intraoral scanners

• Laser dentistry equipment

5. Is the Facility and Equipment Up to Standard?

Thoroughly assess the facility's physical condition and equipment.

Inspect Equipment

Conduct a thorough examination of the equipment in your facility. This survey should include:

• Taking photos of all equipment

• Checking for a preventative maintenance program

• Reviewing recent service and repair records

• Confirming that identified issues have been fixed

Bring in a trusted dental equipment representative to verify major items' condition and expected lifespan.

Regulatory Compliance

The practice must meet several regulatory standards:

• OSHA Compliance: Many dental practices don't fully comply with OSHA's infection control standards. Review infection control protocols and staff training procedures.

• HIPAA Requirements: Verify proper data security measures are in place to protect patient privacy.

• ADA Regulations: Inspect the facility for ADA compliance and determine if modifications are needed.

• Radiation Safety: Check that all radiographic equipment is appropriately maintained and staff are trained on safety protocols.

Future Upgrade Considerations

Identify necessary upgrades to IT systems, sterilization areas, or treatment rooms, which may require significant financial investments.

6. What Should You Know About the Existing Staff?

The existing staff is a significant asset that can affect practice value and patient relationships.

Pay special attention to tenured employees. Long-term team members possess "tribal knowledge"—an institutional memory and understanding of practice operations that prove invaluable during transitions.

Employment Contracts and Retention

These agreements help assess the likelihood of staff retention after acquisition. Request copies of all employment contracts, including:

• Employment terms and duration

• Non-compete clauses

• Bonus structures

• Benefits packages

• Vacation policies

Team Culture and Transition Planning

The existing team culture significantly affects how smoothly your acquisition will proceed. A cohesive, well-trained staff adds value to the practice. One factor affecting staff retention is the seller's future role. Clarify whether the selling dentist will continue working in the practice, which can significantly impact staff stability. A skilled and dedicated team that remains intact during ownership transition provides continuity for patients and helps maintain the practice's reputation and value.

7. Are There Any Legal or Compliance Issues?

Legal due diligence is important to avoid potential pitfalls that could hurt your investment.

Verify Licenses and Permits

Carefully review the practice's systems for logging, storing, and prescribing controlled medications. Confirm that all necessary licenses and permits are current and transferable. This includes:

• Dental practice licenses

• Sedation permits

• Radiation licenses

• DEA registrations for controlled substances

Review Pending Legal Matters

These issues could signal deeper problems and potentially transfer liability to you as the new owner. Investigate any:

• Recent lawsuits against the practice

• Disciplinary actions by regulatory bodies

• Ongoing investigations

• Regulatory complaints

Conduct Compliance Risk Assessment

During site visits, photograph equipment, review maintenance reports, and confirm all identified issues have been addressed. A thorough compliance risk survey should include:

• Reviewing staff training records

• Evaluating data privacy and security measures

• Assessing equipment maintenance programs and documentation

Secure Written Representations and Guarantees

Guarantees in writing provide a safety net should issues arise after the sale is complete. Obtain written assurances from the seller regarding:

• Clear title to all assets being sold

• Accuracy and completeness of financial documentation

• Compliance with all relevant laws and regulations

• Disclosure of any pending legal actions or disputes

8. What Support Will the Seller Provide During the Transition?

Knowing the scope of the seller's involvement during the transition period is important for continuity of care and maintaining practice value.

For example, the selling dentist's participation in introducing you to patients can significantly impact patient retention rates. A well-planned transition might include the seller personally introducing you to long-standing patients, sending announcement letters jointly signed by both parties, or hosting a meet-and-greet event.

Staff Training and Knowledge Transfer

Standard operating procedures can improve the transition and maintain consistency in practice operations. The purchase agreement should clearly outline how the seller will facilitate knowledge transfer, including:

• Training on practice-specific protocols and procedures

• Introduction to referral sources and vendors

• Documentation of unwritten policies and practices

• Sharing insights about patient preferences and histories

Duration and Scope of Seller Involvement

Your agreement should also explicitly define the terms of the seller's continued involvement. This might range from a complete exit on closing day to a more extended transition period. Whatever arrangement you negotiate should be addressed at the beginning of negotiations to avoid misunderstandings.

9. Does This Practice Align with Your Long-Term Career Goals?

Buying a dental practice is a long-term commitment that should fit your professional vision. Assess whether its business model, patient base, and services align with your expertise and growth goals.

Beyond clinical fit, consider financial viability. A practice should support your goals, but decisions should be based on business fundamentals, not lifestyle aspirations.

Work-life balance matters, but reducing clinical hours can raise overhead, require additional providers, and impact patient retention. Ensure the schedule supports both your lifestyle and profitability.

If ownership isn’t the right path, alternatives include partnership tracks, dental service organizations (DSOs), or public health roles.

Secure a Smooth Transition with the Right Support

As you progress in your practice acquisition journey, ask detailed questions about regulatory compliance, secure all necessary representations and guarantees in writing, and clarify the seller's future role. Also, investing in professional guidance from healthcare attorneys, accountants with dental industry knowledge, and insurance experts will protect you from potentially costly mistakes.

The transition process can be complex, especially when hiring and retaining top-tier dental professionals.

At Teero, we make staffing seamless by connecting dental practices with highly qualified hygienists so your new practice runs smoothly from day one. Whether you need temporary support during the transition or long-term staffing solutions, Teero helps you build a team that fosters patient trust and practice growth.

Get in touch with us to simplify your hiring process!