Questions to Ask When Buying a Dental Practice
For a dentist weighing a practice purchase, mostly for the conversations with the seller. The 53 questions run from why the practice is for sale and what it really collects, through insurance, patients, staff and the premises, to the terms of the deal.
The questions
Each question, and why to ask it
First questions
Why are you selling now, and what do you plan to do after closing?
Why ask it
A seller retiring at 65 is a different risk than one leaving after a corporate office opened two blocks away. Burnout, a health problem or a falling-out with a partner are all answers worth hearing, and none of them shows in the numbers. Their next move also tells you whether they might practice nearby and pull patients with them.
What were gross production and actual collections for each of the last three years?
Why ask it
Production is what was billed, collections are what reached the bank, and only the second one pays your loan. Read the three years as a trend as well as a total, and have a dental accountant tell you whether the gap between the two figures is ordinary insurance write-offs or money the front desk is failing to collect.
How many active patients do you have, and how are you defining active?
Why ask it
Some sellers count every name ever entered in the software. Ask for patients seen in the last 18 months, a common yardstick, from a report you watch run on screen, because that figure is what the goodwill in the price rests on.
How many new patients arrive per month, and where do they come from?
Why ask it
Twenty-five new patients a month from search and general word of mouth should keep arriving under a new name on the door. Twenty-five who come through the seller's church, Rotary club or 30-year personal reputation may stop when the seller does.
How did you arrive at the asking price, and may I see the valuation behind it?
Why ask it
A written appraisal from someone who values dental practices for a living can be checked line by line, and a rule of thumb such as a share of last year's collections cannot. Ask who commissioned the report and which month its figures stop at, since an old one may describe a busier practice than the one for sale.
How many days a week do you see patients, and how many weeks did you take off last year?
Why ask it
Collections mean little until you know the hours behind them. The same figure earned in three days a week leaves you room to add a fourth, while one that took five long days and no holidays is already at its ceiling.
Money and insurance
Which personal expenses run through the practice, and what is the net income once they are added back?
Why ask it
A car, the family's phones, a conference in a resort town and a relative on the payroll are the usual ones. Go through each add-back with the seller's accountant and ask for the paperwork behind it, since every dollar accepted as personal raises the cash flow your lender and the valuation both lean on.
What does overhead run by category: staff, lab, supplies and rent?
Why ask it
Those four lines decide most of a dental practice's profit, and the normal range for each depends on the country and the kind of practice, so take your benchmarks from a dental accountant and not from the seller. A line far outside the range is either waste you can trim or something built into the practice, and the price should reflect which.
What is sitting in accounts receivable, how old is it, and is it part of the sale?
Why ask it
The older a balance, the less of it tends to come in, so if you buy the receivables, pay for them by age and not at face value. If the seller keeps them, settle who chases the money and how a payment is split when one patient owes you both.
How much do patients hold in credit balances or prepaid treatment, such as aligner cases paid in full?
Why ask it
This is work you will owe using money the seller has already banked. Run the credit balance report and count the orthodontic or aligner cases still in progress. The total should come off the price or be held back at closing.
When did you last raise your fees, and by how much?
Why ask it
Fees untouched for years leave room on the fee-for-service side, though a contracted plan pays its own schedule whatever your office fee says. A sharp increase just before listing is a different story: it lifts production on paper without adding a dollar to what insured patients bring in.
What is the payer mix across fee-for-service, PPO, Medicaid and any capitation plans?
Why ask it
Ask for the mix by collected dollars, not by patient count, because a plan that covers a third of the patients can bring in far less than a third of the money. The labels here are American; elsewhere the same question is how much comes from private fees and how much from a public scheme or contract.
Which insurance plans are you contracted with, and may I see the fee schedules?
Why ask it
Two offices doing the same procedures can end up far apart in income on fee schedules alone. Get the schedules themselves, then ask each plan whether a new owner keeps the seller's rates or is handed its current standard ones.
How long is credentialing likely to take me on those plans, and how are claims paid in the meantime?
Why ask it
Until a plan has approved you, its patients may be out of network with you, and that can last months. Each payer keeps its own timeline, so call them for current figures and size your working capital to the slowest one.
How does production split between you, any associates and the hygienists?
Why ask it
Revenue attached to an associate can walk out with that associate, and revenue attached only to the seller has to be replaced by you from the first morning. Ask for the split by provider for each of the three years so you can see who has been carrying the growth.
Which procedures make up most of your own production, and are there any I would not be doing?
Why ask it
If a large share comes from sedation, implant surgery or orthodontics and you offer none of them, that income leaves with the seller unless you train or bring someone in. A procedure code report sorted by dollars answers this better than memory does.
What discounts, membership plans or courtesy write-offs do you give, and to whom?
Why ask it
Free care for friends, staff families and old neighbors shows up as production that was never going to be collected. An in-house membership plan is a promise you inherit too, so read its terms and decide before closing which courtesies you will keep.
Are there loans, equipment leases or liens against anything I would be buying?
Why ask it
A leased scanner or cone beam unit is not the seller's to sell, and a lender's lien may follow equipment to its new owner. Your attorney can run the lien search, which works differently from one state or country to the next, and write payoff into the conditions of closing.
Patients
How many patients have gone inactive or transferred out in each of the last three years?
Why ask it
New patients only count net of the ones leaving. If thirty arrive each month and the active count has not moved in three years, thirty are going out the back door. Learn why before assuming your marketing will fix it.
How old is the patient base, and how far do most patients travel to get here?
Why ask it
An older base brings more restorative and denture work but thins out each year, and young families bring hygiene visits and decades of recall. Patients who drive past several other offices to get here are often coming for the seller personally, which makes them the likeliest to drift after the handoff.
How many days of hygiene do you run each week, and how often do patients cancel late or fail to show?
Why ask it
Hygiene days measure how many people actually come back, which is harder to dress up than a patient count. A column that looks full but loses two or three visits a day to late cancellations produces less than the schedule suggests, so ask for the broken appointment report.
What percentage of patients leave with their next recall visit already booked?
Why ask it
A high pre-appointing rate means much of next year's hygiene schedule is already on the books the day you take over, and a low one means the front desk rebuilds the calendar from scratch every month.
How far ahead is the schedule booked for you and for hygiene?
Why ask it
A doctor column full three weeks out says demand is outrunning chair time. Openings tomorrow and the day after say the opposite, however good the annual totals look. Ask to see next week's schedule on screen.
How much diagnosed but unscheduled treatment is sitting in the charts right now?
Why ask it
A treatment plan report shows what patients have already been told they need. A large unscheduled balance is either near-term revenue or evidence of poor case acceptance, and sampling those charts tells you which one it is.
Which procedures do you refer out, and roughly how much do you refer per year?
Why ask it
Molar root canals, implants, wisdom teeth and aligner cases sent down the road are work this patient base already needs. Whatever you are trained to keep in the office is growth that takes no new patients, though expect to hear, fairly, that the seller should not be paid for skills you are bringing.
How would you describe your approach to treatment: when do you watch a tooth, and when do you treat it?
Why ask it
Patients who have heard 'we'll keep an eye on it' for twenty years can feel oversold when a new dentist plans four crowns at the first visit, and some will leave over it. A gap in either direction is manageable once you know it is there, because you can move toward your own standard gradually. Hold the answer up against the charts when you sample them.
What do your online reviews praise and complain about, and how many mention you by name?
Why ask it
Read them before the meeting so you can set the seller's account beside what is posted. Praise for the doctor personally is goodwill that leaves at closing, while praise for short waits, the hygienists or fair billing describes the office you would own.
What do you spend on marketing, and who owns the website, the listings and the tracking numbers?
Why ask it
A practice that spends nothing and still draws new patients is running on reputation, which is cheap but partly personal to the seller. Where an agency is involved, read the contract: some agencies own the site and the phone numbers on the ads, and you would be renting your own front door.
Who else practices within a few miles, and has anything opened or closed recently?
Why ask it
The seller knows which office took patients when it opened and which retirement sent a wave their way. Check the answer yourself by driving the area and reading local planning notices, because a new housing development or a large employer closing changes demand more than any one competitor.
Staff
Who is on the team, how long has each person been here, and who do you expect to stay?
Why ask it
Losing a 15-year hygienist or the office manager who knows every patient by name hurts more than losing equipment. Ask for the roster in writing with wages, benefits and hours as well, because pay sitting below the local rate is a raise you will have to give, and it stays in your overhead.
Does the team know the practice is for sale, and how and when will they be told?
Why ask it
Keeping it quiet until the deal is firm is common and reasonable. Agree on the day, the wording and who is in the room, since staff who learn it from a rumor or a patient tend to start looking elsewhere.
Who handles billing, insurance claims and the books, and is any of it done by a family member?
Why ask it
A spouse who has run the front office for twenty years often leaves on the same day as the seller. That leaves you hiring and training for the one job that decides whether production turns into collections, so price the replacement before closing.
Are there associates, visiting specialists or contractors, and are their agreements written and transferable?
Why ask it
An associate working on a handshake can open nearby with their patients and nothing stops them. Ask too whether anyone has been promised a future buy-in, because that person may consider themselves ahead of you in line.
What has the team been promised or already earned: raises, bonuses, unused leave, retirement contributions?
Why ask it
Unused vacation and a year-end bonus the seller mentioned in the spring become your bill and your broken promise if nobody writes them down. Whether accrued leave must be paid out or carried over in a sale is a matter of local employment law, which is one for your attorney, but either way get the amounts listed before closing.
Who has left the team in the past two years, and why?
Why ask it
One retirement and one move across the country is ordinary. Three assistants gone in two years points at pay, at the schedule or at how the office is run. A former employee will often say which if you ask politely.
Premises
How old is the major equipment, and when were the compressor, vacuum, sterilizers and sensors last replaced?
Why ask it
Worn chairs, a failing compressor or film-based imaging can mean heavy capital spending in the same year your loan payments begin. Read the service records, and have an equipment technician walk the office before closing.
What practice management and imaging software do you use, and is the data fully exportable?
Why ask it
Legacy or heavily customized systems make chart migration painful, and some vendors charge steeply for conversion. Confirm you can export complete clinical notes, ledgers and images, and that license and support terms transfer to you.
How many operatories are equipped, and is there plumbed space to add another?
Why ask it
A room already plumbed but used for storage is the cheapest growth you will ever buy. If every chair is busy and the walls are fixed, growth means longer hours or a move, and the price should not assume otherwise.
What are the lease terms, and will the landlord assign it or issue a new lease at similar rent?
Why ask it
A dental suite is expensive to relocate because of its plumbing, wiring and imaging rooms, so a short remaining term or a landlord set on a large increase can undo the numbers. Lenders commonly want the lease, renewal options included, to run at least as long as the loan, so ask yours what it requires before you sit down with the landlord.
Do you own the building, and if so, would you sell it with the practice or stay on as my landlord?
Why ask it
A seller who keeps the building keeps a hand in your business for as long as you rent: the rent, the renewals, the repairs. Buying it means a second valuation and usually separate financing, so have the property appraised apart from the practice, and if you are not ready to buy, ask whether a right of first refusal can go in the lease.
What does the landlord control: signage, parking, opening hours, and whether another dentist can rent in the building?
Why ask it
Evening or Saturday hours do not work if the building locks at six, and a sign patients cannot see from the road costs you new ones. Ask whether the lease gives you exclusive use for dentistry, and if it does not, ask for it while the landlord still wants the assignment signed.
When were the last radiation, sterilization and infection control inspections, and what did they find?
Why ask it
Who inspects a dental office, and how often, depends on where it sits, so find that out first. Then read the latest reports themselves, since a deficiency left open on closing day is likely to land on the new owner.
The deal
What is included in the price: equipment, supplies, patient records, the phone number, the website and the practice name?
Why ask it
Patients find the office through its phone number and web address, so those belong on the asset list beside the chairs. Get it all on a written schedule, including what leaves with the seller. Records need separate care, because privacy and licensing rules decide how they pass to a new owner, and those differ from place to place.
Is this an asset sale or a sale of the company's shares, and why that structure?
Why ask it
Broadly, an asset sale lets you choose what you take, and a share sale hands you the company along with its history. Which one is usual, and what each costs in tax, differs by country, so put the question to your own accountant and attorney before you answer the seller.
How will the purchase price be allocated between goodwill, equipment, supplies and any restrictive covenant?
Why ask it
Buyer and seller usually want opposite splits, because each category is taxed differently for the one paying and the one being paid. Have your accountant work out both versions under the rules where you are, and negotiate the allocation together with the price instead of after it.
Have there been any malpractice claims, board complaints, or insurance audits and repayment demands?
Why ask it
A payer that audited the seller's coding and asked for money back may look hard at the same office under you, and a complaint history clings to the practice name. Check the answer against the dental board's public record where one exists, and have your attorney put the seller's statement into the purchase agreement as a written representation.
Who pays when work you did fails after closing, such as a crown that comes off in the first year?
Why ask it
Patients will bring the seller's failures back to your chair and expect them fixed for nothing. Agree on a retreatment clause that names the period, the procedures covered and whether the seller redoes the work, reimburses you or does neither.
Would you carry part of the price as a seller note, or accept a holdback tied to patient retention?
Why ask it
Whatever comes of it, the reaction is informative: a seller sure the patients will stay has little to fear from being paid as they do. Your lender will have its own rules about seller financing, so raise the idea with them before it goes into an offer.
How long has the practice been for sale, and has an earlier offer fallen through?
Why ask it
A deal that died in diligence died for a reason, and it is fair to ask what the last buyer found. If a broker is involved, remember who pays them, and treat their summary of that story as the seller's version.
May I spend a day in the office before we sign, introduced as a visiting colleague?
Why ask it
One day of watching tells you things no report does: how the phones are answered, how long patients wait, whether the team gets along. If the seller cannot risk it during working hours, an evening walk-through under a confidentiality agreement is a fair second best.
May I review a sample of patient charts before we settle on a price?
Why ask it
Charts show what the reports cannot: how thoroughly the seller diagnoses, how current the X-rays and gum measurements are, and whether the notes would stand up to a complaint. Expect to sign a confidentiality agreement first, and ask your attorney what privacy law where the office sits allows a buyer to see.
How long will you stay on after closing, and what non-compete will you sign?
Why ask it
A real handoff has parts you can list: a letter to patients over the seller's signature, introductions in person and a set number of weeks working beside you. The non-compete should name a distance and a term and cover soliciting your staff and patients. Courts in some places refuse to enforce these or cut them down, so the wording is your attorney's job.
What would you do with this practice if you were staying another ten years?
Why ask it
It is the friendliest question on the list and often the most useful. The seller knows which evening hours were never tried, which procedure was referred out from habit and which neighborhood has never heard of the office, and by now has little reason to keep any of it back.
Running Diligence on a Dental Practice
Practical guidance for the conversation itself
How to Check the Answers
Get the reports, not the summary
Request production and collections by provider, an active patient report defined at 18 months, an accounts receivable aging report, new patients by month, broken appointments and a treatment plan report. Watch at least one of them run on screen so you know the figures came out of the software and not a spreadsheet.
Hire dental-specific advisors
An accountant and an attorney who handle dental sales regularly will know which add-backs are normal, what kind of non-compete holds up where you are, and which terms lenders accept. A generalist can do the legal work well and still miss something particular to dentistry, such as how long insurance credentialing takes.
Take each question to the person who can answer it
The seller answers for the practice, but the landlord answers for the lease, each insurer for its own credentialing timeline, your lender for the financing it will allow, and your attorney for liens, patient records and local employment law. Where a conversation and a document disagree, go with the document.
Audit charts before you sign
Sample a few dozen charts across new and long-standing patients, under whatever confidentiality agreement your attorney advises. Look at diagnosis quality, radiograph intervals, perio charting, note completeness and how much accepted treatment never got scheduled. That sample shows you the clinical standard you are inheriting and how much work is already waiting in the building.
Model your first twelve months, not their last twelve
Rebuild the profit and loss using your own fee schedules, corrected staff wages, hygiene and associate pay, the loan payment and a credentialing gap. If the deal only works on the seller's numbers, it does not work.
Red Flags Worth Walking Away From
An active patient count that cannot be reproduced
If the seller claims 2,000 active patients and the 18-month report returns 900, the goodwill number is fiction. Price the practice off the report, never off the claim.
Collections propped up by a single source
One large employer group, a capitation contract, or a referral relationship tied to the seller personally can evaporate at closing. Ask what percentage of collections would disappear if that one source went away tomorrow.
A vague transition commitment
A seller who will not put the transition weeks, a patient letter and introductions in writing has made no promise you can hold them to. Some patients leave in any change of owner, and a weak handoff loses more of them.
Declining production blamed on slowing down
Easing toward retirement is a legitimate explanation, but test it by checking whether hygiene volume and new patient flow held steady. If those fell too, demand is shrinking, not just doctor hours.
Documents to Request in Writing
- Three years of tax returns plus year-to-date profit and loss, with the seller's add-back schedule
- The valuation or appraisal behind the asking price, with the date its figures end
- Production and collections reports by provider and by procedure code for three years
- Active patient report defined as seen within 18 months, plus new patients and broken appointments by month
- Accounts receivable aging, patient credit balances, and unearned revenue for prepaid orthodontic, aligner or membership plans
- Every payer contract and fee schedule, plus any capitation rosters
- Current lease including assignment and renewal language, or a separate building appraisal if real estate is part of the deal
- Staff roster with hire dates, wages, benefits, hours, accrued leave and any employment or non-compete agreements
- Associate, specialist and contractor agreements, plus any marketing agency contract
- Equipment list with ages, service records and warranties, plus software license and support agreements
- A schedule of what is included and excluded, down to the phone number, web domain and practice name
- Infection control and privacy compliance records (the OSHA and HIPAA files in the United States), radiation equipment inspections, waterline test results and sterilizer logs
- Written disclosure of malpractice claims, board complaints, payer audits, liens and outstanding equipment loans or leases