Questions to Ask When Buying a Dental Practice
For dentists evaluating a practice acquisition. These 20 questions cover collections, active patient counts, payer mix, hygiene production, equipment, lease terms and the transition, so you know what you are really buying.
The questions
Open any question for the note
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. 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. A collection rate below roughly 96 percent of adjusted production points to billing problems you would inherit.
How many active patients do you have, and how are you defining active?
Why ask it
Many sellers count everyone ever entered in the software. Insist on patients seen within the last 18 months, pulled from a report you watch run on screen, because that number drives the goodwill you are paying for.
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 will transfer to you. Twenty five that arrive through the seller's church, Rotary club or 30 year personal reputation may leave when they do.
How many hygiene days do you run per week, and what share of production is hygiene?
Why ask it
A healthy general practice typically sees 25 to 35 percent of production from hygiene. Very low hygiene signals a weak recall base, while very high hygiene means the doctor schedule is underused, which is an upside you can price in.
What percentage of patients leave with their next recall visit already booked?
Why ask it
The pre appointing rate is the best single predictor of whether the schedule holds after you take over. Under about 70 percent means the front desk is rebuilding the calendar from scratch every month.
What is the payer mix across fee for service, PPO, Medicaid and any capitation plans?
Why ask it
Heavy PPO participation means your income depends on write offs you do not control, and capitation or HMO plans can obligate you to treat patients at a loss. Ask for the mix by collected dollars, not by patient count.
Which insurance plans and fee schedules are you contracted with, and may I see them?
Why ask it
Two practices with identical production can differ by six figures in net income purely on fee schedules. You need the actual schedules to model what those same procedures will pay under contracts written in your name.
How long will credentialing take for me on those plans, and what happens to cash flow in the gap?
Why ask it
Credentialing often runs 60 to 120 days per payer, and until it clears you may be out of network for most of the patient base. This is the most common cause of a first year cash crunch, so size your working capital around the answer.
Which procedures do you refer out, and roughly how much do you refer per year?
Why ask it
Molar endo, implants, third molars and aligner cases sent elsewhere are revenue already sitting inside the patient base. If you can keep that work in house it is the fastest growth lever available, and it should shape your offer.
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.
May I see the staff roster with tenure, wages, benefits and hours, and who intends 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. You also need to spot wages sitting below market, because correcting them raises your overhead permanently.
What does overhead look like by category, and how does each line compare to benchmarks?
Why ask it
Staff near 25 to 30 percent, supplies around 5 to 6 percent, lab 8 to 10 percent and facility under 8 percent are common targets. Any line far off benchmark is either a fixable inefficiency or a structural problem, and you should know which before naming a price.
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 add six figures of capital spending in the same year your loan payments begin. Ask for service records and have an equipment technician inspect 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.
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 plumbing, electrical and imaging infrastructure, so a short remaining term or a landlord seeking a large increase can break the deal economics. If the seller owns the building, settle early whether it sells, leases or gets appraised separately.
Which personal expenses run through the practice, and what does adjusted net income really look like?
Why ask it
Vehicles, family phone lines, destination continuing education and family payroll are often buried in the tax returns. Walking each add back through with the seller's accountant gets you to true cash flow, which is what your lender and your valuation both rest on.
How will the purchase price be allocated between goodwill, equipment, supplies and any restrictive covenant?
Why ask it
Allocation moves real money, since equipment and supplies can often be written off far faster than goodwill, which amortizes over 15 years. The seller usually wants the opposite treatment, so negotiate allocation alongside price rather than after it.
Have there been any malpractice claims, state board complaints, or insurance audits and recoupments?
Why ask it
A pattern of complaints or a payer clawback over coding follows the chart base and the practice name into your ownership. Ask directly, verify against state board records, then require written representations in the purchase agreement.
What exactly will your role be after closing, and what non compete will you sign?
Why ask it
Patient retention depends on a real handoff: a signed letter, in person introductions and a defined stretch of time working beside you. Pair that with a non compete naming a specific mile radius and term, and confirm it also bars soliciting your staff and patients.
Running Diligence on a Dental Practice
Practical guidance for the conversation itself
Sequence Your Diligence
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 and a treatment plan report. Watch at least one of them run on screen so you know the figures came out of the software rather than a spreadsheet.
Hire dental specific advisors
A CPA and an attorney who close dental transitions regularly will know which add backs are normal, what non compete radius holds up in your market, and which asset purchase terms lenders accept. Generalists tend to miss credentialing timing, which is exactly where new owners get hurt.
Audit charts before you sign
Sample 25 to 30 charts across new and long standing patients. Look at diagnosis quality, radiograph intervals, perio charting, note completeness and how much accepted treatment never got scheduled. That sample tells you both the clinical standard you are inheriting and how much revenue is already 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
Sellers who will not commit transition weeks, a patient letter and introductions in writing generally do not show up. Attrition of 10 to 20 percent is normal in a transition, and a weak handoff drives it much higher.
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
- 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 by month
- Accounts receivable aging, and unearned revenue for prepaid orthodontic, aligner or membership plans
- Every payer contract and fee schedule, plus any capitation rosters
- Current lease including assignment language, or a building appraisal if real estate is part of the deal
- Staff roster with hire dates, wages, benefits, hours and any employment or non compete agreements
- Equipment list with ages, service records and warranties, plus software license and support agreements
- OSHA and HIPAA documentation, radiation equipment inspections, waterline test results and sterilizer logs
- Written disclosure of malpractice claims, board complaints, payer audits, liens and outstanding equipment loans