Is Your Dental Practice Ready to Sell?

Pull practice management software reports (Dentrix, Eaglesoft, or equivalent) reconciled against your tax returns for the trailing 36 months. Buyers and SBA lenders require this to underwrite the deal. Inconsistencies between software reports and tax filings are one of the top deal-killers in dental acquisitions.

Owner compensation, personal vehicle expenses, family payroll, continuing education travel, and other discretionary add-backs must be identified and documented as Seller's Discretionary Earnings (SDE) or EBITDA adjustments. A dental-specific CPA understands what's customary versus what will raise flags during due diligence.

Personal credit card charges run through the practice, non-business meals, or personal insurance billed to the practice create audit risk and give buyers grounds to discount the financials. Stop these 24 months before listing to allow two clean fiscal years to present.

Buyers will immediately ask: how much of the production comes from the selling dentist versus associates or hygiene? A practice where the owner generates 90%+ of collections carries a significant key-person discount. This report quantifies the problem — and gives you time to fix it.

Most buyers define an active patient as one who has visited within the past 18 months. Pull this report directly from your practice management software and document the count. Practices with 1,000+ active patients are significantly more attractive to both SBA-financed buyers and DSOs than those with inflated counts using outdated definitions.

Divide the number of completed hygiene appointments in the past 12 months by the number of active patients due for a recall visit. A compliance rate below 65% signals patient attrition risk to buyers. Implement automated recall systems (Weave, Lighthouse 360, or equivalent) now to show improving trend data by the time you list.

Create a breakdown of collections by payer type: fee-for-service, PPO, Medicaid/CHIP, and HMO. Note any contracts with below-market reimbursement rates or pending renegotiations. Heavy Medicaid exposure (over 30% of collections) can reduce your buyer pool and compress your multiple.

Patients who haven't visited in 18–36 months are reachable via text, email, and direct mail campaigns through your practice management system. Reactivating even 50–75 patients adds directly to your active count and demonstrates to buyers that the patient base is growing, not contracting.

Document every team member including hygienists, dental assistants, front office, and office manager — with their start date, hourly or salaried compensation, full-time vs. part-time status, and whether they have signed employment agreements or non-solicitation clauses. Staff retention post-acquisition is one of buyers' top concerns.

Buyers — especially DSOs — want to know the practice can run without the selling dentist managing day-to-day operations. If you are currently the de facto office manager, start delegating administrative responsibilities now. A functioning office manager reduces key-person risk beyond clinical production.

Write down or record how your practice handles scheduling, treatment planning, insurance verification, billing follow-up, new patient onboarding, and recall management. This documentation demonstrates that your practice is a system — not a reflection of one dentist's personal habits — which is essential for any buyer planning a smooth transition.

Unresolved personnel matters — wage and hour complaints, unsigned offer letters, or hygienists without non-solicitation agreements — become liabilities during due diligence. Resolve these now before a buyer's attorney surfaces them and uses them as negotiating leverage.

Buyers — particularly DSOs and associate dentists using SBA financing — cannot assume your payer contracts without active, transferable credentialing. Lapsed DEA numbers or state board issues can delay or kill a transaction. Audit all licenses and initiate renewals well before listing.

Most dental practice asset sales require the buyer to assume or re-negotiate your office lease. Review the lease for remaining term (buyers and SBA lenders typically want 5+ years of remaining term including options), assignment clauses requiring landlord consent, and any personal guarantees. Engage your landlord early to understand their position.

Dental practices in many states have corporate practice of dentistry restrictions limiting non-dentist ownership — relevant if a DSO buyer uses a management services agreement structure. Confirm your current ownership entity (sole proprietorship, PC, LLC) and consult with a dental transactions attorney on transfer mechanics.

A practice valuation from a qualified dental broker or dental-specific CPA provides a defensible EBITDA-based range, benchmarks your practice against comparable transactions, and prepares you to evaluate offers intelligently. Avoid relying on informal rules of thumb like '70% of collections' — buyers using EBITDA multiples will not.

Create a spreadsheet of every major equipment asset: dental chairs, digital X-ray sensors, panoramic/CBCT unit, sterilization equipment, compressor, vacuum, and CAD/CAM units if applicable. Include purchase year, last service date, and estimated replacement cost. Buyers will request this during due diligence and will discount for deferred capex.

Not every equipment upgrade is worth making before a sale — but digital X-ray conversion (if still on film), modern sterilization, and functional chair upgrades have the highest return. Buyers — especially associate dentists — factor in what they'll need to spend immediately after closing, and price accordingly.

Decide how long you are willing to work post-close and under what terms. Most dental practice transactions include a 6-month to 2-year transition employment agreement where the selling dentist introduces the new owner to patients, provides clinical continuity, and supports staff stability. Having a clear plan — even a flexible one — reduces buyer anxiety about patient attrition.

If you are the sole producer, begin working with an associate dentist part-time or expand hygiene hours to grow production outside your personal chair time. Even 6–12 months of documented associate or expanded hygiene production changes the buyer's risk calculation meaningfully.