How to buy a dental practice: the steps, in order
Buying a dental practice usually runs in this order: decide what you want, line up an accountant, a transaction attorney and a lender, search listings, sign a confidentiality agreement to see the real numbers, make an offer in a letter of intent, complete due diligence, sign the purchase agreement and lease, then close and plan the transition. Financing and the lease often set the pace.
1. Decide what you are shopping for
Write down the location you could live in, the size of practice you can run (operatories, staff, patient count), the specialty mix and the budget. A short list makes listings easier to screen, because most listings give only a metro area, a specialty and a few figures.
2. Build your team before you fall in love with a practice
- A CPA who works with dental practices, to read the financials.
- A transaction attorney who has done dental purchases, for the agreement and the lease.
- A lender, ideally one that finances dental practices. Many buyers get pre-qualified first so they know their range.
- Optionally a buyer-side consultant. A broker usually represents the seller, so ask any broker who they work for.
3. Search listings and sign the confidentiality agreement
Sellers keep the practice anonymous. When a listing fits, you sign a confidentiality agreement and the broker releases the name, address and full financials. Read how to read a listing first so you know which figures are the broker's own.
4. Review the financials
Your CPA compares tax returns, profit and loss statements and production and collections reports, and looks at what the seller counts as add-backs when describing earnings. Definitions differ between sellers, so ask for them in writing.
5. Make an offer in a letter of intent
A letter of intent states price, structure and key terms, and is usually non-binding except for items like confidentiality and exclusivity. It starts the clock on due diligence.
6. Complete due diligence
Check what you were told against documents: tax returns, receivables, payer contracts, equipment condition, staff, licenses and compliance. See the due diligence documents list.
7. Financing, purchase agreement and lease
Small practices are commonly bought as an asset purchase, and the buyer and seller allocate the price across asset classes for tax reporting (the IRS asks both sides to report that on Form 8594). Your attorney and CPA decide the structure. The landlord must usually approve a lease assignment or sign a new lease, and lenders look closely at it.
8. Close and plan the transition
Agree in advance how patients are told, how long the seller stays, how records transfer in line with privacy law, and who handles payer credentialing and the software and phone changes.
Related
- How to read a dental practice listing
- Due diligence documents
- What a dental practice broker does
- Dental practices for sale by state
Common questions
Do I need a broker to buy a dental practice?
No. You can approach sellers directly or use listings. A broker usually represents the seller, so buyers often add their own CPA and attorney, and sometimes a buyer-side consultant.
How long does it take?
It varies. From a signed letter of intent to closing it is often a few months, and financing approval and lease terms tend to set the pace.
What is the first thing to check in a listing?
What the figures mean. Ask how the seller defines collections, adjusted net and add-backs, and get them in writing.