Most associates start their search by looking at collections. It's the first number on every listing and the one brokers lead with. It matters, but it's a headline. The questions that decide whether a practice is a good first purchase sit underneath it, and most of them can be answered before you make an offer.
1. Which way is the practice moving?
A practice collecting $1.2 million a year is a very different purchase if it collected $1.4 million three years ago. Ask for at least three years of tax returns and profit and loss statements, plus year-to-date figures, and compare the same months year over year. Then check the practice management software reports against what the listing says. Listings describe a practice at its best; the software shows what actually happened.
Look at the drivers, not only the total: new patients per month, hygiene production, and production per day. A practice that holds its collections steady by raising fees while seeing fewer patients is shrinking, even if the top line looks flat.
2. What will the practice actually pay you?
The number that matters to a buyer is cash flow after a fair wage for the dentist and after the loan payment. Start from the seller's profit, add back the personal expenses that won't continue under you, and subtract a market salary for the dentist doing the work. What's left has to cover your debt service with room to spare.
If the practice only works when the owner works five days a week and takes no salary, you're buying a job with a loan attached, not a business.
3. Who are the patients, and who pays?
- Active patients: ask how the seller defines "active." Twelve months and twenty-four months tell very different stories.
- Payer mix: a practice that depends heavily on one insurance plan carries that plan's fee schedule risk with it.
- Accounts receivable: large balances over 90 days, or unexplained credit balances, deserve questions before closing.
4. Will the team stay?
Patients often stay loyal to the hygienist and the front desk as much as to the dentist. Ask about staff tenure, wages compared with the local market, and whether any key team members are related to the seller or likely to leave with them. A practice can lose a meaningful share of its patients in the first year if the team turns over at once.
5. What does the building commit you to?
Read the lease before you fall in love with the practice. Check how many years remain, the renewal options, the rent compared with market, and whether the landlord must approve the transfer. If the seller owns the building, decide early whether you want to buy it, lease it, or lease with an option to buy, and get an independent opinion of its value.
6. How will the hand-off work?
The seller's transition plan protects the value you're paying for. Agree on how long the seller stays, how patients and staff will be told, and what the non-compete covers. A well-planned introduction keeps patients; a sudden one invites them to look elsewhere.
7. What does the equipment really need?
Ask for an equipment list with ages, then see it in person. Chairs, sterilization, imaging and software that need replacing in your first two years belong in your financial model, not in your first surprise.
Putting it together
No practice scores perfectly on all seven. The goal is to know what you're buying, price the weaknesses honestly, and walk in with a plan to fix them. That's the work we do with associates on every acquisition: we lay out what the numbers say, flag what needs a closer look, and leave the decision with you.
If you're starting to look at practices, book an Acquisition Strategy Call. If you're still in school, the Young Doc Ownership Program covers this and more in its monthly webinars.