Category Archives: Uncategorized

How to Prepare for Buyer Due Diligence (And Why It’s Worth the Effort)

The Deal Isn’t Done Until It’s Verified

So you’ve listed your practice, found a serious buyer, and agreed on the terms. You’re almost at the finish line—but before you can close, the buyer will need to take a closer look.

This phase is called due diligence, and it’s where they’ll confirm that everything you’ve represented about your practice is accurate.

  • Think of it as the buyer’s version of a clinical exam—checking under the surface before committing.

In this post, we’ll explain what to expect during buyer due diligence, how to prepare, and why a little extra effort now can help avoid delays, renegotiation, or even deal collapse later.


What Is Due Diligence in a Dental Practice Sale?

Due diligence is the buyer’s opportunity to verify:

  • Financial health

  • Patient flow and retention

  • Staffing structure

  • Operational systems

  • Legal and compliance standing

It typically happens after a Letter of Intent (LOI) or Offer Letter is signed but before closing.


Why It Pays to Be Prepared

Buyers—and their advisors (CPAs, attorneys, lenders)—need to see organized, credible records. If your documents are missing, incomplete, or inconsistent, it can:

  • Create doubt or mistrust

  • Trigger price renegotiations

  • Delay financing approval

  • Lead to deal fatigue or cancellation

Solid preparation helps keep the process smooth, builds buyer confidence, and protects the value of your practice.


Documents Buyers Commonly Request

Here’s what most buyers will expect to review. It’s best to start organizing this before you go to market—or as soon as you’ve accepted an LOI.

Financials

  • Last 3 years of Profit & Loss Statements

  • Last 3 years of Federal tax returns

  • Year-to-date financials

  • Accounts receivable report

  • Production and collections breakdown by provider and procedure

  • Owner compensation and any personal expenses paid through the practice (for add-back calculations)

Patient Base

  • Active patient count (seen in last 18–24 months)

  • New patient numbers by year

  • Hygiene recall reports

  • Sample of anonymized patient charts (to confirm treatment plans and recordkeeping)

Staffing

  • Staff list with roles, tenure, hours, and wages

  • Benefits offered (health, retirement, PTO, etc.)

  • Any employment agreements or independent contractor arrangements

  • Bonus plans, if applicable

Facility and Equipment

  • Lease agreement or real estate ownership documents

  • Equipment list with approximate ages

  • Notes on upcoming maintenance or upgrades needed

  • Any leased equipment agreements

Legal and Operational

  • Practice license and DEA registration

  • Copies of insurance participation agreements

  • Malpractice insurance policy

  • Any current or past legal disputes or audits

  • OSHA and HIPAA compliance documentation


Tips for Making the Process Smoother

Create a Digital Data Room

Use a secure cloud folder (e.g., Google Drive, Dropbox) to upload documents and share access. Organize it with clear folders and file names.

Be Transparent and Accurate

If there’s a down year or production dip, explain it upfront. Buyers respect honesty—and often understand when issues are well-documented.

Don’t Share Everything at Once

Only share information after an LOI is signed and a confidentiality agreement is in place. Work with your broker to control the flow and timing.

Work With Professionals

An experienced dental CPA and practice broker can help you prep documents, explain add-backs, and avoid red flags that may raise buyer concerns.


Common Seller Mistakes During Due Diligence

Avoid these missteps that can stall or jeopardize a sale:

  • Inconsistent reporting (e.g., P&L vs. tax return numbers)

  • Incomplete patient data or inflated “active patient” counts

  • Unclear staff roles or undocumented pay structures

  • Missing lease agreements or surprise facility issues

  • Being slow to respond to buyer questions or document requests


What Buyers Take Away From This Process

It’s not just about the numbers. Due diligence helps buyers understand:

  • How the practice really operates

  • Where the strengths and risks lie

  • Whether the seller is organized and transparent

  • How easily they can step in as the new owner

The smoother this process is, the more confident they’ll feel about the investment—and the more likely they’ll follow through.


Preparation Protects Value

Preparing for due diligence might feel tedious, but it’s one of the most important steps in selling your practice. It protects the price you’ve negotiated, speeds up the closing timeline, and helps the buyer trust that they’re getting exactly what you’ve promised.

Remember: a buyer’s confidence is your leverage.

Be prepared, be transparent, and let your practice speak for itself.


Thinking of Selling? Let’s Get You Ready.

At American Practice Consultants, we guide sellers through the entire process—from preparing your financials to managing due diligence to closing with confidence.

Contact us today for a confidential consultation and learn how we help dentists sell smoothly and successfully.

Due Diligence 101: What Every Dental Practice Buyer Needs to Review Before Closing

Why Due Diligence Matters

So, you’ve found a dental practice that seems like a perfect fit—great location, solid collections, loyal patients. The numbers look promising, and the seller seems trustworthy.

Now it’s time for due diligence—the phase where you verify everything you’ve been told before finalizing the purchase.

  • Think of due diligence as your opportunity to “look under the hood” and confirm that the practice is everything it appears to be.

In this post, we’ll walk you through the key areas every buyer should review so you can move forward with confidence—and avoid surprises after closing.


Financial Statements and Tax Returns

Start by requesting the past 3 years of:

  • Profit & Loss Statements

  • Tax Returns (Federal)

  • Production and Collection Reports

Look for:

  • Trends in revenue and expenses

  • Consistency between tax returns and internal reports

  • Profitability after adjusting for seller’s perks (owner add-backs)

Pro Tip: Have a dental CPA help you interpret the numbers—especially to calculate adjusted EBITDA or cash flow.


Patient Base and Production Mix

You’re not just buying numbers—you’re buying patient relationships.

Review:

  • Number of active patients (typically defined as those seen in the last 12–24 months)

  • New patient flow

  • Procedure codes and production by type (restorative, hygiene, specialty, etc.)

  • Treatment referred out (growth opportunity!)

Ask: Is this a recall-driven practice or one dependent on new patient flow?


Hygiene Program and Recall System

The hygiene department is often the lifeblood of a general dental practice.

Request data on:

  • Hygiene production as a % of total production

  • Recall scheduling systems

  • Frequency of continuing care visits

Strong hygiene = stable recurring revenue.


Fee Schedules and Insurance Participation

Review the practice’s:

  • UCR fees (Usual, Customary, and Reasonable)

  • PPO participation and reimbursement rates

  • In-network plans and potential credentialing needs

Compare fees to regional benchmarks.

Ask if there are opportunities to drop low-paying plans post-sale.


Staffing and Payroll

A great team can make or break your first year of ownership.

Request:

  • Staff roster with roles, hours, and length of employment

  • Compensation and benefits

  • Employment agreements or contracts

  • Any known issues with morale or turnover

Be sure to factor salaries and benefits into your cash flow projections.


Lease, Real Estate, and Equipment

If the practice is in a leased space:

  • Review the current lease agreement

  • Check for assignment clauses or landlord approval requirements

  • Understand rent escalations and renewal options

If the real estate is for sale:

  • Get an independent appraisal

  • Consider whether owning or leasing makes more sense

Also inspect:

  • Equipment age and condition

  • Digital vs. analog systems

  • Technology you may want to upgrade


Legal and Compliance Review

Have your attorney review:

  • Corporate structure and ownership

  • Licensure and permits

  • HIPAA compliance and record keeping

  • Any pending legal issues, claims, or audits

It’s rare—but not unheard of—for legal or compliance concerns to surface during diligence. Better to uncover them now.


Watch for Red Flags

Be alert to signs of concern, such as:

  • Drastic year-over-year revenue drops

  • Incomplete patient records

  • Over-reliance on high-production procedures

  • High staff turnover

  • Unusually low net income despite high collections

These don’t always mean a deal-breaker—but they require deeper investigation.


Do the Work Now, Avoid Regret Later

Due diligence isn’t the most exciting part of buying a practice—but it is one of the most important. It’s your chance to validate the opportunity, reduce your risk, and plan your transition with eyes wide open.

The more thorough your review, the smoother your ownership journey will be.


Need Help Navigating the Due Diligence Process?

At American Practice Consultants, we specialize in helping buyers assess practices from every angle—financial, operational, and clinical. Let us help you make a confident decision.

Contact us today to schedule a confidential buyer consultation.

Why Local Knowledge is Key to Successful Dental Practice Transactions

Buying or selling a dental practice is not a one-size-fits-all process. Each market is unique, shaped by local demographics, competition, and economic trends. For dental professionals in New Jersey and Eastern Pennsylvania, working with a broker who understands the local landscape can make all the difference.

In this post, we’ll explore how local expertise influences practice valuation, buyer and seller connections, and transaction success.

Why Local Expertise Matters

  1. Understanding Regional Demographics

Every market has its own patient base, shaped by factors like age, income levels, and dental care needs. Local experts can help you:

  • Identify areas with a high demand for dental services.
  • Understand patient demographics that influence revenue potential.
  • Tailor your marketing and services to the community’s needs.

Example: A practice in a suburban family-oriented neighborhood may thrive on general dentistry and pediatric care, while an urban practice might focus on cosmetic and restorative services.

  1. Accurate Practice Valuation

Market conditions vary widely between regions, and these differences significantly impact practice valuation. A local broker brings:

  • Knowledge of recent sale prices for comparable practices.
  • Insight into local economic trends affecting patient spending habits.
  • Awareness of regulatory factors specific to the area.

Tip: An accurate valuation ensures your practice is competitively priced, whether you’re buying or selling.

  1. Navigating Local Competition

Local brokers understand the competitive landscape, including:

  • The density of dental practices in the area.
  • Opportunities to stand out through specialization or service offerings.
  • How to position your practice as a desirable choice for patients or buyers.

Example: In areas with high competition, emphasizing advanced technology or niche services can give a practice an edge.

  1. Connecting Buyers and Sellers

Finding the right buyer or seller is easier when your broker has established connections in the local dental community. Local expertise allows brokers to:

  • Identify qualified buyers who are actively seeking practices in your area.
  • Match sellers with buyers whose goals align with their practice’s legacy and patient care philosophy.
  • Leverage local networks to uncover opportunities not publicly listed.
  1. Complying with Regional Regulations

Dental practice transactions often involve complex legal and regulatory requirements, which vary by state and region. A local broker ensures:

  • Compliance with state-specific dental board regulations.
  • Proper handling of patient record transfers.
  • Adherence to zoning laws and lease agreements.

Tip: Avoid costly mistakes by working with a professional familiar with your area’s regulatory landscape.

Why Choose Us for Your Local Dental Practice Needs?

At American Practice Consultants, we specialize in helping dentists buy and sell practices in New Jersey and Eastern Pennsylvania. Here’s how our local expertise benefits you:

  • Deep Market Knowledge: We know the patient demographics, competition, and trends that define this region.
  • Established Networks: Our relationships with local dental professionals, lenders, and attorneys streamline the transaction process.
  • Tailored Advice: Whether you’re buying or selling, we provide customized guidance to meet your unique needs.

Common Pitfalls Without Local Expertise

  • Overpricing or Underpricing: Misjudging the value of a practice can lead to missed opportunities or undervalued sales.
  • Missed Connections: Without local networks, finding the right buyer or seller becomes much harder.
  • Regulatory Errors: Failing to comply with local regulations can delay or derail transactions.

Conclusion

When it comes to dental practice transactions, local knowledge isn’t just a bonus—it’s a necessity. By understanding the unique dynamics of New Jersey and Eastern Pennsylvania, we help dentists achieve successful, stress-free transitions.

Ready to buy or sell a dental practice in the region? Contact us today to leverage our local expertise and make your next move with confidence.