Buyers, and their lender, will need access to several financial documents as a first step of the sale. You will need to gather all of the following:

Due Diligence is the time for the buyer to understand the inner workings of the practice and ensure that they are getting what they are paying for. Let's look at how the buyer will be looking at your practice during this critical time. The buyer's due diligence checklist should include answering questions regarding the following:

Compatibility

First and foremost, are the philosophies of care in alignment? The buyer may want to ask you questions about how you would approach certain cases, or whether you share an enthusiasm for certain protocols. Additionally, do you share a work ethic and personal values? This may be harder to determine, but can be very telling.

Treatment philosophy 

The buyer may ask to see work in progress, including lab work, x-rays, doctor treatment plans, impressions and before/after photos.

Reputation

 How is the practice viewed in the community? Are you well regarded by other dentists? How do specialists view the practice? The buyer will probably even look at online reviews to get a sense of the practice’s reputation.

Financials 

Is the practice in strong financial shape? An informed buyer will ask about gross production and collections by doctor and hygienist (over 5 years and year-to-date) and other financial markers.

Practice facility

What is the overall appearance of the facility? Fresh and modern or dated and worn? Is the equipment up-to-date or will the practice need expensive upgrades? Is there sufficient parking or is it near public transit? The buyer will need information about the length and terms of the current lease.

Operational

How many new patients join each month? How many active patients does the practice have – and how many inactive? What is the recall system? Is the current fee schedule competitive for the area? When was it last updated? Which procedures are offered, and which are referred? Which insurance policies are accepted? The buyer may ask to review some charts to assess the quality of record keeping.

Legal matters

Are there any pending or threatened litigation matters? Is the practice in good standing with its liability insurance provider (and the IRS)?

Patient relationships

 Do not be surprised if the buyer calls the office as a patient to see how the staff treats the average person. They will want to understand the practice from the patients point of view as well as the clinical operations.

To help your practice valuator determine an accurate estimate, you will need to show detailed practice information.

Typically, a valuation professional will want to see:

• Three to five years of financial statements, plus current year-to-date, including income statement, balance sheet, and cash flows
• Five years of new patient flow, collections, and production
• Insurance and billing information
• Accountant prepared statements (if available)
• The number of active and inactive patients 
• A list of all your equipment and fixtures that will be included in the sale with the date of purchase, the price paid, maintenance or repair records, and depreciation schedule
• Depreciation schedule for equipment
• Five years of tax returns
• Mortgage and appraisal OR or current lease 
• Organization chart by role and employee
• Location and demographic information
• Any marketing materials (website, brochures)

Download our free checklist to help you gather documents pertaining to your practice finances, practice statistics, and practice assets.

Before a potential purchaser can review valuation, financials or patient information, they must sign a confidentiality agreement. The confidentiality agreement is a legal, non-disclosure document that disallows the dentist viewing confidential or proprietary information from sharing any of the details they see. You will have the opportunity to access and review a template NDA when you have a potential buyer. Always make sure to have documents reviewed by your legal counsel.