This will serve as a check the box for your search to purchase an existing practice. Don’t be naïve in thinking that any one of these areas are not important in making the decision to purchase. Skip one, and expect a horrible surprise when you take over the office. Each and every one will tell a story of where you will find positive situations and challenges. Take the time to perform due diligence and make sure that each step is analyzed, and, if need be, researched more deeply, and then checked off (completed).
- Profit & Loss Statement for 2021 year-to-date
- Profit & Loss Statement for 2020 and 2019 (prior 2 years)
- Staff: Names, Positions, Age, Length of employment, Pay, Benefits, copy of any contracts of employment for associate or hygienist, schedule of work days and hours for each
- Software: Dentrix: Practice statistics report (Office Manager, Reports, Management, Practice Statistics Report). EagleSoft: Patient Analysis Report. Open Dental: Number of patients by zip code, patient numbers by age, insurance/no insurance, male to female ratio, number of active patients, number of active patients without future appointments.
- Equipment list with number of Ops
- Production by provider for 2020 and 2019
- Number of new patients for 2020 and 2019
- Collection and production numbers by month for 2020 and 2019
- List of any State Board actions against the practice and/or seller
- List of any civil or criminal suits against doctor or office
- Lease copy: Is it assignable, term of lease
- Why is the selling doctor leaving?
- Range of services provided by doctor
- Production by procedure for 2020 and 2019
- Copy of tax returns for past year
- Current Appraisal if it exists for current year
- Ratio of PPO or any other managed care plan to collections
- List of services provided
- Fee schedule for practice
- If Asset Sale: Percentage allocation of the following: Goodwill, supplies and equipment, non-compete agreement, and accounts receivable.
- Comprehensive Letter of Intent
- Photos of ops, reception area, outside photo, lab, staff area
- Current work schedule for all providers
- Check all available online reviews of practice
- Accounts receivable aged by current, 30, 60, 90 days and over
- Aged insurance accounts receivable
- List of insurance companies that they are in-network with
- Search for the number of dentists within 5 miles of this practice you are looking to buy. Establish the ratio of dentists to population. Do not spend time on practices with a ratio of less than 1 dentist per 1,500 patients. Ideal would be greater than 1:2,000.
- Pull demographics from zipwho.com and confirm the ratios for income, education, population, children, cost of living, etc.
Most of us start our search for an office to buy with a broker or seeing some form of announcement that the practice is for sale. While brokers seem to be a necessary evil, their main objective is to sell the practice and collect their 10% commission. I look at dozens of broker appraisals and one thing is certain; they tend to accentuate the positive and by omission minimize any negatives to the valuation or sales proposal. This list will drive them crazy and help you stay on the side of completing due diligence in a world of opportunities distracted by numerous half- truths of a negotiation. You need all of the data you can get. Then and only then can you ask the right questions in order to make the best decision for your situation. Good luck and remember to call me with your questions.
Michael Abernathy, DDS