How can I tell if a dental lab for sale is profitable?

A lab can look busy and still earn little. Profit depends on what mix of work it does, what each case costs to make and how much of that cost it absorbs when a case fails. A single total on a profit and loss statement hides all of this, so ask the seller for the numbers in layers and have an accountant review them with you.

Revenue by type of case

Ask for sales by case type: crowns, bridges, dentures, appliances and anything else the lab makes. Different work takes different time and materials, so one type may carry the lab while another barely covers its cost. Ask how prices are set, whether some dentists get discounts and whether the mix has changed over recent years.

Costs that move the result

• Materials, and any work the lab sends out to others to finish.
• Technician labour, including overtime and who is paid and how.
• Remakes, where the lab redoes a case at its own cost.
• Equipment leases, repairs and software fees.

Ask whether remakes are tracked at all. If they are not, ask your accountant how the cost of remakes shows in the books.

What dentists owe the lab

Labs often invoice dentists after delivery, so receivables build up. Ask for an ageing report showing who owes what and for how long, and whether any accounts are in dispute. Slow payers can strain cash even when sales look healthy. The BDC explanation of accounts receivable is a useful starting point, and the BDC guide to financial statements helps you read what you receive.