Due diligence on a dental practice

Financial statements on a dental practice can look clean and still hide the thing that actually determines whether the deal is worth closing: whether the patients behind those numbers are coming back on schedule, and whether the revenue survives a change of ownership. Due diligence on a dental practice needs to go past the profit and loss statement into the recall list, the hygiene department, the charts, and the practice’s standing with its regulatory college — the checks that are specific to a dental practice rather than to any small business generally.

Verify the recall list, do not just count it

Ask for the practice’s actual recall percentage — the share of active patients who returned for their most recent scheduled hygiene visit — rather than accepting a total patient-of-record count at face value, because a list built up over fifteen years can include a large share of people who have not been back in three. Cross-check the number the seller quotes against the practice management software’s own scheduling and recall-tracking reports rather than a summary the seller has prepared, and ask how recall appointments are actually generated: an automated recall system run by the software is a very different asset than a system that depends on someone remembering to call.

Separate hygiene-department output from the owner’s own production

Break down production by provider, not just by department, so you can see how much of total revenue the hygiene department generates independent of the owner dentist’s own chair time, and how much of the clinical, higher-margin production is concentrated in the owner personally. A practice where the owner performs the bulk of the specialty or high-production procedures is a fundamentally more owner-dependent asset than one where an associate or a second dentist already carries a meaningful share of that work, even where the two practices show identical revenue on paper.

Test the chart migration before you close, not after

Ask the seller’s software vendor, in writing, whether patient charts, imaging and billing history can actually export in a format your own practice management system can import — do not accept a verbal assurance that migration is usually fine. A chart set that turns out to be non-exportable, incomplete, or missing the consent needed to transfer patient information is one of the more expensive surprises a dental practice buyer can discover after closing, when there is no leverage left to negotiate a price adjustment.

Confirm college standing and any open complaints

Confirm the selling dentist and the practice corporation are in good standing with the relevant provincial college, with no unresolved complaint, condition or restriction that would affect the practice’s operation or your own ability to obtain a certificate of authorization to take over — in Ontario this runs through the Royal College of Dental Surgeons of Ontario, and every other province has its own college and its own process for this kind of check. This is not something to take on the seller’s word; confirm it directly with the college.

Insurance mix and billing consistency

Break down revenue between insurance-reimbursed and fee-for-service billing, and check that the claims history matches what the practice management system reports rather than a headline percentage the seller quotes. A practice that leans heavily on one or two insurer relationships, or that shows billing patterns inconsistent with its stated procedure mix, is worth a closer look before you accept the revenue at face value — insurers and the provincial college both take billing accuracy seriously, and a pattern that looks unusual to you will look unusual to them too. Ask for at least two full years of remittance summaries, not just the practice’s own internal reporting, so you are comparing what was actually paid against what was actually billed.

Associate and hygienist retention

Speak to, or arrange to speak to, any associate dentists and key hygienists before you close where the seller permits it, because their willingness to stay through and after the transition materially affects how much of the recall list and hygiene revenue actually survives the sale. A verbal assurance from the seller that everyone is staying is not the same thing as a signed retention agreement, and the gap between the two is exactly where post-closing surprises tend to live.

Equipment, lease and what a dental buildout actually costs to replace

Have imaging equipment — sensors, panoramic units, any CBCT — and sterilization systems inspected for age and remaining useful life, since replacing outdated imaging is a cost that lands on the new owner almost immediately after closing. Review the lease with particular attention to its remaining term and assignment rights: dental operatories require plumbing, electrical and structural work that is expensive to replicate, so a short or non-assignable lease undermines the value of everything else you are buying.