How to Sell a Dental Practice

Before agreeing to sell your dental practice, compare the purchase documents with the transition you will actually perform. Review payment conditions, continuing clinical work, premises arrangements and the patient-records handoff. Give each unresolved decision an owner before relying on a proposed closing date.

Start with your own exit requirements. Write down when you want to stop treating patients, whether you want to keep working, which liabilities you expect to retain and whether you own the premises. Those answers influence which buyer and structure can work for you. Share the requirements with your transaction attorney, accountant and any adviser helping you approach buyers.

Then prepare a supportable financial picture, compare buyer proposals, review the letter of intent and organize diligence. Keep an issue list showing the document, decision-maker and evidence needed for each unresolved term. A proposed closing date becomes useful when the financing, approvals and handoff tasks behind it are identified.

A purchase price can include cash payable at closing, money held back for claims, a seller loan, contingent payments and an investment in the buyer. Ask for each component separately. Record when you can receive it, what could reduce it and whose decisions affect payment.

Separate sale proceeds from continuing work

If a buyer expects you to remain as a treating dentist, review the employment agreement alongside the purchase terms. Set out clinical hours, compensation, benefits, termination rights and the treatment of your unpaid sale proceeds if employment ends. A seller seeking retirement needs a different handoff from a seller seeking an ongoing clinical role.

Use the same comparison sheet for every proposal. A buyer offering less cash at signing may require fewer ongoing obligations; another may ask for employment and investment commitments that extend beyond the practice sale. Compare the written obligations against your priorities before choosing a headline price.

An individual dentist, another dental group and a dental support organization can propose different operating arrangements. A dental support organization, or DSO, supplies business support services to dental practices. Its proposed management and ownership structure needs review under the law governing the practice.

Ask every buyer to identify the entities purchasing assets, employing clinicians, providing management services and paying the purchase price. Have counsel check licensing, professional ownership and clinical-control requirements in each applicable state. A familiar brand name leaves these legal entities and responsibilities unresolved.

Request a financing plan and a list of approvals required before closing. Ask who has authority to change the proposal after diligence and which assumptions could trigger a price adjustment. These questions help compare a particular buyer's ability to perform without treating a buyer category as proof of a higher price or a better transition.

A useful valuation begins with financial records a buyer can reconcile. Assemble collections reports, tax returns, financial statements, payroll, accounts receivable and equipment obligations. Explain differences between billed production, adjusted production and cash collected. Ask the valuation professional which measure the proposal uses and why it suits your practice.

Test the earnings adjustments

EBITDA means earnings before interest, taxes, depreciation and amortization. Buyers may use an adjusted version to discuss operating earnings. For each proposed adjustment, record the amount in the source records, the reason for changing it and the cost the buyer will incur after closing. A personal expense, replacement dentist compensation and a recurring equipment cost deserve separate treatment.

Review owner compensation, related-party rent, associate arrangements and work you perform without a separate charge. Ask the accountant to show how replacing your clinical and management work affects the earnings picture. Use a qualified valuation adviser for the pricing opinion; transaction counsel should connect the negotiated economics to the documents.

Keep valuation questions distinct from payment risk. A supported earnings figure still leaves the earnout formula, debt payoff, retained liabilities and tax consequences to resolve. Prepare an estimated proceeds statement with your advisers before accepting the proposed structure.

Ask how each buyer will handle the practice name, staff offers, patient communications, existing treatment plans and continuing clinical decisions. Identify promises that matter enough to include in the sale documents. A conversation about preserving the practice culture needs a written decision about the specific employment or operating obligation behind it.

For an individual buyer, clarify lender conditions and the process for obtaining premises and payer arrangements. For a group or DSO proposal, identify the management agreement, professional entity documents and employment terms you need to review. The relevant question is whether that buyer's documented arrangement fits the transition you can perform.

A broker can help market the practice and manage buyer introductions. Review its engagement agreement for the commission calculation, expenses, exclusivity, termination and fees claimed after the engagement ends. Confirm which work belongs to the broker, accountant, valuation adviser and attorney so that important tasks have an owner.

Ask for a payment schedule tied to the draft purchase agreement. Separate the closing payment from deferred obligations and show the debt, expenses and adjustments deducted before cash reaches you. Check whether the buyer can offset a disputed claim against an otherwise scheduled payment.

Earnouts and seller financing

An earnout makes part of the price depend on future results. Define the metric, accounting approach, reporting, dispute procedure and operating decisions that can affect the result. Ask what happens if the buyer changes staffing, hours, patient allocation or the services offered during the measurement period.

A seller note is the buyer's promise to pay part of the price later. Counsel should review the borrower, any guarantor, collateral, payment terms and remedies. If a lender requires subordination, understand when payments or enforcement could be restricted before agreeing to carry the loan.

Rollover equity

Rollover equity means reinvesting some sale proceeds in an entity connected with the buyer. Request the actual entity documents and capitalization information. Review distributions, dilution, information rights, transfer limits, future sale rights and the treatment of your investment when employment ends. Model the investment separately from cash sale proceeds, including the possibility of losing the invested amount.

Make the records handoff a closing decision with its own written responsibilities. Identify the records covered, the lawful custodian, the systems holding them and the process for responding to patients. Include paper charts, images, electronic records, backups and records held by outside vendors in the inventory.

The American Dental Association's patient-records transition guidance discusses keeping originals, keeping copies and arranging contractual seller access after a sale. Use that guidance with your attorney and liability insurer to select an arrangement suited to the practice. Specify how a lawful request connected with a claim or regulatory inquiry will be handled and who pays the access costs.

Record the applicable rule and the operational owner

State law, patient rights and applicable federal privacy requirements need separate review. The HHS summary of the HIPAA Privacy Rule describes who is covered and the framework for permitted uses and disclosures. Have counsel identify the lawful basis and required safeguards for the proposed information flow.

Retention and accessibility duties depend on the jurisdiction. For example, Washington's dental patient-record retention rule sets duties for dentists practicing there. Ask counsel to identify the rules governing your practice, any longer obligation and the treatment of records for minors. Record the applicable requirement in the handoff plan.

For execution, name the custodian, access contact, migration vendor and person responsible for patient requests. Agree how the team will test that transferred records remain readable and complete, document any exceptions and preserve lawful seller access. Resolve notice, authorization and security requirements before transferring identifiable information.

The letter of intent, or LOI, records the proposed business terms before the full purchase agreement. Its effect depends on its wording and applicable law. Ask counsel to identify which provisions bind you immediately and which remain subject to definitive agreements.

Review price components, the assets or equity being sold, assumed liabilities, employment expectations, premises arrangements and the conditions for closing. Make material assumptions visible. If the buyer expects continued clinical work or an equity investment, request enough detail to understand the commitment before granting exclusivity.

Exclusivity restricts your ability to pursue other buyers. Tie the proposed period to a workable diligence plan and examine extension, termination, access and expense provisions. Agree who must deliver each document and how unresolved issues will be escalated. The LOI negotiation guide explains the business decisions to raise with counsel.

The LOI generator is a planning tool for organizing proposed acquisition terms before attorney review. Use it to prepare questions, keeping patient information and confidential documents out of the tool. The acquisition LOI template guide explains clauses to examine in the actual proposal.

Organize a document index with an owner for each category. Include entity records, financial information, employment arrangements, premises documents, equipment contracts, payer agreements, licenses and material disputes. Track requested documents, delivery dates and open follow-up questions in the same index.

Have counsel establish the access process before sharing sensitive records. Begin with appropriately aggregated or de-identified information where suitable and confirm the legal basis and protections needed for any later patient-level review. A confidentiality agreement needs to work alongside the applicable privacy requirements.

Review payer and provider arrangements individually. Ask whether the proposed structure requires a new agreement, consent, enrollment or other action and who will obtain written confirmation. Practices with government-program participation should examine the specific issues in the healthcare M&A guide with qualified advisers.

Keep a disclosure schedule as issues emerge. An equipment lien, employee dispute or contract restriction needs an agreed treatment in the purchase documents. Use the diligence after the LOI guide to organize the process; have the closing team confirm the practice-specific requirements.

Ask the accountant and attorney to review the proposed structure together before signing the definitive agreement. The tax treatment can depend on the assets or interests transferred, the seller's entity and the allocation of consideration. Have the accountant estimate proceeds under the actual proposed terms.

The IRS guidance on Form 8594 describes reporting requirements for qualifying acquisitions of a business's assets. Ask your tax adviser whether the form applies and how the agreement and tax reporting should reflect the allocation. A later price adjustment may require further review.

Confirm the premises and continuing role

If you lease, examine assignment, change-of-control, consent and release provisions with counsel. Obtain the landlord's required documentation and determine what happens to your guaranty. If you own the building, coordinate the property sale or new lease with the practice transaction.

Review employment compensation and termination separately from the purchase price. Clarify malpractice coverage, any required tail coverage, responsibility for prior treatment and patient complaints. Have local counsel assess restrictive covenants under applicable law and the actual sale and employment arrangements.

Set the timetable after identifying the tasks that can prevent closing. Financing, landlord documents, ownership approvals, payer arrangements, definitive agreements and records migration may depend on different decision-makers. Ask each owner for its process and evidence of completion before committing to a date.

Maintain a closing list that shows the requirement, responsible person, current status and proof needed. Separate a signed document from a verbal expectation. When a task slips, assess its effect on exclusivity, financing conditions, patient communications and the proposed handoff.

Use the post-LOI timeline resource as a planning framework. Its example schedule needs adjustment for the actual approvals and dependencies in your sale. Agree on a communications plan so staff and patients receive accurate information at the appropriate stage.

Bring the offer or LOI, a description of the buyer, your desired continuing role and the decisions blocking progress. Identify whether you own or lease the premises and whether patient-record custody has been addressed. Keep patient identifiers and confidential documents out of the initial website inquiry; arrange secure document review after intake.

A dental practice transaction attorney can assess the agreement's allocation of payment, liability and transition obligations, coordinating with tax, valuation and regulatory advisers as the scope requires. Ask who is responsible for each workstream and what remains outside the engagement.

Acquisition Stars serves clients nationwide from its Novi, Michigan office. Alex Lubyansky leads each engagement, reviews every document, and leads negotiation and closing, with an associate supporting the work. Submit Transaction Details with your role, buyer type and the specific sale decision you need assessed.