How to Buy a Dental Practice

Buying your first practice is the biggest financial decision most dentists make, and it is a business purchase as much as a clinical one. The good news is that the process is well worn and follows a predictable sequence. This guide walks the steps in the order they happen, so you know what comes next and what to check before you commit at each stage. It is written for associates a few years out of school who are buying for the first time.

Step 1: Deciding what to buy

Before you look at any single listing, get clear on what kind of practice suits you. A busy multi-chair general practice in a city runs very differently from a two-operatory practice in a small town, and the right answer depends on how you like to work, where you want to live, and what you can realistically finance. Think about the mix of clinical work you enjoy, whether you want an established patient base you can step straight into or a smaller practice you can grow, and how far you are willing to commute or relocate.

Be honest about the type of dentistry the practice depends on. If most of its production comes from procedures you do not perform or enjoy, you may lose patients or revenue after the handover. The best first practice is usually one where your clinical style and the existing patient base already fit, so the transition changes as little as possible for the people in the chairs.

Step 2: How dental practices are valued

Once you find a practice worth pursuing, you need a view on what it is worth, and dental valuation is more art than formula. Most valuations start from one of two anchors: a share of the practice's annual collections, or a multiple of its adjusted profit, sometimes called seller's discretionary earnings, which is the profit left after adding back the owner's salary and personal expenses. Both are starting points, not answers. The figures below are illustrative and not a quote for any specific practice.

What moves the number up or down is everything a headline figure hides. A valuation should reflect how dependent the practice is on the selling dentist, because a practice built entirely around one owner's personality and hours is riskier to take over than one with systems and associates already in place. It should reflect the age and condition of the equipment, the remaining term and cost of the lease, the payer and patient mix, which decides how fast the same billed revenue actually converts to cash, and whether the team is likely to stay. Two practices with the same collections can be worth very different amounts once you account for these, which is why you should treat any quick multiple you hear as a conversation starter and build your own view from the verified numbers.

Step 3: Due diligence

Due diligence is where you confirm that the practice is what the seller says it is. It is the most important stage, and the one first-time buyers most often rush. Give it the time it needs, ideally with an accountant and a lawyer who know dental deals. There are five areas to work through.

Financials. Ask for at least the last three years of production and collections reports, tax returns and profit figures, and reconcile them against each other. You are checking that the money the seller reports actually arrived, that collections are stable rather than propped up by a one-off year, and that the add-backs used to inflate adjusted profit are genuine business owner expenses.

Patient base. A practice is its patients. Look at the number of active patients, how many are new each month, how reliant the practice is on a small number of high-value cases, and how much of the production depends on referrals the selling dentist personally controls. A shrinking or ageing patient list is a warning sign a strong recent revenue figure can hide.

Lease. If you are buying the practice but not the building, the lease is one of the most important documents in the deal. Check the remaining term, the renewal options, the rent and any planned increases, and whether the landlord will assign the lease to you on workable terms. A short or hostile lease can undo an otherwise good purchase, because you cannot move a patient base easily.

Equipment. Walk the practice and inventory the equipment, its age, and its condition. Ageing chairs, imaging or sterilization equipment can mean a large capital bill soon after you take over, which belongs in your financing plan rather than as a surprise. Note what is owned outright and what is still under a lease or loan you might inherit.

Staff. The team often matters more than the equipment. Find out who is employed, on what terms, how long they have been there, and how likely they are to stay through a change of owner. A hygienist or front-desk lead the patients trust is part of what you are buying, and their departure can cost you patients. Understand the payroll you are taking on before you agree a price.

Step 4: The letter of intent

When you are satisfied enough to move forward, the next step is a letter of intent, or LOI. This is a short document that sets out the headline terms you and the seller have agreed: the price, what is included, the rough timeline, and any conditions such as financing approval or a satisfactory final diligence review. Most letters of intent are largely non-binding on the price itself but often include binding parts, such as a period where the seller agrees not to shop the practice to other buyers.

The LOI matters because it turns a conversation into a shared plan and gives your lender and lawyers something concrete to work from. Keep it honest about your contingencies. If your offer depends on financing or on the lease assigning cleanly, say so, so that you can step back without penalty if those fall through. Have a lawyer review it before you sign, even though it is not the final contract.

Step 5: Financing the purchase

With an LOI in hand you can arrange the money. Most first-time buyers borrow the bulk of the purchase price, and the source you choose has a real effect on cost and on how quickly you can close. The main routes are below. The honest summary is that for a clean, profitable practice with good records, a bank or SBA 7(a) loan is often the cheapest money you can get, and the specialist and non-bank routes earn their higher cost only when the deal is unusual, the timing is tight, or a bank has said no.

Compare the full cost of each route across the life of the loan, not just the headline rate, and factor in the down payment, any working capital you need for the first months, and the equipment bills diligence uncovered. If a non-bank offer comes back priced as a factor rate rather than a rate of interest, put it on the same annual basis before you compare it: the conversion is written out in merchant cash advance versus a business loan. Ovesture arranges practice acquisition financing and will tell you plainly when a bank or SBA lender is the cheaper answer. For how funding works specifically in this sector, see our page on dental practice financing.

Step 6: Transition and handover

Closing is not the finish line. The months around the handover decide whether the patients and staff you paid for actually stay. The single biggest risk in buying a practice is that patients leave when the dentist they knew does. A good transition plan works against that, usually by having the selling dentist stay on for a defined period to introduce you, transfer goodwill and reassure long-standing patients and referrers.

Plan the practical handover too: notifying patients, keeping the team informed and reassured, taking over the payer relationships and systems, and making sure the day-to-day runs without a gap. Resist the urge to change everything at once. The patients and staff chose this practice as it was, so the more continuity you offer in the early months, the more of what you bought you keep. Make your improvements gradually, once people trust that the practice is in good hands.

This page is general information about buying a dental practice and is not legal, tax or valuation advice. Practice values, loan terms and lease and employment obligations vary by practice, lender and location. Before you commit, take independent advice from a qualified accountant, lawyer and practice valuer on your specific deal.