Dental Practice Due Diligence Checklist

How should you organize the checklist?

Start with the proposed price, included assets, financing, buyer work schedule, and transition plan. Give each assumption a question that the review must answer. A buyer planning to do the seller's work needs proof of clinical fit. A group planning to hire needs evidence for the staffing cost and availability.

Keep an issue log. Record the status, owner, evidence, possible effect and decision needed. Use statuses such as requested, received, reconciled, unresolved, and accepted. Received should not automatically become accepted. Keep financial analysis linked to the current version of the offer.

The ADA buyer roadmap identifies preparation, advisors and negotiation as parts of the ownership path. The checklist below is an original practical framework for applying those ideas to a proposed purchase. (Source: ADA: Buyer transition roadmap.)

Which financial checks come first?

Use a consistent accounting basis. If tax reporting uses cash accounting and management reports use accrual conventions, explain the bridge. Do not add back an expense that was never deducted from the profit figure being used. Trace a sample of material entries rather than accepting a polished total at face value.

What should you verify about patients and production?

Define an active patient before counting one. Define the period and activity that qualify a patient. Remove duplicates and check deceased or transferred records. State whether purely administrative contact counts. Compare those groups with actual visits, recall response and receipts.

Production reports should identify the clinician, procedure category, location and date basis. Separate doctor and hygiene activity where useful. A clinical reviewer should assess which work the buyer can provide and what resources it needs. A broker should not offer a clinical judgment about the necessity or quality of treatment.

Open Dental's official report documentation is an example of the vendor evidence needed to understand report generation. Other systems have their own definitions and permissions. Preserve extraction settings so another reviewer can reproduce the result. (Source: Open Dental: Reports.)

How do you examine team capacity?

Review staff roles, paid hours, benefits, tenure, open positions and applicable agreements. Compare the operating schedule with actual coverage. An unfilled hygiene role can create a different risk from a full schedule that is merely underbooked. Budget the pay and benefits needed to fill required roles. Use current local evidence for those costs. The staff retention and coverage guide shows how to reconcile agreed work hours, temporary support and paid training before relying on the team in an opening schedule.

Coordinate employee contact through the confidentiality plan. The seller cannot guarantee every employee will stay. Have the appropriate attorney review employment documentation and the implications of the proposed transaction structure.

What belongs in premises and equipment review?

Read the lease and amendments. Review its term, renewals, transfer conditions and required consent. Then check permitted use, charges, repairs and guarantees. If the property is owned, analyze it separately and use a consistent rent assumption in the practice model.

Check who owns each asset and whether a lien or lease applies. Review condition, service history, software fit and likely replacement needs. Ask who will service equipment after transfer and whether support contracts and licenses can be reassigned. Book depreciation is not a physical inspection.

EPA dental effluent guidelines are relevant to applicable facilities and amalgam controls. Use the published applicability and exceptions, plus local requirements, rather than assuming all practices or specialties have identical obligations. (Source: EPA: Dental effluent guidelines.)

Which legal and privacy checks need specialists?

A signed NDA establishes commercial confidentiality terms; it does not automatically authorize every PHI disclosure. Counsel should determine the lawful basis, scope and protections for patient-level review. Begin with aggregate data where it can answer the commercial question. (Source: HHS: Summary of the HIPAA Privacy Rule.)

The state board directory locates authorities but is not a fifty-state ownership opinion. Do not assume licensure, an entity filing, a permit, or the seller's contracts transfer with the assets. (Source: ADA: State dental board directory.)

How do findings change the purchase decision?

Classify an issue by its effect: price, terms, timing, required operating changes, or ability to proceed. A fixable document gap is different from unsupported recurring earnings. A lower price may not solve a practice model the buyer cannot operate.

For example, if an illustrative $60,000 annual cost was excluded from the model but remains necessary, restore it before evaluating debt service. Do not quietly offset it with speculative production growth. Have the parties decide whether the new evidence changes the price, staffing plan, funding, or willingness to continue.

What evidence should be ready at closing?

Use the final lender conditions and legal closing checklist. Confirm signed premises documents, required professional permissions and insurance. Add the payer, staff, records and technology plans. Confirm the responsibility for old receivables, patient credits and unfinished work.

Make the decision explicit. Record which assumptions were checked, what remains uncertain and who carries each risk. Explain why the buyer can proceed. Keep that record with the transaction documents so the first operating period can be compared with the assumptions made before closing.

How do you turn a finding into a decision?

A finding should state a fact before it proposes a remedy. Write down the source and what the reviewer observed. Then explain how that fact affects the buyer's plan. Keep a missing document separate from a proven defect; they may lead to different next steps.

For example, an unsigned draft lease is not proof that the landlord refused consent. It is proof that the buyer does not yet have the final premises evidence needed. The next action may be to obtain a written status. If the final terms then increase rent, that new fact also needs to enter the cash model.

Use this original decision log. The entries are invented examples and do not describe any practice represented here.

Rank issues by their effect on the decision, not by how many files they generate. A small paperwork gap can be resolved quickly. A right to use the premises can determine whether the buyer can operate at all. Keep the highest-impact open items visible at each advisor meeting.

Distinguish one-time and recurring costs

Consider an invented $20,000 repair quote and a separate $60,000 annual staffing cost omitted from a model. Their sum is $80,000, but treating that total as one annual expense would misstate the repair. Treating it all as a one-time closing deduction would ignore recurring labor.

Put the repair into the relevant opening cash or capital schedule. Put necessary recurring staff cost into the operating model. Then have the CPA and lender review the earnings and funding effects using their definitions. Do not apply a valuation multiple to a mixed total without understanding what it represents.

The seller may dispute the finding or offer a different remedy. Preserve the original evidence and each proposed response. The decision file should show what changed and why, rather than only the final negotiated price.

What does an effective advisor review meeting look like?

Send the open issue list before the meeting. Ask each reviewer for conclusions within their scope, the evidence still needed and the decision that depends on it. A long list of documents received does not explain whether those documents answered the question.

Use clear statuses. Requested means the team asked for evidence. Received means it arrived. Reviewed means someone assessed it. Resolved means the parties and relevant advisors have dealt with the effect on the transaction. Do not advance an item merely to make the project look close to finished.

For each proposed concession, ask what risk it addresses. A holdback, repair, price change or closing condition may serve different purposes. Counsel should assess the legal terms. The financial model should show the economics. No checklist entry makes a remedy sufficient without that review.

At the end, assign the next action and the person who can confirm completion. Include a decision date that matches the contract and real dependencies. If a deadline must change, route it through the appropriate process; a meeting note does not necessarily amend a signed agreement.

Common mistakes in dental practice due diligence

One mistake is using a clean annual total to overlook a recent change. Compare like periods and ask what happened in the latest months. Another is treating every seller add-back as accepted earnings. Trace the expense to the reported profit and ask whether the cost will return under the buyer's plan.

A third mistake is treating clinical capacity as a purely financial assumption. A procedure line may be profitable in the seller's hands but require skills, equipment or support the buyer does not yet have. Have qualified clinicians assess the actual work and use that assessment in the model.

Avoid repeating the same questions through several advisors without coordinating the answers. Keep one controlled request log and identify who needs the response. That reduces confusion and helps the seller see which requests remain open. It also preserves the basis for a later correction.

Do not substitute a price reduction for an inability to operate. Missing authority, unusable premises or an unresolved care-continuity issue can matter regardless of price. Ask the advisor responsible for that area what would be required to proceed.

Summary: leave diligence with a supported operating decision

The final file should connect each material assumption to evidence, review and a decision. It should also name any uncertainty the buyer accepts and the operating action needed after closing. Compare the first operating period with that file so the new owner can act on the findings instead of leaving them in an unused archive.

Use the acquisition credentialing register to track the incoming dentist, entity, location, network and effective date. Keep submitted forms separate from written payer approval when deciding whether the planned start is supported.