Buying a dental practice typically involves finding a practice that fits your clinical and financial goals, securing financing, performing thorough due diligence, and negotiating deal terms that protect your investment. The entire process usually takes six to twelve months from initial search to closing day. Most practices sell for 6x to 12x EBITDA (the practice’s earnings before interest, taxes, depreciation, and amortization), though the final price depends heavily on the size, location, and financial health of the business.
Whether you’re a new graduate or an experienced associate ready to become an owner, here’s what the process looks like from start to finish.
Finding the Right Practice
Start by defining what you want: a general practice or specialty, urban or suburban, solo or multi-provider. Your search radius, target revenue size, and clinical philosophy will narrow the field quickly. Practice brokers (sometimes called transition specialists) list practices for sale and can match you with sellers, but they typically represent the seller, so keep that in mind during negotiations. You can also find opportunities through dental school alumni networks, state dental associations, and word of mouth from colleagues.
When evaluating a listing, the numbers that matter most are annual collections (total revenue collected, not just billed), overhead percentage, and the active patient count. A practice collecting $800,000 a year with 60% overhead leaves roughly $320,000 in earnings before the owner’s compensation. That earnings figure is what drives valuation. Practices with strong hygiene programs, diversified payer mixes, and steady new-patient flow command higher prices.
How Practices Are Valued
Dental practice valuations typically use one of two approaches: a percentage of annual collections or a multiple of EBITDA. Smaller solo practices often sell in the range of 60% to 80% of annual collections. Larger, more profitable practices, especially those attractive to dental service organizations, tend to be priced using EBITDA multiples, which currently range from 6x to 12x depending on the size and health of the business.
A formal practice appraisal breaks down the value into tangible assets (equipment, supplies, leasehold improvements) and intangible assets (goodwill, patient records, the practice’s reputation). Goodwill often represents the majority of the purchase price. You’ll want an independent appraisal rather than relying solely on the seller’s valuation or the broker’s opinion of value.
Securing Financing
Banks that specialize in healthcare or dental lending are the most common source of acquisition financing. They understand dental practice cash flows and are generally more comfortable with the risk than a conventional commercial bank. The American Dental Association notes that most acquisition loans are structured as fixed-rate term loans, typically amortized over 10 years.
Before approaching a lender, do a self-evaluation of your finances. Lenders will look at your credit history, existing debt (including student loans), and your overall financial condition. Having a clear picture of how much you can invest and how much debt you’re comfortable carrying will make the conversation more productive. Some lenders offer 100% financing for well-qualified buyers, while others require a down payment of 10% to 20%.
If the practice owns its real estate, that’s a separate loan. Real estate loans amortize over a longer period, typically 20 years, and the lender may require you to bring some equity to the table. If you don’t have the cash, ask the lender to structure the loan to accommodate that. You should also plan for a modest operating line of credit to cover day-to-day expenses during the transition period. This revolving credit line lets you draw funds as needed and pay interest only on what you borrow.
Asset Sale vs. Stock Sale
Most dental practice purchases are structured as asset sales, and for good reason. In an asset sale, you’re buying the practice’s equipment, patient records, supplies, and goodwill individually rather than purchasing the seller’s corporate entity (which is a stock or entity sale).
The distinction matters for two reasons: taxes and liability. In an asset sale, you can take depreciation deductions on the purchased assets, which lowers your taxable income in the early years of ownership. Equipment depreciates faster than goodwill, so allocating more of the purchase price to equipment gives you larger tax deductions sooner, freeing up cash flow when you need it most. The allocation between tangible and intangible assets should be agreed on in writing and reported to the IRS on Form 8594.
On the liability side, an asset purchase generally protects you from the seller’s existing and future liabilities, including lawsuits, unpaid debts, and regulatory violations. The seller retains those obligations along with the practice’s cash and outstanding debts.
A stock sale is simpler on the surface: you step into the seller’s shoes and take over the corporate entity as-is. The seller benefits because the entire sale is taxed at the capital gains rate. But as the buyer, you inherit every liability the business has, known and unknown, and you don’t get to reset the depreciation schedule on existing assets. Stock sales are less common in dentistry and typically only make sense in specific situations where the entity itself carries valuable contracts or licenses that can’t easily transfer.
Due Diligence: What to Verify
Due diligence is where you confirm that the practice is actually worth what the seller claims. Cut corners here and you risk overpaying or inheriting problems. Plan to review three categories: financials, equipment, and patient records.
Financial Records
Request at least three years of tax returns, profit-and-loss statements, and production and collection reports. Compare what was billed to what was actually collected. Look at the payer mix: how much revenue comes from fee-for-service patients versus insurance plans versus Medicaid? A practice heavily dependent on one or two insurance contracts is riskier than one with a diversified payer base. Check for trends in revenue. Flat or declining collections need an explanation.
Review accounts receivable to see how much money is outstanding and how old those balances are. Aging receivables over 90 days may signal collection problems. Also examine staff compensation, lab fees, supply costs, and rent as a percentage of collections to see if overhead is in line with industry norms.
Equipment Inspection
Walk through the office and inspect every piece of clinical and operational equipment. Note the age, condition, and remaining useful life of chairs, handpieces, sterilization units, digital imaging systems, and the practice management software. Equipment that’s near the end of its life means capital expenditures soon after closing, and that cost should factor into your offer price or be negotiated as a seller credit.
Patient Chart Audit
The patient chart audit lets you visually validate what the seller’s financial reports claim. Pull a random sample of charts and check for complete treatment records, consistent billing, and the overall quality of care. Look at how many active patients the practice truly has versus the total patient count in the database. A practice may claim 2,000 patients, but if only 800 have been seen in the past 18 months, the active base is much smaller. Working with a dental CPA or consultant during this audit is well worth the cost.
The Letter of Intent and Purchase Agreement
Once you’ve settled on a price, the next step is a letter of intent (LOI), a non-binding document that outlines the key deal terms: purchase price, deal structure, proposed closing date, and any contingencies like financing approval or landlord consent to a lease assignment. The LOI gives both parties a framework before spending money on legal documents.
The purchase agreement is the binding contract. It will detail exactly what’s being sold, the allocation of purchase price among asset categories, representations and warranties from the seller (such as confirming there are no pending lawsuits), and the conditions that must be met before closing. Your attorney should draft or review this document carefully.
Restrictive Covenants That Protect Your Investment
One of the most important provisions in any practice purchase is the restrictive covenant, the agreement that prevents the selling dentist from competing with you after the sale. Without one, the seller could open a new office down the street and take patients with them, destroying the goodwill you just paid for.
A well-drafted restrictive covenant covers several elements. The time restriction is typically five years from the date the departing owner stops working at the practice. The geographic radius depends on where patients and referral sources are located: averages run about one to five miles in urban areas and up to 20 miles in rural settings. Non-solicitation provisions prevent the seller from actively recruiting your patients, referral sources, or staff, even outside the restricted geographic area. Confidentiality provisions protect patient lists, fee schedules, and personnel information.
These covenants should also include a buyout clause specifying what it would cost the seller to be released from the restriction early, and liquidated damages provisions that set a predetermined penalty if the seller violates the terms. Enforceability of non-competes varies by state, so make sure the terms are reasonable for your area.
Managing the Transition
The weeks before and after closing are critical for retaining patients and staff. Both are the real assets you’re buying, even though they don’t appear on a balance sheet the same way equipment does.
Negotiate a transition period where the selling dentist stays on, typically 30 to 90 days, to introduce you to patients and ease the handoff. Send a letter to all active patients from the selling dentist endorsing you as the new owner. Keep the existing staff in place if possible. They know the patients, the systems, and the daily rhythm of the office. Abrupt changes to office hours, accepted insurance plans, or front-desk procedures can spook patients who are already uncertain about a new dentist.
On the operational side, notify insurance companies of the ownership change, update your DEA registration and state dental board credentials for the new location, transfer or renegotiate the office lease, and set up new vendor and lab accounts. Your practice management software will also need to be transferred or re-licensed under your name. Build a checklist and start working through it well before closing day so nothing falls through the cracks during the transition.