Dentists tell me they can take one look at the image of a tooth and 9 times out of 10 -- if not more -- know exactly what to recommend to the patient. Those same dentists spin in analysis paralysis when they’re trying to decide whether to buy a dental practice because no one taught them exactly what to look for.
I will teach you two easy questions that will eliminate at least 80% of the practices you can pass on. A proper practice purchase analysis and valuation involves a dental-specific accountant, an attorney, weeks of document review, and thousands of dollars in fees. That investment makes sense for the practice that passes the initial screen. It makes no sense for the eight listings you look at before you find it.
Brian Hanks, MBA, CFP.
Yet that’s where I watch associates burn their time, money, and emotional energy. They fall for a listing, commission the deep dive, and discover six weeks later what a sharper first look would have told them in 10 minutes: This one was never going to work.
Before my team touches a spreadsheet, I ask buyers to run every listing through a two-question screen. I call it the Lemon Test.
Neither question requires a financial background, and together they eliminate more bad deals than any valuation formula you’ll ever learn.
Question 1: Do you actually want to live there?
Buyers hear this and assume I’ve started with the soft stuff. I haven’t. This is the hardest financial question on the board.
Think about what a practice purchase really is: a commitment measured in decades to a specific building, a specific team, and a specific community. The wealth-building math of ownership -- the equity, the stabilized cash flow, the tax advantages that reward time -- only pays off for owners who stay. Buy in a town you merely tolerate and you will eventually join a category I know well: the owner who sells early and gives back most of what ownership was supposed to build.
Location is also the one thing about a practice you cannot change. New equipment, better systems, a rebrand, a retrained team: all fixable. The ZIP code is forever.
So run the test honestly. If this practice didn’t exist, would you still choose to build your life in this place? If the answer is “I could put up with it for the money,” you’ve found a lemon. Maybe not a lemon practice. A lemon match, which will cost you just as much.
Question 2: How much did the practice collect last year?
I call this the most honest number in dentistry. Not production, which measures what was billed. Not adjusted EBITDA -- earnings before interest, taxes, depreciation and amortization -- which measures what someone reconstructed, often gently massaged by brokers. Collections: what actually came through the door.
The number matters because a practice’s collections have three jobs, all at once. They have to cover the overhead, service your acquisition loan, and pay your household.
The rule of thumb among brokers, dental certified public accountants, and bankers is that practices collecting $800,000 a year or more are generally worth a serious look, while practices below that line, on average, struggle to do all three jobs no matter how much energy a new owner brings. That’s not pessimism about small practices. It’s arithmetic about what a fixed pool of profit dollars can fund.
Two refinements make the question even sharper. First, ask for three years of collections, not one, because the trend tells you what the snapshot can’t: A steady or growing practice is patients voting with their feet, while a declining one invites an explanation, and the explanation better be something that leaves with the seller rather than something that transfers with the keys.
Second, watch how the seller responds to the ask. Owners of healthy practices share their numbers quickly and sometimes proudly. Hesitation is data.
This question also protects you from the most seductive listing on the market: the underpriced “turnaround.” Low-collecting practices attract buyers who want a smaller loan, especially buyers staring at a six-figure student debt balance.
But remember who owns that practice now: a smart, trained, hardworking dentist, just like you. When collections sit far below the local market, the cause is almost never that a capable clinician forgot to try or was lazy. It’s the location, the demographics, or the payer mix, and every one of those transfers to you at closing. A deep discount isn’t the market being generous. It’s the market telling you something.
What passing the test earns
A practice that fails either question just saved you weeks of attachment and a pile of advisory fees. A practice that passes both questions hasn’t earned your signature. It has earned real due diligence: the full analysis, the overhead math, the payer mix review, and the income projection before and after the loan payment.
Ten minutes. Two questions. The discipline to walk when either answer fails. It won’t make buying a practice easy. It will make sure the hard work only gets spent on practices that deserve it.
Brian Hanks, MBA, CFP, is a dental accountant, the author of How to Buy a Dental Practice (fifth edition) and the founder of Dental Buyer Advocates, where he has advised on more than 1,400 practice acquisitions across 49 states.
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