Purtzki, Johansen + Associates


Buying a practice: Due Diligence Audit

Financial Review

  • Ask your CPA (choose one with experience in dental practices) to obtain copies of the tax returns and financial statements for the clinic’s previous four years. Use these to identify revenue and expense trends.
  • Ask your CPA to prepare cash flow projections and recommendations regarding reducing clinic overhead.


  • Review a representative sample of the clinic’s patient charts to get an idea of the quality of patient care, the type of dental treatments performed, any remaining treatments, patient needs, and any area where you might increase revenues.
  • Is the seller’s treatment philosophy compatible with your own?
  • How does the practice monitor treatment acceptance?
  • How many active patients does the clinic have, and what is its definition of active?
  • What are the demographic characteristics of the patients (i.e., age, income, and location?)
  • On average, how close do patients live to the dental clinic?
    • What is the likelihood that patients who don’t live close to the clinic will move to a different practice after the purchase?
  • How many patients have left the practice in the last two years?
    • For what reasons did they leave?
  • How many inactive patients does the clinic list?
    • What procedures are in place to reactivate these patients?
  • What is the clinic’s fee structure, and is there leeway to generate more revenues?
  • Where do new patients come from: referrals, advertising, social media?


  • What is the salary of each staff member?
    • Are you willing and able to maintain current salaries?
    • Are salaries comparable to the industry average?
    • On what criteria have salary increases been decided?
    • When was the last round of salary increases?
    • When is the staff expecting another increase?
  • Is on-the-job performance evaluated?
    • How often?
    • Do salary increases reflect employee productivity? If not, why not?
  • Do you consider the practice understaffed or overstaffed?
    • Would you consider hiring more employees or working with fewer employees?
  • Is there a policy and procedures manual?
  • Does the practice maintain professional personnel files?
  • Is the management structure appropriate for the size of the practice?


  • Is the clinic working at, under, or over capacity?
    • How does it handle current patient volumes?
    • How many operatories are in use?
    • Can operatories be added without a major renovation?
    • What renovations are required to improve efficiency?
  • What is the overall condition and appearance of the clinic?
    • Is the facility in need of a facelift?
    • Is work required immediately?
  • Is there adequate parking for staff and patients?
  • Has your legal counsel reviewed the terms and conditions of the lease?
    • What are their recommendations?
  • What are the clinic’s operating hours?
    • Could office hours be expanded to include evenings and weekends?


  • Compare the equipment listed in the valuation report with what you see during your clinic visit.
  • Review the equipment specialist’s report regarding the state of the equipment and any necessary repairs.
    • Does any of the equipment need to be replaced?
    • How much will it cost?
  • Are there any maintenance contracts or leases on equipment?

Practice Management Systems

  • What management systems are in place, and are they primarily digital?
    • If not, estimate the cost of using state-of-the-art dental practice software.


  • What percentage is hygiene production of total office production?
    • How many hygiene days are there per week?
  • How many weeks are the dentist and hygiene booked out by at least seventy percent?
  • How many days does the owner/dentist take off each year?
  • What proportion of endodontics, periodontics, oral surgery, and implant placement is referred out?
  • Obtain up-to-date production records by provider and procedure code.
  • What is the monthly average of short-notice cancellations?
  • How is the acceptance of treatment plans monitored?
  • How many emergency patients are handled per month?

Accounts Receivable

  • Obtain an up-to-date accounts receivable aging report.
    • What percentage of the accounts receivable are over ninety days?
    • Will you purchase the accounts receivable?
  • What percentage of production are collections?
  • What is the total of credit balances owed to patients?

Future Growth

  • Analyze the growth trends of the practice.
  • Does the practice have a marketing or promotional program?
    • How effective is it?
    • Is the website up-to-date?
    • Is the clinic active on social media?

(The above Checklist is from: The Simple Guide To Buying A Dental Practice & Getting A Great Deal)

Visit Booth #1436 to receive your FREE copy of The Simple Guide To Buying A Dental Practice & Getting A Great Deal). The book gives you guidance on how to find the most suitable practice opportunity, and practical tips of getting a great deal.

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