Buying A Practice? Who’s Actually On Your Side?

Due diligence when buying a dental practice: what to verify before you sign

Here’s an uncomfortable exercise for anyone about to buy a practice. List every experienced professional involved in your deal — the listing broker, the seller’s accountant, the seller’s attorney — and next to each name, write down who pays them. In most transactions, every seasoned person at the table is compensated by the seller. The buyer, making the largest financial decision of their life, is often the only person in the room with no one in their corner.

Brian Hanks built a firm around fixing that. Dental Buyer Advocates does buyer-side representation only — he’s a CPA and CFP, wrote How to Buy a Dental Practice, and joined us on the Dentelligentsia podcast to walk through what a buyer should actually verify. His test for loyalty is simple: “You can generally know someone is on your team if you are paying them directly.”

Verify the numbers — and interrogate the add-backs

Hanks’ working benchmarks for a practice worth buying: collections north of $800,000, average profitability around 38 percent, staff costs under 32 percent of collections, lab and supplies each in single digits. A practice can miss a benchmark for a fixable reason — the point of diligence is knowing which misses are opportunities and which are the reason it’s for sale.

Then read the add-backs like an auditor. Seller-prepared numbers routinely “normalize” expenses to inflate profitability — the family member on payroll, the personal truck, the conference in Hawaii. Some add-backs are legitimate. Every one deserves proof.

And resist the bargain instinct. Hanks’ sharpest line is about buying the cheap practice to build it up: “What you’re essentially saying is: I am smarter, harder working, and generally a better dentist than the person I’m buying it from.” The math favors the opposite move — “the way to make a lot of money in dentistry is a high-producing, high-collecting practice that’s profitable,” even at a fuller price. Debt on a strong practice retires faster than debt on a cheap one.

Verify the culture — the checks nobody runs

Numbers survive a transition; loyalty sometimes doesn’t. Hanks’ culture diligence costs almost nothing and gets skipped constantly. Read the reviews — not for the star average, but for who patients are loyal to. If every five-star review names the departing doctor, you’re buying a relationship that’s leaving. If reviews praise the hygienists and the front desk, the goodwill stays. Check staff tenure — long-tenured teams carry patient relationships across the handoff; a revolving door means you’re buying a schedule, not a practice. And Google the seller by name. Hanks has seen deals where thirty seconds of searching surfaced what months of financial review didn’t.

One more modern check: the online presence. “Online presence is at least two to three times more important than the physical location of the dental office,” Hanks told us. A practice invisible online is either a problem or an opportunity — price it accordingly.

Verify the deal on paper, not on trust

Everything the seller promised has to survive contact with documentation. Hanks tells of an $87,000 verbal promise that only got honored because a proper valuation process caught it — and of two phone calls, comparing lenders, that were worth $230,000 in interest over the life of a loan. Nothing in a practice purchase is standard. Everything is checkable.

The real estate deserves the same rigor, because the practice is married to it. If you’re assuming the seller’s lease: the remaining term, the renewal options, the assignment terms, and the personal guarantee all transfer to you — a lease with three years left and no options can be a bigger problem than any number on the P&L. If the seller owns the building, the purchase-or-lease decision and the terms of either are their own negotiation, running parallel to the practice deal. This is the diligence lane we run for buyers, and it follows Hanks’ rule: paid by you, answering to you.

A closing reassurance from a man who has watched hundreds of buyers borrow seven figures: being nervous is correct — “if you’re not a little nervous borrowing almost a million dollars, it should make you nervous.” But ownership is learnable. And his three habits that put any owner in the top tier of practices: start your appointments on time, make sure the front desk answers the phone, use plain English in the chair.

Hear the full conversation with Brian Hanks, Owner of Dental Buyer Advocates, on the Dentelligentsia podcast — including why the best practices never hit the listing sites, and how to find them anyway.

For the real estate side of your purchase — lease review, building acquisition, or both — talk to us. We represent tenants and buyers only.

For more on our interview with Brian Hanks, check out our article, “Buying A Practice? Check The Numbers, The Culture — And Who’s Actually On Your Side.”

And follow Brian Hanks on Linked In or check out the Dental Buyer Advocates website.