About two years before a sale, start with clean, consistent financials and a clear record of owner expenses. Then reduce how much the practice depends on you, steady the team, confirm the lease can be assigned with enough term left, and clean up AR, debt, equipment and records. Buyers and their lenders will review all of it.
Two years can sound like a long runway. In practice it's about the time it takes for changes to show up in the tax returns and reports a buyer will ask for, which is why the work tends to start earlier than owners expect.
This is general operational guidance, not tax, legal or investment advice. A CPA, an attorney and a transition broker who know dental sales should guide the decisions, structure and timing of any sale.
What do buyers and lenders look at?
Every buyer is different, whether it's an associate buying in, a nearby dentist, a group or an individual relocating. Most of them, and the lenders who finance them, end up asking similar questions.
- Are the revenue and profit steady, and do the tax returns match the practice reports?
- How much of the production depends on the selling doctor?
- Will the team stay, and are the patients active?
- Does the lease give the new owner enough time in the space, and can it be transferred?
- What condition are the equipment, technology and records in?
- Are there debts, liens or contracts that come along with the practice?
The rest of this article takes those in turn.
Why do clean financials matter so much?
A buyer's offer and a lender's approval are both built on the numbers. If the profit and loss statement, the tax return and the production and collections reports tell slightly different stories, the buyer has to guess, and guesses are usually conservative.
Clean means a few things. The books are closed every month, categories are used the same way year to year, and collections in the practice software reconcile with deposits in the bank. Your CPA can help set this up well ahead of the years a buyer will review.
How are owner expenses handled?
Most owner-run practices pay for some things that a new owner wouldn't, like a vehicle, travel or a family member on payroll. In a valuation these are typically "normalized," meaning added back to show the profit the business would earn under a new owner.
Add-backs are easier to accept when they're documented and modest. Keep a running list with amounts and receipts, and talk with your CPA about which ones are reasonable to carry and which are worth winding down before the sale years.
How can the practice depend less on you?
The more a practice relies on one doctor's relationships and production, the more risk a buyer sees. Reducing that dependence is often the most valuable work of the two years.
- Hygiene and the doctor's schedule run on written routines, not on your memory
- Patients know and trust other team members, especially in hygiene and at the front desk
- An associate, if you have one, builds a patient base of their own
- The front desk handles scheduling, financial conversations and collections without you stepping in
- Monthly numbers are reviewed by someone other than you, too
Written SOPs help a great deal here, since they show a buyer the practice can run the same way after you step back. Our SOP article covers what to write first.
What about the team and associates?
Buyers look closely at turnover and at who might leave after a sale. A stable team with clear roles, documented pay and current HR files is easier to take over.
If there's an associate, an up-to-date written agreement matters. Have your attorney review any employment terms, restrictive covenants and how the agreement would be handled in a sale. When and how you tell the team about the sale is a separate decision, best planned with your broker and attorney.
What should you check in the lease?
A lease problem can stall an otherwise good sale. Lenders often want the term, including renewal options, to cover a good part of the loan, and the landlord usually has to consent to an assignment.
- Remaining term and renewal options
- Assignment clause, and whether landlord consent can be unreasonably withheld
- Any personal guarantee and how it's released on assignment
- Relocation, demolition or radius clauses
- Rent increases scheduled over the next several years
If the term is short, renegotiating two years out gives you far more room than doing it during a sale. If you own the building, your CPA and attorney can help decide whether to sell it or lease it to the buyer.
Which equipment, records and AR issues need attention?
Equipment and technology. Keep a list with age, condition and service history. Major items near the end of their life will come up in the buyer's review, so decide early whether to replace them or price that into the sale.
Patient records. Make sure charts are complete and digital records are organized and backed up. Your attorney can advise on how records transfer under HIPAA and your state's rules.
Accounts receivable. Old balances raise questions about collections and are often excluded or discounted in a sale. A steady AR routine in the two years before a sale helps both the numbers and the story. Our article on the over-90 AR column covers the routine.
Debt and contracts. List every loan, line, lease and vendor contract, along with any prepayment terms and liens. Most are paid off or handled at closing, and knowing the details in advance avoids surprises.
What does a 24/12/6-month timeline look like?
| Window | Focus |
|---|---|
| 24 months out | Meet with your CPA, attorney and a transition broker. Clean up the books and start an add-back list. Review the lease term and assignment clause, and renegotiate if needed. Begin writing SOPs and shifting patient relationships to the team. Start or tighten the AR routine and inventory all debt and contracts. |
| 12 months out | Hold the financials steady and consistent. Get an informal valuation view from your broker. Wind down add-backs you won't carry. Plan equipment replacements, review associate and team agreements with your attorney, and organize records and backups. |
| 6 months out | Assemble the data room your broker requests. Finish outstanding repairs. Confirm lease assignment steps with the landlord. Plan team communication with your broker and attorney. |
If a sale is somewhere on your horizon, we'd be glad to help you get the practice ready well before the buyer's review. Growth and exit planning is part of our Premier retainer, "The Right Hand," and fixed-fee projects such as the Receivables Review and the Lender and Debt Review handle specific cleanup work. A complimentary 30-minute First Look is a good place to begin. Molar + Margin is based in South Florida and works with practices remotely across the U.S., and you can reach us at jana@molarandmargin.com or 561-685-4859.