Throughout the past decade specializing in Dental Practice Transitions, I often speak with prospective buyers about the first phase of transition, commonly known as “due diligence”. When doctors reach out to me, they have many questions regarding the specifics of the process. Consequently, I have been exposed to conflicting information they gained from others. This is concerning because due diligence offers a crucial opportunity to understand the condition of the practice he/she wishes to purchase. The advice is not properly tailored to the individual’s practice, so it has the potential to do more harm than good. Since there is no simple way to compare varying practices, I’d like to outline what “proper” due diligence entails, and why it is a pivotal consideration for buyers who wish to become successful owners.

Intro to Due Diligence

Buyers will usually be introduced to a practice through a Dental Practice/Transition Broker, who provides a Practice Summary. This summary is a very basic source of information that intends to market the practice to a potential buyer, as well as justify the asking price. With this in mind, the report often contains a disclaimer stating how the contents are not necessarily verified by the broker. Thus, the summary does not supplement the research a buyer should be doing as due diligence. Takeaway: Do not make the mistake of considering a Dental Broker Summary as your due diligence.

Timing for Due Diligence

Buyers are given a time frame, typically 2-4 weeks, to conduct and complete their due diligence process. Brokers will initiate the timeline once a LOI (Letter of Intent) is signed by a prospective buyer.

Seeking Due Diligence Advisors

Proper due diligence requires the following specialty advisors: Dental CPA, Practice Management Consultant -buyers’ advocate, and a Dental Attorney. Enlisting these three people will ensure the financial condition, operation system, and sales agreement are in order should the buyer decide to purchase. Takeaway: Utilize the time frame a broker gives you wisely. Hire the right advisors, and allow time for scheduling.

Comprehensive Due Diligence

Too often, buyers omit one of the most important aspects of the due diligence process: the Comprehensive Practice Evaluation provided by a qualified Transition Dental Consultant-buyers advocate. Throughout my 12-year career as a consultant, I have received countless calls just before closing or after the transaction is completed. I encounter overlooked verification, data, cross-referencing, and analytics, all of which manifest too late. In this sense, the opportunity was not what it seemed, and new owners end up with a problematic start to practice ownership, stressful transitioning and loss of revenue. Takeaway: Dentists understand the importance of diagnostic tools in the industry, which is essentially what the comprehensive practice evaluation aims to do. Using this crucial tool eliminates the guess work, and instead, informs the buyer. Proper due diligence should prompt questions, provide answers and create a solid plan for transitioning into ownership. Mention this blog to receive a complimentary phone consultation provided by Teri McAviney. Email: [email protected]  

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