Dental Practice Financial Analysis Checklist
Thorough financial analysis prevents costly mistakes. Use this checklist to evaluate any dental practice before purchase.
Revenue Analysis
Collections Trend (3-5 Years)
- Growth rate year-over-year
- Seasonal patterns
- Impact of COVID-19 or disruptions
- Projected future collections
Production vs Collections
- Collection rate should be >95%
- Production growth rate
- Fee schedule changes
- Procedure mix analysis
New Patient Flow
- New patients per month (target: 15-25)
- New patient trend
- Source of new patients
- New patient value
Expense Analysis
Overhead Ratio
Target ranges:
- Total overhead: 60-70% of collections
- Staff costs: 24-28% of collections
- Rent: 5-7% of collections
- Dental supplies: 5-7% of collections
- Lab: 8-12% of collections
- Marketing: 2-4% of collections
Owner Compensation
- Doctor salary vs net income
- Benefits included
- Draw vs W-2
- Personal expenses in practice
Profitability Metrics
| Metric | Strong | Average | Weak |
|---|---|---|---|
| Net Income % | >35% | 25-35% | <25% |
| Hygiene % | 25-35% | 20-25% | <20% |
| Case Acceptance | >75% | 60-75% | <60% |
| Recall Rate | >75% | 60-75% | <60% |
Balance Sheet Review
Assets
- Equipment value and age
- Accounts receivable aging
- Inventory levels
- Cash position
Liabilities
- Outstanding loans
- Lease obligations
- Credit card debt
- Accounts payable
Red Flags
- Declining collections (2+ years)
- Collection rate <90%
- Overhead >75%
- AR >30 days old increasing
- Negative cash flow months
- Unexplained expense spikes
Normalization Adjustments
Adjust for:
- Owner's personal expenses
- One-time costs
- Below-market rent
- Family member salaries
- Discretionary spending
Bottom Line
Complete financial analysis takes 10-20 hours but prevents costly mistakes. Engage a dental CPA for complex situations. The numbers tell the story—listen carefully.
Financial analysis help? Contact DentalBridge.