Red Flags When Buying a Dental Practice

Some practices aren't worth buying at any price. Learn the warning signs that should make you walk away or proceed with extreme caution.

Financial Red Flags

Declining Revenue

• Collections down 2+ consecutive years
• New patient count declining
• Average production per patient falling

Collection Problems

• Collection rate below 90%
• Excessive AR over 90 days
• High PPO dependence with poor negotiations

Questionable Financials

• Inconsistent tax reporting
• Refusal to provide financial documents
• Cash business with poor documentation

Operational Red Flags

Staff Issues

• High turnover rate
• Key staff leaving before sale
• Toxic workplace culture

Facility Problems

• Lease expiring within 2 years
• Non-transferable lease
• Deferred maintenance
• Outdated equipment requiring replacement

Legal Red Flags

• Pending malpractice claims
• OSHA violations
• License restrictions or investigations
• Unresolved partnership disputes

Patient Base Red Flags

• Declining active patient count
• Over-dependence on seller's personality
• Poor recall system
• High patient churn

Deal Structure Red Flags

• Seller won't stay for transition
• No non-compete agreement
• Unrealistic price expectations
• Refusal to provide warranties

When to Walk Away

• Multiple red flags present
• Seller dishonesty discovered
• Financial trends irreversible
• Location fundamentally flawed

Bottom Line

Trust your instincts. If something feels wrong, investigate thoroughly. Some deals aren't meant to happen—better to walk away than inherit someone else's problems.

Need objective practice evaluation? Contact DentalBridge.