Red Flags When Buying a Dental Practice
Not all practices are good investments. These red flags signal potential problems that could turn your dream purchase into a nightmare. Learn what to watch for during your search.
Financial Red Flags
- Declining revenue for 2+ years
- Collection ratio under 95%
- Rising overhead percentage
- Declining new patient flow
- Excessive accounts receivable
- Unexplained cash transactions
- Inconsistent financial records
Patient Base Red Flags
- Fewer than 800 active patients
- High patient turnover
- Single patient >10% of revenue
- Declining recall rates
- No new patient marketing
Operational Red Flags
- High staff turnover
- Key person dependencies
- Outdated equipment
- Poor online reviews
- Compliance issues
Legal Red Flags
- Unassignable lease
- Pending litigation
- License violations
- OSHA complaints
- Insurance fraud investigations
Seller Behavior Red Flags
- Refuses to provide financials
- Pressure to close quickly
- Won't allow staff interviews
- Multiple practices for sale
- Unwilling to transition
When to Walk Away
Serious deal-killers:
- Fraud or misrepresentation
- Major compliance violations
- Unsolvable lease issues
- Severe declining trends
Conclusion
Trust your instincts. If something feels wrong, investigate thoroughly or walk away. Better to miss a deal than buy a problem.
Get Buyer Protection
DentalBridge buyer representation includes red flag analysis to protect you from bad purchases.