When it comes to selling your dental practice, your numbers speak louder than your equipment or location. Well-prepared, transparent, and accurate financials not only boost buyer confidence but also streamline due diligence and reduce deal risk. Whether you plan to transition your practice in six months or three years, doing a financial health check now can improve your sale outcome later.
One of the most important things you can do is prep your books before selling a dental practice. This guide outlines what to focus on to ensure a smoother, more valuable transition.
1. Prep Your Books Before Selling a Dental Practice: Organize Your Financial Statements
Buyers and their advisors will request at least 3 years of:
- Profit & Loss (P&L) Statements
- Balance Sheets
- Tax Returns
- Cash Flow Statements
Make sure these are:
- Accrual-based (not cash-based)
- Reconciled with bank and credit card statements
- Reviewed or prepared by a CPA familiar with dental transitions
Pro Tip: Remove non-operational expenses (e.g., personal travel or auto) to help buyers understand the true earning potential.
2. Standardize and Categorize Expenses
Clear expense categories help buyers compare your practice to others and identify potential efficiencies.
Ensure categories like these are accurate and consistently used:
- Clinical supplies
- Lab fees
- Staff wages and benefits
- Facility expenses
- Equipment maintenance and IT
Use accounting software like QuickBooks Online, Xero, or practice-specific systems to generate reports easily.
3. Track Key Practice Metrics That Tie to Value
Beyond financials, buyers will want to see operational metrics that support cash flow:
- Production and collections per provider
- Hygiene production percentage
- New patient volume and referral sources
- Accounts receivable aging
Use tools like Jarvis Analytics or Dental Intelligence to generate easy-to-understand dashboards.
4. Clean Up AR and Eliminate Old Balances
Review your accounts receivable report and identify:
- Uncollectible balances to write off
- Insurance claims older than 60 days
- Patients with outstanding balances
Buyers may discount your sale price if there’s uncertainty around AR collection. A clean AR report helps avoid surprises.
5. Prepare a Normalized Cash Flow Statement
You’ll need to show buyers what the practice actually earns after adjusting for:
- Owner compensation
- Discretionary expenses
- One-time costs (e.g., new equipment)
This normalized EBITDA is often the foundation for the practice valuation.
6. Consult Your CPA and Transition Advisor Early
An experienced CPA and a Henry Schein Dental Practice Transitions advisor can help:
- Clean and package your financials for buyer review
- Identify red flags to resolve in advance
- Improve clarity and valuation potential
Start Cleaning Early to Maximize Value
Your financial presentation reflects your professionalism. The cleaner and more organized your financials are, the easier it is for buyers to see your value. Preparing your books well in advance of a sale gives you time to correct gaps, highlight strengths, and position your practice for a smoother, more profitable transition.
Want help evaluating your practice’s financial readiness? Schedule a complimentary consultation with your local Transition Sales Consultant today.
