Selling? Build Dental Practice Profitability

A dentist can have a full schedule, strong collections, and an impressive annual revenue number, then get a surprise when a buyer starts reviewing the financials. Dental practice profitability matters because buyers want to know what the business actually keeps, how much depends on the owner, and whether those results can continue after a transition.

That is why preparing to sell shouldn’t begin when you’re ready to leave. As Kiera Dent and practice transition advisor Brannon Moncrief discussed on The Dental A Team Podcast, the habits that make a practice easier to sell also make it a stronger business to own right now.

Why Dental Practice Profitability Shapes a Sale

Buyers don’t pay for how busy the doctor feels. They look at what the practice earns, what it costs to operate, and what a new owner would need to maintain performance. Dental practice profitability gives them a clearer picture than a packed schedule alone.

Imagine two offices with similar collections. One has reliable billing, steady hygiene reappointment, and an office manager who owns daily operations. The other depends on the doctor to fill scheduling gaps, resolve every patient concern, and monitor overdue balances. Those are two very different businesses to step into, even if their top-line numbers look alike.

Before speaking with buyers, review the same metrics that help you run the office: collections, overhead, payroll, cash flow, and actual profit. Dental A Team’s guide to the numbers dentists need to track is a useful place to begin.

What Does a Private Buyer Value?

A private buyer often plans to become the treating dentist, so the value includes the income they can earn doing the dentistry as well as the practice’s operating cash flow. That differs from an investor buying a business to operate with paid clinicians already in place.

According to Moncrief, traditional buyers also pay attention to location, operatories, equipment, patient mix, and room for future growth. Clean books matter, too, because both the buyer and their lender need to understand how the practice performs without guessing which expenses are personal or discretionary.

For a dentist considering a sale to an associate, this raises a practical question: could that associate step into the practice and understand the schedule, finances, team responsibilities, and patient relationships without rebuilding the operation? The earlier those answers are clear, the more options the owner has for a thoughtful transition.

How DSOs Assess Dental Practice Profitability

DSOs typically focus more heavily on EBITDA, or earnings before interest, taxes, depreciation, and amortization. In the context of a sale, the key question is what operating earnings remain after accounting for the cost of paying doctors, including the seller, to provide clinical care. Dental practice profitability has to stand on its own rather than rely entirely on the owner’s chairside wages.

The interview offered a useful illustration: a practice producing $2 million in revenue with $400,000 in EBITDA might receive very different private-buyer and DSO proposals. Those figures were examples discussed in the conversation, not guaranteed valuations or current market quotes.

A DSO may also ask the selling doctor to remain involved for several years. That makes the owner’s timeline, the practice’s management team, and the amount of production tied to one dentist just as important as the headline price. For another perspective, see Dental A Team’s article on what to consider before selling to a DSO.

Keep Dental Practice Profitability Beyond the Doctor

If every operational decision runs through the owner, a buyer is inheriting a job that may be difficult to hand over. A sellable practice needs systems the team can follow and leaders who can carry out those systems without constant rescue.

Start with the areas that most directly affect results. Make block scheduling predictable, assign ownership of insurance follow-up and aged accounts receivable, and give the office manager clear decision-making authority. Track the results weekly so a buyer can see evidence of dependable performance, not just a written manual.

Equipment can matter as well, but timing changes the ROI. Moncrief cautioned against assuming a costly upgrade immediately before a sale will be recovered in the purchase price. When there are several years left, useful investments can benefit the practice during ownership and strengthen its appeal later. That’s the same thinking behind growing a practice through stronger core systems.

The Price Tag Is Only Half the Decision

A higher proposed price does not automatically mean more money in the owner’s hands at closing or a better lifestyle afterward. In a traditional sale, the owner may receive most of the price in cash and complete a relatively short transition. A DSO transaction can include retained equity, contingent payments, and a longer commitment.

In the podcast, Moncrief compared an illustrative $1.8 million private offer with a $2.8 million DSO valuation. The difference sounded dramatic until the payment structure and years of continued involvement entered the conversation. Deferred compensation and equity introduce risks that need careful review, not assumptions about a future payout.

Before choosing a path, ask how much cash is available at closing, what conditions apply to the rest, how long clinical work is required, and how the arrangement affects the team’s future. A dental-specific CPA, transaction attorney, and experienced transition advisor should review the actual terms. The best answer depends on the owner’s goals, not a single multiple.

Protect Dental Practice Profitability Years Early

Ideally, exit planning starts while selling is still optional. Moncrief recommended beginning the conversation three to five years ahead so owners have time to improve performance, consider an associate succession plan, or evaluate a private sale against DSO affiliation.

A practical first move is to ask the CPA for clean, current financial statements and an explanation of the practice’s true cash flow. Next, identify the operational gaps a buyer would notice, such as inconsistent production, aging receivables, or decisions only the owner can make. Give each issue an owner and review the trend monthly.

Avoid quietly easing off production years before a sale without understanding the effect on recent earnings. A planned reduction in clinical days may be right for your life, but it should be part of the transition strategy rather than a surprise when the valuation arrives.

Dental practice profitability is ultimately about options. It gives dentists more room to decide whether to grow, bring in a partner, sell to another doctor, explore a DSO, or simply enjoy a business that runs with less daily pressure.

Dental A Team helps practice owners build the financial visibility, leadership, and operating systems behind those options. If you’d like help improving the business before deciding what comes next, schedule a call with our team.