Due diligence is really nothing more than understanding what you’re buying. When making a purchase as significant and life-altering as the dental practice where you could potentially be for the next 20+ years, it’s reasonable to assume you’ll get a chance to open the hood and peek under all the rugs.
But the timing of due diligence can trip up some buyers.
Here’s the basic truth to know about dental transition due diligence: you generally don’t get the really juicy details about a practice until you have a signed letter of intent in hand.
Of course you’d love to get every bit of data about a practice before you submit an offer and commit to purchasing a practice. But you typically won’t get answers to every question you reasonably have before you decide to buy or not.
The basic sequence of events almost always goes something like this:
- Find a Practice
- Get Financial Info, a Production Overview & Basic Practice Facts
- Submit & Negotiate the Letter of Intent
- Visit the Practice and Do In-depth Due Diligence
Think of step #2 above as high-level due diligence. You’re usually getting tax returns & production reports at this stage of the process, which will give you a decent sense of whether or not this is a practice that will fit you and your skills.
Step #4, is the in-depth due diligence where you get to audit patient charts, closely examine equipment, and ask detailed questions about referral partners & advertising strategy..
In order to let another dentist see that level of detail about a business, most sellers and their brokers want a firm commitment that you’re relatively committed to a purchase.
That means that you’ve submitted, and finished negotiating the LOI.
If you have a signed LOI in hand, it’s customary to be granted access to the practice computers, patient charts and the seller for in-depth questions about how they run their business.
And, yes, while it’s rare it can happen that buyers find something during their in-depth due diligence that materially changes their mind about purchasing a practice. Most LOIs are written with a 30-60 day due diligence period where a buyer can change their mind.
If you’d like a 7-page document with lists of questions I’ve created to guide clients through the in-depth due diligence process, feel free to snag your copy here free of charge.
Good luck and thanks for reading!
I created a guide called “77 Questions to Ask to Avoid Buying the Wrong Dental Practice.”
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