Preparing to Sell Your Dental Practice: What Actually Increases Your Sale Price

Selling your dental practice may be one of the most significant financial and professional decisions of your career. The work you do before the practice reaches the market can help strengthen its value, address potential issues and prepare you for a smoother transition.

Ideally, preparing to sell a dental practice begins years before the intended sale, not in the final few months. Starting early gives you time to understand what your practice is worth, strengthen profitability, develop your patient base, review your team and operations, and address issues with your facility or lease.

Even if your timeline is shorter, there are practical steps you can take to better prepare your practice for a future buyer.

Why Early Preparation Matters When Selling a Dental Practice

Practice value is built over time.

Buyers are evaluating more than annual revenue. They want to understand the practice’s earnings, patient base, team, facility and ongoing operations. A professional valuation brings these elements together and can identify both strengths and areas that require attention.

Starting early gives you something particularly valuable: time.

If your valuation identifies an opportunity to improve profitability, strengthen your hygiene program or grow your patient base, those improvements generally cannot be made overnight. Similarly, a lease concern, outdated equipment or employment agreement may be easier to address years before a transaction than when a buyer is already conducting due diligence.

A valuation is therefore a useful starting point for dental practice transition planning, even if you are not ready to sell.

Financial Preparation Before Selling Your Dental Practice

Strong financial performance is an important driver of practice value. Understanding your numbers before a sale can also help you identify where improvements may be possible.

Understand Adjusted Earnings and EBITDA

When evaluating a dental practice, revenue only tells part of the story.

EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortization, is commonly used to assess the underlying earnings and cash flow of a practice. For a practice owner, the important point is that profitability matters. Increasing revenue without understanding the expenses required to generate it does not necessarily create the same value as sustainable, profitable growth.

Understand One-Time and Discretionary Expenses

A comprehensive valuation examines the practice’s cost structure to provide a clearer picture of financial performance.

This can include reviewing discretionary expenses, occupancy costs if you own the building, salaries and other expenses that may need to be normalized.

Understanding these adjustments helps provide a more accurate picture of the practice’s earnings and allows you to identify areas where costs may be affecting profitability.

Maintain Financial Performance

As your transition approaches, continue managing the practice as a healthy operating business.

Revenue trends across services and providers, operating expenses and profitability all contribute to the financial picture a prospective buyer will evaluate.

If you plan to reduce your clinical schedule as you approach retirement, consider how those changes may affect production, staffing requirements and overall profitability. A significant decline in practice performance before a sale can change the business a prospective purchaser is evaluating.

Organize Your Financial and Corporate Records

Preparation is also about having the information required for a future transaction readily available.

Documents that may be required when preparing for a valuation or sale include:

• Financial statements, including recent and historical statements
• Production reports
• Staff and associate contracts
• Staff charts
• Office lease information or a property appraisal if you own the premises
• Accounts receivable
• Equipment inventory
• Production by provider and procedure code
• Other detailed practice management reports

Additional corporate, financial and legal records may be required during due diligence.

Organizing documentation early can make it easier to respond to requests once a transaction is underway.

Start Tax Planning Early

Tax planning should not be left until you have an accepted offer.

Owners of Professional Dental Corporations may have tax planning opportunities associated with the eventual sale, including potential access to the Lifetime Capital Gains Exemption where eligibility requirements are met.

Tax planning is complex and specific to the individual owner and corporation. Work with an accountant and lawyer experienced in dental practice transactions well before the intended sale to understand the options available to you.

Operational Changes That Can Strengthen Practice Value

Many of the factors that help build practice value are also characteristics of a healthy, well-managed dental practice.

Build and Retain Your Patient Base

For a general dental practice, a stable and engaged patient base is a significant asset.

Focus on both attracting new patients and retaining existing ones. Effective recall tracking can help ensure patients return for regular hygiene appointments rather than becoming inactive.

Patient experience matters as well. Quality care and positive patient relationships can support retention and referrals, helping maintain the health of the practice as you approach a transition.

Strengthen Your Hygiene Program

A robust hygiene program can provide sustainable recurring revenue and ongoing opportunities for dentistry.

Review how effectively your practice manages recalls, scheduling and patient education. Hygiene performance should also be considered alongside patient counts and the distribution of hygiene procedures to identify potential opportunities within the existing patient base.

The objective is not simply to increase hygiene revenue before selling. It is to operate a strong hygiene program that supports the health and ongoing performance of the practice.

Maintain an Efficient, Stable Team

Your team contributes to the patient experience and can play an important role in continuity following a sale.

A buyer will typically need a team capable of continuing to operate the practice. Existing employees also bring established patient relationships and knowledge of the practice.

At the same time, wages are a significant practice expense. Appropriate staffing levels, efficient scheduling and minimizing unnecessary downtime can help support productivity without compromising the strength of the team.

Employment agreements should also be reviewed with an appropriate legal professional to ensure they remain current and enforceable.

Strengthen Your Systems and Processes

A well-run practice should not rely entirely on information held in the owner’s head.

Consistent systems for scheduling, recall management, payroll, supply ordering, chair utilization and performance reporting can make the practice more efficient to operate.

Tracking key performance indicators also helps you understand how the practice is performing before you reach the point of sale.

Make Equipment Investments at the Right Time

Equipment and technology can support productivity, efficiency and patient care, but timing matters when you are preparing to sell your dental practice.

If you are five or more years from a sale, investing in technology that improves clinical efficiency or practice performance may provide enough time to realize the benefits.

If you are only one or two years from selling, a significant purchase requires more consideration. There may be limited time to generate a return on the investment before the practice changes hands.

Closer to a sale, practical cosmetic improvements such as paint, flooring and general upkeep may help maintain the appearance of the practice without requiring a significant capital investment.

However, outdated technology should not simply be ignored. A professional valuation can help identify where equipment or facility issues may affect how prospective buyers view the practice.

Review Your Facility and Lease

The premises can have a significant impact on a dental practice transition.

If you lease your space, buyers and lenders need confidence that the practice can continue operating at the location over the long term. Review the lease early enough to understand its remaining term, renewal options and any clauses that could affect a sale.

Do not assume that simply having an assignable lease solves every issue. Some assignments can leave the seller with ongoing obligations. The availability and long-term security of the location for a future owner are important considerations.

If you own the property, consider whether you ultimately want to sell it or retain it and become the new practice owner’s landlord. This decision can have financial and lifestyle implications that should be considered as part of your broader transition plan.

Patient Performance That Can Influence Practice Value

Your financial statements tell you what the practice produced. Patient data can help explain the business behind those numbers.

Active Patient Base

Knowing how many patients are actively using the practice is more meaningful than simply knowing how many patient files exist.

Tracking patient counts over multiple years can help reveal whether the patient base is stable, growing or declining.

New Patient Flow

New patients help replace natural patient attrition and can contribute to the continued growth of the practice.

Tracking new patient flow over time provides insight into whether the practice is consistently attracting new patients.

Attrition and Retention

Patient growth should not be considered without also understanding patient loss.

Analyzing attrition and delinquency alongside new patient numbers provides a clearer picture of whether the practice is maintaining its patient base.

Hygiene Program Strength

The hygiene program can provide insight into patient engagement, recall effectiveness and recurring practice activity.

Looking at hygiene patient counts and the frequency and distribution of procedures can help identify strengths and opportunities within the program.

Production Per Patient

Production per patient provides another way to understand practice performance.

Looking at billings per patient, including dentistry, hygiene and lab where appropriate, can provide insight into the practice’s current performance and areas of potential opportunity.

Tier Three’s Advanced Patient Metrics® incorporates these types of patient measures into our practice valuation process, providing insight beyond the financial statements alone.

Preparing to Sell: What to Prioritize as Your Sale Approaches

There is no single preparation schedule that applies to every practice. However, thinking about your transition at several points before a sale can help you prioritize the right decisions at the right time.

Five or More Years Before Selling

This is an opportunity to understand where your practice stands and make improvements that need time to produce results.

Consider:

• Obtaining a professional practice valuation
• Assessing profitability and practice management
• Optimizing revenue and operational processes
• Building and retaining your patient base
• Strengthening your hygiene program
• Reviewing your premises and lease
• Considering equipment and technology investments
• Beginning tax and financial planning
• Identifying issues that could affect a future sale

At this stage, you have time to make meaningful changes and monitor their impact.

Approximately Three Years Before Selling

As your intended transition gets closer, focus on maintaining and building on the progress you have made.

Priorities can include:

• Maintaining profitability and operational improvements
• Continuing to develop the patient base
• Keeping the facility well maintained and current
• Reviewing staffing and employment agreements
• Revisiting your tax strategy with your advisors
• Updating your practice valuation as appropriate
• Addressing issues that could make the practice more difficult to transition

Approximately One Year Before Selling

At this stage, the emphasis begins shifting from longer-term improvement to sale readiness.

Consider:

• Obtaining an up-to-date professional valuation
• Maintaining production and profitability
• Organizing financial and practice documentation
• Reviewing staff and associate contracts
• Confirming your premises and lease arrangements
• Preparing for buyer inquiries and due diligence
• Discussing your transition objectives with your professional advisors

This is not the time to mentally retire from the practice. Continue operating it as the healthy business you want a prospective buyer to acquire.

What to Avoid as You Approach a Sale

Knowing what not to do can be just as useful as knowing where to invest your time.

Letting Production Decline Too Early

Reducing your involvement before the sale can affect practice performance. If you want to change your schedule, consider the effect on production, staffing and profitability before making the change.

Allowing Your Patient Base to Decline

Continue paying attention to new patient flow, retention and recall. A transition on the horizon is not a reason to stop developing the patient base.

Making Major Investments Without Considering Your Timeline

A technology investment that makes sense five years before a sale may not make the same financial sense one year before selling.

Evaluate major purchases based on whether there is enough time for the practice to benefit from them.

Ignoring Team Stability

Both staff turnover and inefficient staffing can affect a practice.

Maintain a capable team while continuing to manage staffing levels and costs appropriately.

Making Significant Compensation Changes During a Sale

Be particularly cautious about significant employee raises once a sale is underway.

A valuation and prospective buyer’s financial projections may have been based on existing wage levels. Significant increases can change the practice’s cost structure and the cash flow available to a future owner.

Leaving Lease Issues Until You Have a Buyer

A lease problem discovered during a transaction can be considerably more difficult to address than one identified earlier.

Review the premises well before going to market so you understand any issues that may affect a future purchaser.

Waiting Until You Are Ready to Sell to Get a Valuation

If you wait until the moment you want to list, you lose the opportunity to act on many of the insights a valuation can provide.

Knowing your value earlier gives you more time and more options.

Considering Who Might Buy Your Dental Practice

Part of dental practice transition planning is considering what type of sale may be appropriate for you and your practice.

Potential purchasers can include another dentist, an existing associate or an investment group. Different sale scenarios can come with different considerations, including the seller’s future role and the structure of the transition.

If an associate is interested in purchasing the practice, obtaining an objective valuation can help establish a well-supported value for the transaction. It is also important to consider the sale as a complete business transaction rather than assuming that familiarity with the associate eliminates the need for appropriate valuation, legal and financial advice.

If you are considering this route, read more about selling your dental practice to an associate.

Pre-Sale Dental Practice Checklist

As you get closer to selling your dental practice, use this checklist to identify areas that may need attention.

Financial Readiness

• Current practice valuation
• Organized financial statements
• Clear understanding of revenue and profitability
• Review of practice expenses
• Tax planning underway with your accountant
• Required corporate and tax documentation organized

Operational Readiness

• Practice systems and processes are functioning effectively
• Staffing levels support practice needs
• Staff and associate contracts have been reviewed
• Equipment inventory is current
• Facility is well maintained
• Lease or premises arrangements have been reviewed

Patient Base Readiness

• Active patient counts are understood
• New patient flow is being tracked
• Attrition and delinquency are understood
• Recall systems are functioning effectively
• Hygiene program performance is being monitored
• Production per patient is understood

Transition Readiness

• You have considered your desired timeline
• You have considered whether you want to continue practising after the sale
• You understand what role, if any, you would like following the transition
• Potential issues affecting the practice’s saleability have been identified
• Required practice documentation is being organized
• You have a plan for maintaining practice performance through the sale

Advisor Readiness

• Dental practice broker or transition consultant
• Accountant experienced in dental practice transactions
• Lawyer experienced in dental practice sales
• Financial planner, where appropriate

A coordinated advisory team can help you address the financial, legal and transition considerations involved in a practice sale.

Find Out Where Your Practice Stands

You do not need to have a sale date before you start planning.

Understanding your practice’s current financial performance, patient base, operations and value can help you decide what to prioritize and when.

If you are still determining how prepared your practice is for a future transition, start with our Practice Readiness resources.

If you are ready for a deeper assessment, a professional valuation can help you understand what your practice is worth today and identify opportunities that may strengthen its value before a future sale.

Request a practice valuation and speak with a Tier Three Transition Consultant about your plans.

Frequently Asked Questions About Preparing to Sell a Dental Practice

When should I start preparing to sell my dental practice?

Ideally, transition planning should begin five or more years before your intended sale. Starting early gives you time to understand your practice’s value, improve profitability and patient performance, address facility or lease concerns and make strategic investments before the transition.

What can increase the value of a dental practice before a sale?

Practice value is influenced by factors including profitability, patient performance, the hygiene program, operational efficiency, team stability, facility and market conditions. Improvements that strengthen sustainable earnings and the overall health of the practice can help build value over time.

Should I get a valuation before I start preparing?

A valuation is a useful starting point because it shows you where the practice stands today. It can identify strengths, opportunities and potential concerns, giving you a clearer basis for deciding what to address before a future sale.

What financial documents do I need before selling?

You should be prepared to provide financial statements, production reports and detailed practice management information. During a transaction, buyers and their advisors may also request corporate tax returns, bank and credit card statements, general ledger information and other supporting financial records.

Should I cut back my schedule before selling?

Consider the effect on the practice before significantly reducing your schedule. A reduction in owner production without corresponding changes elsewhere in the business can affect revenue, staffing efficiency and profitability.

Is it a mistake to stop marketing before selling?

The more important objective is to maintain a healthy patient base and sufficient new patient flow as you approach a sale. Continue the activities that are effectively supporting patient acquisition and retention rather than allowing the practice to decline because a transition is approaching.

What do buyers look for in a Canadian dental practice?

Buyers evaluate the practice as a whole. Financial performance, patient base, hygiene program, team, operations, facility, lease, equipment and opportunities within the practice can all contribute to how the business is assessed.

How do I make my practice easier to transition?

Start planning early and address issues before the practice reaches the market. Maintain financial and patient performance, build a capable team, keep practice systems organized, review contracts and premises arrangements, and have the necessary documentation ready for a future buyer and their advisors.