There is an old Russian proverb that translates to “trust but verify, “and that’s due diligence in a nutshell. It is a responsible approach to vetting and verifying before completing a transaction like a dental practice sale.
Due diligence is the process of researching what has transpired in the dental practice – from financials to evaluations to legal obligations – and to verify that what is being represented is true.
For the seller
While due diligence can sound ominous, a dentist selling their practice should view due diligence as a necessary and constructive process that both validates the value of their practice and builds the confidence of the buyer.
Words of advice
Buyers tend to scrutinize most closely the practice financials. To that end, work in advance to “clean up “the office both financially and physically. Uncovering potential issues during due diligence, rather than before the practice is listed, can delay or kill the dental practice sale.
Be ready
Important documents for a buyer to review during due diligence include:
- sellers tax returns,
- general ledger of the practice expenses
- dental practice management software
- dental charts
- and more
Be prepared to provide these so you’re not caught off guard and you do not cause unnecessary delays
Avoid Pitfalls
Curious what mistake practice owners make that can hurt the sale?
Having excessive personal expenses run through the practice that cannot be accounted for in the expense lines. Take steps to rectify this in advance of beginning your dental transition.
Representation matters
Before you reach the due diligence phase – and even before you considering your dental practice for sale – you need representation. Best outcomes to derive from planning ahead.
It’s ideal to start working with a Transition Professional 1-3 years (or longer) in advance of a practice sale so they can help you prepare in the best ways possible, discerning your goals, optimizing your practice, and guiding you through each step.
DDSmatch Founder Thad Miller shares, “the more you care about what happens after the sale, the more cautious you need to be, and the more time it will take. “
In Summary
Due diligence is an integral piece of your practice transition that doesn’t have to be an overwhelming burden. A trusted Transition Professional will run point on your behalf, serving as a conduit of information to all participants, including when real estate is involved, leaving you time to practice dentistry while your transition goals are being shepherded by experts in the field.
