Things to Consider Before You Sell


What happens if a business doesn’t conduct basic
due diligence ahead of a possible transaction?

Preparing a business to sell is not always top of mind for many owners, but can have significant impact on outcomes.  What happens if a business doesn’t conduct basic due diligence ahead of a possible transaction?

Worst-case scenario, they lose the deal.

Another scenario: they sell for much less than they expected.

If a dental practice or DSO is disorganized — if they haven’t conducted an internal assessment or had an advisor help them — a potential buyer may uncover something that materially impacts the transaction. This could be the price, the structure — anything and everything about the sale.

Here are a few suggestions to avoid unexpected surprises:

Make sure documents are signed and kept in a central repository. This one seems mundane, but you’d be surprised how often documents go unsigned. These could be employment contracts, rental agreements, leases, you name it. The moment you think about selling your practice, ensure you have a central repository for all your important documents and contracts, making sure they’re signed and dated. If you neglect this and wait until the buyer starts their diligence process, you’ll be overwhelmed.

Keep proper records and track your financials. Often, small business owners take advantage of tax opportunities to run personal expenses through the business. If you want to get credit for these, you need to have support. You can’t just randomly declare, “Oh, that $100 is personal,” without rationale and support for why something isn’t considered a business expense. If you choose to run discretionary expenses through your business, keep proper records and track everything.

Understand how your revenue is recorded and recognized. It’s not uncommon to see a variance in collections reported in the practice management system, versus what’s reported in the bank statement, versus what’s reported on the tax return. There are always timing differences. But when the variance becomes too significant, buyers can interpret it as shielding income from taxation. However, it may also be indicative of staff theft. I’ve seen cases where the variance was significant enough to cause the buyer to walk away from the deal.

Compliance requirements. As your organization grows, HR and clinical compliance issues become more likely. It’s important to have up-to-date manuals that are regularly reviewed, not something written a decade ago and then put in a drawer. HR and clinical compliance requirements change regularly so for groups that haven’t regularly consulted with a professional, it’s wise to have someone come in to conduct a review. Different states and localities have varying rules & regulations. If you’re unknowingly non-compliant, a potential deal can be jeopardized as buyers view this as a more risky investment.

Equity transparency. When multiple owners are involved – especially if there are multiple entities – equity values, distributions, etc. can be complicated.  Having a tool like Pulse Equity provides transparency and clarity. Owners can visualize their equity in a way that makes sense to them and understand the impacts their actions have on the value of their business. This encourages accountability, good decision-making, and resonates well with investors.

dentist selling practice


Proper due diligence makes for a smooth deal process.

Distraction during the closing process hurts your business.

Think about it: if you’re scrambling to play “catch-up” with everything listed above, your day-to-day operations will suffer. This may affect your revenue. Buyers will notice, which can impact the terms of your deal.

Proper preparatory due diligence means you can more comfortably focus on running your practice. The deal won’t suffer — and you can be rewarded appropriately for your life’s work.

For a deeper dive into ways to maximize your value ahead of a transaction, read this whitepaper.




Written by Maria G. Melone. Maria is a recognized thought leader, published author, and speaker with a long history of mentoring, supervising, and developing teams. She has helped facilitate hundreds of transactions and has valued even more. She has extensive dental industry knowledge and a proven ability to analyze markets, operations, and growth opportunities. Currently serving as a managing director at Caber Hill Advisors, Maria represents clients in the healthcare industry who are transacting with institutional investors or strategic partners.