How to evaluate a dental practice is a different question from what it is worth. Valuation is an opinion a professional signs; evaluation is the buyer's own reading of the seller's reports to decide whether the practice is what it is presented as and whether its earnings can carry a purchase. This page is the second thing. It uses the figures every practice management system prints and the free checklist sheet on this site to turn them into ratios a buyer can compare and a lender will recognise.
Collections, not production
Production is what was billed; collections is what arrived. A practice that produces $1,200,000 and collects $1,000,000 has a collections ratio the buyer needs to understand before anything else, because the note will be paid from collections. The checklist sheet takes collections and returns the asking price as a share of it, 75% on the worked example.
Active patients and what each produces
Ask how the seller's software defines active, because 18 months and 24 months give very different counts. On the example 1,800 active patients produced $555.56 each and the price works out at $416.67 a patient. A high price per patient with low collections per patient means the buyer is paying for relationships that have to survive the handover.
Overhead, the lease and what is left
At 62% overhead the example practice keeps $380,000 before the owner's pay and before any note, or $31,666.67 a month. That is the figure the funding stack must fit inside. Then read the lease: the practice's earnings belong to the room they are made in, and a short lease turns a good evaluation into a relocation budget.
Questions people ask about how to evaluate a dental practice
Is this a valuation?
No. It is the buyer's own reading of the seller's figures. A valuation is a professional's signed opinion and this site does not provide one.
Which report should I trust?
The tax returns, then the practice management system's collections report, then the profit and loss. Where they disagree, the disagreement is the finding.
How does Pro help with evaluating?
It keeps every practice's collections, patients, overhead and lease term beside the others, so the evaluation is a comparison rather than a memory.