Operational Due Diligence: Know Your Dental Practice Baseline

Sometimes you get good advice. But it isn’t good advice for you.

My son Gio is ten years old. When he is not on a PS5 or running around with his younger brother, he is on a baseball field. And when he was nine, he was mashing.

He loves baseball — and he earned a reputation in the local circuit as a kid who could flat-out hit. Whether it was for average or for power, he was a problem at the plate. Coaches noticed. Other parents noticed. He had found something that worked, and he was doing it consistently.

This season, he moved up and played travel baseball for the first time. The competition got better. The fields got bigger. And most importantly, his circle of coaches expanded.

Somewhere along the line, a well-meaning coach tweaked his swing. Then another coach saw something and made an adjustment. Then another. Each one was trying to help. Each one probably had good reasons for what they suggested.

But after weeks of layering adjustments on top of adjustments, Gio started to slump.

The issue wasn’t a lack of talent. It wasn’t a lack of effort. He was working harder than ever. But the more he worked on the new mechanics, the worse things got. The confidence that came so naturally at nine was gone, replaced by hesitation and second-guessing at the plate.

I finally went back and pulled up videos of his 9U swing.

The issues he was having now didn’t exist then. At all. The mechanics the coaches were trying to fix weren’t broken in the first place. They had taken a swing that worked and, with the best of intentions, rebuilt it into something that didn’t.

We had to break the habits he had just learned. But because we had the video, we had the proof. I could sit down with him, pull up the footage, and say: it’s not you. You’ve done this before. We know what your good looks like. We just have to get back to it.

He played his first game after that conversation recently. He looked more like himself. Still some things to clean up, but the foundation was back — because we had gone back to the baseline.

After we worked through it, I told him something that applies far beyond the batter’s box: sometimes you get good advice, but it isn’t good advice for you.

The coaches who adjusted his swing weren’t wrong in a vacuum. The mechanics they were teaching probably work for a lot of players. But they were trying to fix a swing without knowing what his baseline of success actually looked like. They were giving advice without data. And without data, even well-meaning guidance can take a player further from what made them good in the first place.

In the dental industry, this exact dynamic plays out every single day. And it costs practice owners millions of dollars.

The buyer who doesn’t look under the hood

When a dentist decides to buy a practice, their circle of advisors immediately expands — just like Gio’s circle of coaches did when he moved up to travel ball.

They get a broker. They get a lender. They get an attorney. They might get a CPA. All of these people are well-meaning. All of them will give advice. And most of that advice will be technically sound.

The broker will tell them the practice is priced appropriately based on a multiple of collections. The lender will confirm that the cash flow covers the debt service. The CPA will note that the tax returns look clean. The attorney will review the purchase agreement.

It is all good advice. But it might not be good advice for this practice.

Because none of those advisors are looking at the operational baseline. They are looking at the financial outputs — the collections, the overhead percentages, the adjusted net income — without examining the clinical engine that generated them. They are telling the buyer whether the numbers add up. They are not telling the buyer whether those numbers are sustainable, repeatable, or dependent on conditions that will change the moment the selling doctor walks out the door.

If the buyer walks in without a forensic, operational evaluation, they are adopting a swing without knowing if it actually works for them. They don’t know:

• If true case acceptance is 30% or 60%.
• If hygiene is retaining patients, or just masking churn with high new-patient volume.
• If production is distributed across a stable clinical system, or entirely dependent on the seller’s hands.
• If the fee schedule is built on a Delta Premier dependency that will instantly erode.

Month one, the practice looks fine. Month three, things start to slip. And because they never established a baseline, they have no idea what broke. They cannot pull up the video. They cannot say, “here is what good looked like; here is where we drifted.” They are adjusting mechanics without knowing what the original swing was supposed to be.

The slump becomes a crisis. And the crisis becomes expensive.

The practice that never saw the QoE coming

This dynamic doesn’t only affect buyers. It affects sellers — especially solo owners and $1M+ EBITDA groups who are preparing for a private equity transition.

For years, these owners have taken advice from their traditional CPAs and consultants. They have been told to manage their overhead, cut their supply bills, keep the top line growing, and minimize their tax liability. It was reasonable advice for running a profitable lifestyle practice.

But it is the wrong advice for surviving an institutional Quality of Earnings evaluation.

When a PE firm’s QoE team walks into a practice, they are not reviewing the tax returns. They are bypassing the general ledger entirely and digging straight into the clinical ledger — pulling raw data directly from the practice management software to find the unvarnished, unmanaged operational baseline.

If the owner has never looked at their own data through that lens, the QoE process will be brutal.

The QoE team will find the unadjusted doctor compensation — the number that reflects what the practice actually pays the owner for their clinical production, not the number that was structured for tax efficiency. They will find the inflated active patient count — the 2,400 “active patients” that, upon forensic review, includes everyone seen in the last 36 months, including patients who have not returned in two years. They will find the broken appointment rate that is quietly bleeding the schedule. They will find the case acceptance rate that the front desk has been recording as “accepted” on a verbal yes with no deposit and no appointment scheduled.

They will use that data to systematically dismantle the valuation of the practice. Every gap they find becomes a negotiating lever. Every metric that cannot be defended becomes a discount.

The owner will feel blindsided. They will feel like they are in a slump they cannot fix — because they never knew what their “good” actually looked like in the first place. They took advice that worked for a retail asset and tried to apply it to an institutional transaction. The advice wasn’t wrong. It was just wrong for where they were trying to go.

Find your baseline before someone else does

Whether you are buying your first practice, running your current one, or preparing to sell to a DSO or PE group, the principle is the same.

You cannot fix what you have not measured. You cannot protect what you have not quantified. And you cannot filter the advice you receive if you do not have a baseline to filter it against.

You need the video of the 9U swing.

In practice terms, that means raw data from your practice management software — not the dashboard summary, not the year-end report your office manager prints, but the actual extracted data that shows what is happening at the procedure code level, the provider level, and the patient behavior level. It means knowing your true case acceptance rate, your schedule density, your hygiene reappointment rate, and your real EBITDA margin after you have paid yourself what your production is actually worth.

Once you have that baseline, everything changes. You can listen to the broker, the CPA, the consultant, and the well-meaning coach — and you can confidently evaluate whether their advice fits your practice or whether it is good advice that simply isn’t good advice for you.

You can get back in the box. And you can swing like yourself.

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Know what your good looks like — before a buyer defines it for you. The free Defense Gap field guide includes the operational self-audit that surfaces these baseline gaps while you still have time to fix them.

About the author — Joe DeLuca is Chief Analytics Officer and co-principal of Precision Dental Analytics, where he builds the benchmarking architecture behind the firm’s M&A defense and growth work. He is the author of The Root of Leadership.