​(If you haven’t read Part 1 of this article – click here to read it first.)

​It’s a question we’re often asked.  From our experience in helping dentists sell their practices, we know the answer from observation of our sales.  To put the answer in a clear form for our readers and selling clients, we analyzed data on 835 practice sales over a 10-year period (2011 thru 2020).  To assure that this analysis represented the overall practice sale market, the data we chose included some of the sales that we brokered, but it also included data from sales by many other practice brokers, accountants, and sale consultants.  Sales chosen for the study were for practices collecting between $400,000 and $2 million per year because they represent 85%+ of practice sales in recent years.  This selection excludes extremes at both ends of the range of annual collection.

​When a potential buyer considers a specific dental practice, the buyer wants to know what his / her annual income potential might be, if the buyer reproduces the seller’s level of production and collection.  

​Most sellers realize that they will need to give potential buyers copies of at least 3 years of their practices’ tax returns.  However, tax returns only show buyers the sellers’ taxable income.  They do not show buyers what their income potential might be after the sale.  Buyers may have some expenses that the sellers didn’t have.  Buyers may not have some of the expenses that sellers show on their tax returns.  Some of the buyers’ expenses may be more or less than those incurred by sellers.