DDSWhat is a quality of earnings review in a dental practice sale?
A QoE review reconstructs historical earnings into the adjusted EBITDA a buyer will underwrite. The team tests collections, expense classification, owner pay, personal and one-time costs, related-party rent and whether key producers will stay. It answers one question: what profit remains once a market-rate dentist replaces the owner?
It is not a financial statement audit. An audit gives an opinion on statements under accounting standards; a QoE is scoped to the buyer’s underwriting questions. See the quality of earnings definition and how dental practices are valued.
What documents does a QoE team request?
Expect several years of profit and loss statements and balance sheets, tax returns, production and collections by provider, payroll detail, payer-mix reports, fee schedules, membership plan data, accounts receivable aging and a written add-back schedule backed by invoices. Building that file before marketing is the single best way to shorten diligence.
The 24-month preparation checklist sequences the cleanup. Henry Schein Dental Practice Transitions allows roughly 30 days for due diligence and financing in its sale timeline; incomplete files are a common reason that window stretches.
Which add-backs survive a QoE, and which are rejected?
Add-backs survive when they are documented and will not recur under a new owner: personal expenses run through the practice, one-time legal or repair costs and above-market owner perks. Buyers reject vague lifestyle lines, growth that has not happened yet and savings that depend on cutting clinically necessary staff.
Your CPA should keep a bridge from tax net income to normalized EBITDA, with evidence for each line. That bridge becomes the basis for price, and later for any earn-out or holdback targets.
What operating metrics sit beside the earnings bridge?
Buyers test hygiene reappointment, case acceptance, payer mix, membership and discount plans, refunds and how much production depends on the selling dentist’s own chair time. If most production leaves when the owner leaves, the EBITDA is not fully transferable, which is why associate depth affects both price and structure.
The DSO version of this screen is in what DSOs look for in a practice. Owner age matters too: 15.2% of U.S. dentists were 65 or older in 2025, according to ADA Health Policy Institute data, so buyers check for succession inside the practice.
How does a QoE change the price agreed in the letter of intent?
A letter of intent usually prices the practice on a stated EBITDA that must survive diligence. If the QoE lowers that EBITDA, the buyer re-trades the price, the structure or both. Sellers protect themselves by defining earnings carefully in the LOI and by understanding holdback and escrow terms before agreeing to exclusivity.
Published ranges on practice valuation multiples only matter once the earnings base is trusted. The allocation of the final price between equipment and goodwill is a separate, later step.
Do private buyers and DSOs both commission a QoE?
Institutional buyers, mainly DSOs and private equity groups, more often commission a formal QoE report and tie purchase accounting to it. Individual dentists buying with bank or SBA financing usually rely on the seller’s CPA package and the lender’s underwriting instead. Both still test earnings; the depth and the cost of the review differ.
Compare paths in DSO or private buyer and how long a DSO sale takes compared with a private sale. Public-record transition signals show some of these steps in aggregate.
Frequently asked questions
Is a quality of earnings review the same as an audit?
No. An audit gives an opinion on financial statements; a QoE rebuilds earnings for a buyer’s underwriting and is scoped to diligence.
Who pays for the QoE?
Usually the buyer. Some processes share the cost or start from a seller-prepared report; the letter of intent or process letter should say.
Can a clean QoE raise the sale price?
It supports the stated EBITDA and lowers re-trade risk. It does not by itself raise the multiple.
Which add-backs fail most often?
Undocumented personal expenses, projected savings that have not happened, and costs a new owner would still have to pay.
Does DDSIntel publish QoE results for practices?
No. DDSIntel publishes aggregate education and dental market data only, never findings about a single practice.
Sources
- TUSK Practice Sales. TUSK Practice Sales Assesses the State of the Dental Industry in Its Q3 2026 Dental Market Report (July 10, 2026). pr.timesenterprise.com.
- Benesch, via Mondaq. Benesch monthly dental and DSO report, July/August 2026. mondaq.com.
- Henry Schein Dental Practice Transitions. How long does it take to sell a dental practice? And how to control the timeline (July 3, 2026). dentalpracticetransitions.henryschein.com.
- ADA Health Policy Institute. The dentist workforce. ada.org.
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