Buying the Practice She Ran: A Dentistry Buyout That Nearly Unravelled

The situation

Yasmin had run the day-to-day operations of a dental and oral surgery practice in Lindsay for eight years, working alongside its founder, Rivka, an oral surgeon who had built the practice from a single chair into a multi-provider clinic with two associate dentists on staff. When Rivka decided it was time to retire, she gave Yasmin first refusal rather than listing the practice with a broker or entertaining offers from a corporate dental group looking to consolidate practices across the region.

Yasmin was not a dentist herself, but she understood the business better than anyone outside the clinical staff. Her husband, Tarek, an investment advisor, helped her think through the financing and the numbers. Between a commercial loan secured in part against the practice's own receivables and a portion of their savings, they put together financing for a purchase in the range of six to seven million dollars — a substantial commitment for a household that, however comfortable, had never bought a business of this size before.

Our team was retained to act for Yasmin and Tarek on the purchase: reviewing the practice's financials, structuring the deal, and drafting the purchase agreement. On paper, this looked like one of the more straightforward professional practice sales — a known buyer, a cooperative seller, and years of trust between them. The complications turned out to sit not between Yasmin and Rivka, but in contracts neither of them had thought much about: the associate agreements.

What the diligence found

The practice's annual billings ran to roughly $8 million across three providers: Rivka herself, and two associate dentists who leased chair time and shared revenue under separate agreements. When our team reviewed those agreements as part of due diligence — the standard review of a target business's contracts, finances and liabilities before a purchase closes — a problem surfaced that is common in professional practice sales but easy to miss until it is examined directly.

Both associate agreements had been signed personally between Rivka and each associate dentist. Neither agreement contained a clause allowing it to be assigned to a new owner without the associate's consent. In law, a contract for personal services generally cannot be transferred to someone else simply because the business changes hands — the associate had agreed to work under Rivka's supervision and reputation, not under an obligation to work for whoever bought the practice next. Unless each associate agreed in writing to continue under the new ownership, both agreements would effectively end the moment the sale closed.

One associate, who had built a loyal patient base over several years and accounted for roughly $1.3 million of the practice's annual billings — about sixteen percent of total revenue — was noncommittal when asked to sign a new agreement with Yasmin's company ahead of closing. She said she wanted to "see how the transition went" before committing to a new employer. That left Yasmin buying a practice where a meaningful slice of the revenue underpinning the purchase price rested on the goodwill of someone who had made no promises at all.

This is the risk that sits underneath every professional practice acquisition that includes associates, partners or key producers: the purchase price is usually built on historical billings, but historical billings were generated by specific people, and people are not assets that transfer automatically. A dental chair, a patient list and a lease can be assigned. A dentist's willingness to keep showing up cannot.

What we did

1. Broke the valuation down by provider, not just by the practice total. Before advising on deal structure, our team asked for billings attributable to each of the three dentists separately, rather than accepting the aggregate figure the practice normally reported. That breakdown made the concentration risk visible in dollars, not just in general terms — one person's departure could remove a sixth of the practice's revenue.
2. Pushed for early, direct outreach to both associates. We advised Rivka's side that the associates should be approached about their intentions well before closing, not left to find out about the sale as a fait accompli. One associate signed a new agreement with Yasmin's company promptly. The other continued to withhold commitment despite repeated conversations.
3. Structured a revenue holdback tied to retention. Rather than delay or collapse the deal over one associate's uncertainty, we negotiated a holdback of $650,000 — roughly ten percent of the purchase price — to be held in escrow for twelve months after closing. Under the terms, the amount released to Rivka at the end of that period would depend on how much of that associate's book of billings the practice actually retained, whether the associate stayed or left.
4. Built a transition support obligation into the agreement. Rivka agreed to remain available part-time for three months after closing to support patient communication and staff continuity, and to actively encourage the uncommitted associate to stay, rather than simply walking away once her sale proceeds were in hand.
5. Added standard restrictive covenants for the departing owner. Rivka agreed to a non-solicitation and non-competition undertaking preventing her from opening or joining a competing practice nearby or soliciting the practice's patients or staff for a defined period, which is a standard protection in a sale like this but one that is easy to overlook when buyer and seller already know and trust each other.

The outcome

The deal closed on schedule at roughly $6.8 million. For the first two months, it looked like caution had been unnecessary — both associates continued working, patient volumes held, and the transition seemed smooth. Then, about nine weeks after closing, the associate who had never fully committed gave notice. She had accepted a position elsewhere and, despite the non-solicitation terms limiting her ability to actively pursue the practice's patients, a meaningful number of them chose to follow her when she left, as patients of an individual provider often do.

Over the following months, the practice retained roughly 55 percent of that associate's former patient base, redistributing them among the remaining providers and a newly hired associate. The other 45 percent — about $585,000 of the associate's approximately $1.3 million in annual billings — did not transfer. That was a real loss of revenue against the numbers the purchase price had assumed.

This is where the holdback did its job. Because the purchase agreement tied the escrowed $650,000 to actual revenue retention rather than to a fixed release date, the shortfall triggered a proportionate reduction. Roughly $390,000 of the holdback was returned to Yasmin's company to offset the lost billings, with the remaining $260,000 released to Rivka. Yasmin still ended the first year with revenue below what she had underwritten — a net shortfall of about $195,000 once the holdback recovery was applied — but that was a manageable, one-time gap the business could absorb through the loan's amortization schedule, not the six-figure-and-growing hole it would have been without any protection built into the deal.

It was not the outcome anyone hoped for. Yasmin had wanted to keep the full team intact, and losing an associate who had built real relationships with patients was a genuine setback for the practice's stability in its first year under new ownership. But the loss was contained to a defined, absorbable amount instead of an open-ended one, because the risk had been identified and priced into the deal structure before closing rather than discovered afterward.

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