To buy or not to buy

To buy or not to buy, which dental practice is right for you?

John Clarke Practice Management Leave a Comment

Buying a dental practice is arguably more competitive today than it has ever been as demand continues to outstrip supply. Practices on the market, particularly those situated in affluent areas, typically receive many substantial offers as goodwill valuations have increased year-on-year.Research compiled by the National Association of Specialist Dental Accountants and Lawyers (NASDAL) in July 2017 has revealed that valuations for practices reached 135% goodwill as a percentage of fee income – a rise of 11% when compared against the same period last year. The conversion rate for deals completed also rose to 137% from 116% in the previous quarter.

However according to leading experts, such as specialist dental accountant and partner at UNW LLP Alan Suggett, the ‘boom’ in the practice sales market may be showing signs of waning. In October 2016, valuations peaked at 163% goodwill as a percentage of fee income. Although this figure has since fallen, notably the dental practice market is still rising, albeit more slowly. So if you were thinking of putting aspirations to purchase your own practice on hold, perhaps it’s time to think again as now still appears a good time to buy.

“To ensure the best chance of success, it’s imperative to select a business structure that is most suited to your strengths and preferred way of working.”

Whilst timing is often key, it is equally important to know what you are looking for. Whether you intend to purchase an NHS, private or mixed dental practice there is usually no right and wrong answer as each option offers contrasting benefits and challenges. To ensure the best chance of success, it’s imperative to select a business structure that is most suited to your strengths and preferred way of working.

NHS practices are attractive propositions for many buyers as they possess strong goodwill, a guaranteed income and lower patient turnover. In contrast, NHS contracts can also be restrictive and dentists can expect to pay a premium for them. It’s therefore essential to do your homework before contemplating making an offer. This should include determining whether a practice has met its NHS targets, if any claw backs are due and a balanced appraisal of your own ability to meet the UDA number as a practice owner as well as identifying potential areas for growth.

“It’s therefore essential to do your homework before contemplating making an offer.”

If you are more entrepreneurial in your business outlook then buying a private practice could represent the perfect fit for you. Private dental practices, including those operating practice-branded membership plans, can be very profitable and grow in value as the strength of goodwill will be greater as the percentage of patients you have on plan increases. But be mindful that private patients will have greater demands for specialist services so your skillset, along with your team’s, must be able to fulfil their expectation levels. Furthermore, successful private owners place a greater emphasis on being proactive with marketing their practice due to the levels of competition they face to retain exiting patients and attract new ones.

Whichever route you decide to go down, help is at hand. Specialist dental finance providers, lawyers and accountants offer step-by-step support to dentists looking to acquire a dental practice and possess an intricate understanding of what can be a complex transaction process and challenging market. Experienced and trusted lenders, such as Wesleyan Bank, can also provide guidance and tailored funding to help you purchase your dream practice and maximise growth and profitability once the sale has been completed.

This will include flexible finance products to support the expansion of a practice, including payment over time solutions to enable you to invest in innovative dental equipment and modern IT technology to enable you to always remain ahead of your competition.



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