Selling your Dental Practice in 2020: 7 Essential Things to Consider

2020 Jan 04

Selling your Dental Practice in 2020: 7 Essential Things to Consider

It’s that time of year when change is upon us, and you maybe considering hanging up the drill and selling your dental practice in 2020. If this is you, read on.

Banking Confidence

Despite the political shenanigans of 2019, it appears we have a hint of certainty arising across the UK which can only be a good thing for the Dental sector.

Dentistry as a whole is liked by the banking sector, but over the last couple of years, banks are slower, and question more before they make a firm commitment.

Arun’s Opinion:

With Brexit due to happen in a few weeks, we believe banks will feel increasingly confident in their lending which, can only be a good thing if you are seeking to sell your dental practice, as buyers have easier access to finance.

Growth of Private Equity (PE)

PE is a growing trend in the dental sector, with more and more PE-backed groups emerging to acquire practices.

Despite the growth of PE there is a limit to the number of practices available to purchase, with many of the PE backed groups looking for the larger profitable practices.

Arun’s Opinion:

Tread carefully here, just because they have the money, doesn’t mean they will be a good fit for you and your exit strategy.  Seek help and meet with as many buyers as possible before you make a firm decision.

Check out our video on Selling your Dental Practice to a Private Equity – so you are fully aware of the pitfalls that can arise.

Should I sell to a Private Equity Backed Dental Group

Budget and Tax

Sajid Javid’s first budget is pencilled in for February, soon after the UK leaves the EU. In the budget, we can expect some significant changes occurring including Corporation tax remaining at 19%, rather than dropping.

More significant could be a change in Entrepreneurs relief (ER) for Capital Gains tax. This currently reduces CGT down from 28% to 10%, but if this changes, it could mean a significant rise in tax payable for anyone who does sell.

Arun’s Opinion:

Despite the rumours, my feeling is that the Conservative government will try and retain their pro-business stance, and don’t think ER will be abolished – but you never know in the world we live in today!

NHS Values

Values of NHS practices still remain strong, but now with a new government in place, the age-old question of time-limited contracts for NHS Dentistry coming into place could arise.

Arun’s Opinion:

Overnight, changes occurred in the Orthodontic sector, with many practices losing their NHS Orthodontic contract.

Could something happen with general dental contracts?  Possibly.  Bottom-line, make your own judgement and don’t trust anything a politician says.

Golden handcuffs

For many of the larger transactions we deal with, there are usually a set of golden handcuffs put in place, to ensure that the transition from seller to buyer goes well.

In today’s climate, it’s less likely you will be able to walk away from any sale with all the money in one go, any serious buyer will want to ensure some protection for themselves, so be ready for some monies to be retained, whilst you ensure a successful handover.

Arun’s Opinion:

In such deals, since you will be working with the new owners for a while, make sure you like them and understand their philosophy! Not all buyers are the same!

Competition

Dentistry is a very competitive market. The cost to acquire a patient is increasing every year as the market becomes more and more competitive. This puts downward pressure on margins which can impact your practice value.

Arun’s Opinion:

Getting the branding and marketing is essential in Dentistry today. The cost of acquiring a patient is rising, so it’s imperative every practice cares for each patient appropriately and has the know-how in house to offer the patient the full array of services. See if you can bring specialists to you, rather than sending patients away from your practice.

Which way are Valuations heading?

No-one has a crystal ball and if anyone who says they do, tread very carefully. I have just highlighted some of the macroeconomic factors that will effect the value of your practice in the coming year – some negative, others positive.

Dentistry is not immune to the changing economic climate and is heavily affected by government action.

The key to maximising your value is ultimately running a well-oiled practice, caring for patients properly, developing a stellar team, building a well branded business, which ultimately translates into higher profits and a higher valuation.

Thinking about Selling your Dental Practice?

If you are thinking about selling your dental practice, our team have the expertise to help you navigate your exit.

Further details on our Dental Practice Sales service are here.