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Buying a Dental Practice – The 2018 Guide

The most exciting time of your life

Dental Practice ownership is the most thrilling aspect of your professional life. Providing important oral health care and restoration treatments to the public rewards you and helps communities.

Whether you are looking to buy your first – or next – dental practice, Samera Business Advisors are here to help you to achieve your goals and build your future.

View all of our Dental Practices for Sale or learn more about Buying a Dental PracticeLearn more about how Samera can help in buying and selling Dental Practices

For our friends who are looking to embark on the journey of dental practice ownership, we hope this guide helps to start you on the path to your future in dentistry!

How long does it take to buy a dental practice?

The short answer to this question is: it takes as long as the buyer and seller allow it to take.

Like any important transaction, it’s completion hinges on whether or not the buyer and seller can agree upon a price and contract terms. As the buyer, you are expected to make the initial offer on the practice, with negotiations to follow.

However, there are many tasks that you, or a representative like Samera Business Advisors, must perform in order to make sure that your transaction is legal and your resources are secure. These include:

  • Care Quality Commission (CQC): The timing and execution of your CQC application is crucial to ensure you are ready to begin operation of your practice after ownership is transferred, without CQC approval you won’t be able to trade.
  • Funding: Unless you plan on financing your transaction in cash, you will likely be using your bank for funding. Banks are notoriously cautious. Both parties will need to agree the terms of borrowing with a business manager, and the contract will need to be approved by the banks Securities Department. Using a finance broker will help you ensure you consider all the funding options available in the market.
  • Property and Leases: Often, the property side of the transaction can slow the deal down. It’s important you have a property lawyer that can assist in ensuring any lease in place can be assigned to you as new owner.

From start to finish, most transactions can take up to eight months in order to complete when handled without the financial help of expert dental business advisors.

Dental Practice Valuations

You must get a valuation from an established provider to receive an accurate purchase price of the practice you are purchasing. Always remember, the valuation from the seller needs assessing, so do your own homework and employ your own valuer to ascertain if the practice is worth what the sellers wants to sell it for.

Due diligence

Keep in mind: You are not just buying real estate, you are buying a business. This may be the foundation of the next 30 years of your professional life! You must take the time to learn every facet of the practice that you are thinking to buy.

From the accounting to the exterior bricks and mortar, a magnifying glass must be applied everywhere. A specialist dental lawyer will know the right questions to ask so you can assess the business and plan for its growth.

You will also want to us an experienced accountancy firm to review the financials and check that the numbers for validity and potential. Management information, details from the software system and other important financial information will help you get a much better picture of the health of the business too.

As part of the due diligence process, your solicitor must request the seller to guarantee that the supplied information is correct in order to protect against any loss caused by misrepresentation.

Dental Practice Purchase Funding

A deposit of at least 10% is standard when buying a dental practice, whilst the remainder can be financed from a bank.

When a lender assesses your loan application they will be looking at a variety of factors. These include:

  • Your earning history as an Associate Dentist
  • Your financial track record and how you have managed your personal finances e.g. do you have high credit card balances is always a bad time to apply for a loan.
  • Your current living situation i.e. do you own your own house or rent?
  • Your management experience and number of years you have from leaving Dental School
  • Your ability to repay the loan with a comfortable margin of error if interest rates rise
  • If you place an offer for a practice and do not have available funds (or a finance agreement in place) you risk being unable to buy a practice whilst losing credibility with a seller.

Check the ratios and find the potential profit

It’s important to chart the potential profit of your dental practice. How much of an opportunity for growth do you see?

Make sure you ask how many active (seen in the last 10 months) patients the practice has. Out of those active patients, what are the ratios between checkups versus treatments? That will give you a birds eye view of the type of work you are inheriting.

Ask the seller for a short (3-5 examples) list of their most outstanding treatments to gauge the effectiveness of their follow up system. If the seller is a member of a local business referral group or association, follow up with other members. After all, you are entering their community and early networking prevents many headaches.

Key Performance Indicators (KPIs) like these reveal the day to day work being done to maximize the practice’s earning potential. There are a number of dental KPIs, but let’s look at …

  • A few basic numbers you must ask for:
  1. How many new patients have they generated in the last 12 months? Is this rate on the rise?
  2. What are the exam and hygiene recall rates? Are they rising?
  3. What marketing is working the best for the practice and which marketing avenues are exhausted?
  4. What’s the level of new patients received from direct referrals?
  5. What is the patient retention rate? How many patients did the practice lose over the last 12 months?

This will help you to understand how good the patient experience is and what you can do to improve it.

Why you’re buying their dental practice

Many dentists who are selling their practice factor in a sense of legacy to the transaction, and may be more willing to negotiate with someone who can show respect for their accomplishments – while also being conscious of their own ambitions.

Have a good conversation with the seller and explain your goals. Where do you want to take their practice after their gone? You will be caring for the sellers patients, and they want to make sure that they are in good hands as well.

Dental Practice Marketing

Make sure to ask the seller about the marketing relationships they’ve forged during their time at the practice. Ask them what ways they’ve advertised in the past, and if there were any open accounts with dental marketing specialists that you could utilize.

If there currently is no marketing in place, that might be a point for contract negotiations further down the road.

Using a specialist dental solicitor

Placing an attractive offer on your future dental practice is one of the most essential elements in completing a successful purchase. After all, if the seller doesn’t like your proposal, they will simply move on to the next buyer – there is no prize for second place.

To ensure that your offer is fair (to both you and the seller) we always recommend enlisting the services of a professional dental solicitor. A good solicitor will carry out due diligence, negotiate the property aspect of the deal and look at the NHS contract with you. In essence, they make sure all of the t’s are crossed and i’s are dotted, so you don’t have to.

It is important to research the right solicitor for your transaction. Check in with colleagues to see if they have any firms that they’ve used in the past, do your research, and interview several providers until you find the “right fit” for you.

Samera Business Advisors

When acquiring a new dental practice you need the competent hands of qualified professionals. With Samera Business Advisors you can rest easy knowing that your investment is secure and your future is brighter. Contact us today so we can plan for your tomorrow.

2018-04-25T21:00:08+00:00