Buying a dental practice can be exciting, profitable and rewarding. It can also be fraught with risk and become a costly mistake. Roy Hogg, Partner, Head of Dental and Scottish Chairman and National Committee Member of NASDAL, offers some key buying tips.
If you’re at the stage of considering purchasing your first Dental Practice, or even looking to expand by opening in another location, there are some crucial points to consider. It is undeniably an exciting step forward, but it is incredibly important to think about and plan for the potential risks that may be involved.
If the purchase involves a practice which is already trading, this can easily make the transaction more expensive. This type of purchase will also require more financial and legal due diligence.
Another option may be to open a ‘squat’ practice. This option allows you to effectively start with a blank canvas and create a practice that matches your vision. While this way may seem tempting, there is also the added pressure of having no previous foundations to support you. Everything down to the last detail needs to be planned and thought out – people, training, equipment, hours, marketing and even uniforms.
Building a team that can support you from the initial steps of acquiring a brand to it becoming a reality, is a very significant step. As in the example of a ‘squat’ practice, every little detail needs considered, and having specialist support behind you that has extensive Dental sector experience will undoubtedly make this easier.
This support team will include the likes of:
• Dental Accountant (must be NASDAL member)
• Dental Solicitor (must be NASDAL member)
• Dental Bank
• Dental Valuer / Agent
As the transaction progresses, every GDP (General Dental Practitioner) should invest time to ensure they fully understand the process and the management of each step of the transaction.
Checking whether there is a sales prospectus for the practice helps give an early indication of how professional the seller is, or not. Ensuring that who you’re buying from is reliable and organised will certainly help. At the very minimum, you should ask to view the last 3 years trading accounts. It’s important that these are finalised and have been signed by a qualified accountant.
I would actively encourage preparing a financial projection, and in many circumstances these will be a mandatory request by the bank. Documenting the financial viability of the project is hugely important. It’s expected that the acquisition will cost a significant sum, so every possible assurance that the business can run successfully is highly advisable.
Ultimately, it’s important to emphasise the need to get the process right. I’d highly recommend avoiding taking any shortcuts – no matter how tempting – as this will only increase the potential future risks.
If you are considering buying a dental practice and would like to discuss what to look out for and your options, contact:
Partner, Head of Dental and Scottish Chairman and National Committee Member of NASDAL
01786 460 030
The information in this article should not be regarded as financial advice. This is based on our understanding in June 2019. Laws and tax rules may change in the future.