Buying your first dental practice: Key considerations
So, you’re looking to buy your first dental practice. This will no doubt be a significant highlight of your personal and professional life, giving you complete control over the way you work and the direction you wish to take your career in. The good news is that despite the COVID-19 pandemic, the dental practice market remains strong with plenty of demand to buy and sell, which means you can expect to pay a fair price for the practice of your dreams. Of course, before you invest substantial amounts of your time and finances into taking this exciting step, you need to make sure it’s the right one for you.
The right step for you?
The reality is that being a practice owner isn’t suited to everyone, and it can be equally challenging as it is rewarding. As such, it is worthwhile speaking to your peers and other practice owners, who will be able to advise on the purchasing process and the problems they may have faced. They can also provide valuable insight on effectively juggling the responsibilities of being an excellent dentist and managing a business. Once you are certain that purchasing your first practice is a commitment you want to make, there are some key factors to consider to ensure a smooth transaction.
There are various ways in which you can finance a practice purchase, with one of the most common being through a bank loan. Every bank is different and will therefore have varying credit criteria and requirements. Most loans for the first-time purchase of a practice are unsecured which means lenders will understandably want to be sure you are financially capable of repaying the loan. To give yourself the best possible chance of securing a loan at a reasonable rate, it is important that you determine your affordability. This not only relates to the practice price, but also the additional costs that are incurred during the acquisition process including legal expenses, bank charges and valuation fees.
If for instance you can secure a loan of £500,000, this does not necessarily mean you can afford to purchase a practice of the same market value. You will need to set aside some savings to account for all the extra costs that come with buying a practice – a lump sum of £15,000 generally provides a suitable cushion for this. In the event that you receive offers from several different lenders, you should review the lending packages carefully, taking into account factors such as the loan value, loan interest rate, repayment period and additional fees for early or late repayment. It is essential that you fully understand the terms and conditions of each individual loan before choosing your lender, particularly as any loan you take out could affect additional lending for future acquisitions.
It is important to bear in mind that as a practice owner, you are not just taking on the responsibilities of managing a property but a business too. Therefore, you should take the time to learn about the practice you are looking to purchase, applying a magnifying glass to every aspect of the business – from the exterior bricks and mortar, to supplier and employee contracts, as well as equipment inventory. When it comes to the due diligence process you need to ask the right questions of the seller so that you can assess the business properly and plan for its development. A key part of this is to investigate whether there are any skeletons in the closet, including NHS contract breaches or outstanding litigation claims, as these factors can affect the value of the practice.
It is also vital to review the financial background of the practice and check the figures for validity, as this will help you gain a good picture of the business’ health and growth potential. The due diligence process will ultimately demonstrate whether or not the investment you are making is worthwhile and sustainable for the future. At this stage, it is also wise to start the CQC registration process, as well as any other relevant applications. When registering with the CQC for the first time, it can take several weeks to complete so it pays to get underway as soon as it’s feasible to do so. It is of the utmost importance that your forms are filled in correctly as any mistakes will lead to the CQC rejecting the application, which can delay the transaction significantly and cause unnecessary headaches during an already stressful venture.
Preparation is key
Buying your first dental practice is a momentous step forward in your career, but it’s not without its difficulties. That’s why it is important to be prepared, and to seek professional advice and guidance to ensure success. With Dental Elite, you benefit from the support of a reliable company that works solely within the dental sector and therefore understands the ins and outs of practice acquisitions. The friendly team can help you find the practice of your dreams and manage the purchasing process with an expert eye, liaising with your chosen lender, solicitor and accountant to ensure an efficient transaction, free from delays.