While the idea of selling or buying a practice might be simple in theory, there is a lot more to take into consideration when the dream becomes a reality. From the CQC application process to the effects of base rates on borrowing and repayments, to details such as goodwill premiums, it is integral that you know what the process consists of before you enter it. For instance, are you looking to buy or sell through an open bid or a sealed bid? Are you 100% sure you understand what both of these processes entail and which one is best for you?
What is open bidding?
As the term suggests, open bidding is a bid that is available for all other bidders to see. The tender process is typically executed in a traditional live auction and is open to anyone wishing to take part. Not unlike an auction for merchandise, all bids on the property in question can be increased at will, provided someone bids higher than the previous offer. The process is only declared finished when no further offers have been made after a certain period of time.
What are the benefits of open bidding?
Although in the past open bidding has not always been seen as the preferable option, the process has numerous advantages that sealed bidding doesn’t offer. If you are a seller, it is testament to how effective an auction can be that vendors choose to undergo an open bidding process rather than sealed bidding. However you sell your practice, there is always the risk that you might not achieve the valuation price, but in today’s market this is highly unlikely – especially for NHS practices. What’s more, as people can see their competition and are more likely to attempt to out bid their rival, there is even the possibility that the practice might achieve over and above its valuation price. In the current market where there are more interested buyers than practices themselves, you can rest assured that the competitive nature of the bidding process will ensure you aren’t left out of pocket.
The problem with sealed bidding
A number of practice owners have previously shown reluctance to involve themselves in this kind of process, fearing that it lacked professionalism. However, this is the way businesses are brokered both in the city and internationally, so in truth, it is just the thought of being open about money that causes this fear.
The problem with sealed bids is that for many it becomes game-like as they don’t want to overpay for a practice but also don’t want to lose out. As a result, people often make bids below what they would have been prepared to pay only to lose out on an opportunity for £50,000. That’s £50,000 extra that could have been in the selling practice owner’s pocket!
An open bidding process on the other hand empowers you to be more in control of what you want to spend – you know what your limit is and you can rest assured that you made your best offer. It ultimately allows you to see how your bid compares to others, if you are losing and by what margin – this is where bids can be raised. In sealed bidding, you don’t have this opportunity.
An open and honest approach
When you take part in an open bidding process, you also know the final price paid by the competition. The insight that this offers is not only invaluable for future reference when buying a practice, but it also lets you see the competition you are up against – useful if you plan on bidding on other practices of a similar nature. The important thing to remember is, while there is no right or wrong answer about how much you should pay as a buyer, the choice remains 100% yours and yours alone.
All in all, the process is a much more open, honest way of completing a transaction. As the process allows everyone to know what – and who – they are up against, it is also very ethical. Indeed, if you all know the valuation price and your own limitations on what you can offer, then everyone is on the same playing field. An open bidding process also makes it easier to uncover unethical behaviour, should any arise.
As the process is not exclusive and it helps mitigate any potential favouritism, it is also a very fair way of buying or selling a practice. Indeed, the transparency and equal opportunities that open bidding offers is perhaps the biggest selling point of all.
Do you need specialist advice?
Ultimately, knowing how to make a move on purchasing your dream practice and how to go about selling can be difficult. But with advice available from specialists, such as Dental Elite, the process doesn’t have to be an arduous task. Dental Elite is the only practice sales agent who doesn’t charge membership fees or additional top-up fees to award buyers priority access and to run a fully transparent bidding process. If you are interested in taking part in an open bidding process, don’t hesitate – with the right support you can take the steps you always dreamed off.