Buying a dental practice is a huge commitment, so if you are looking to become a principal, there are a few things you will need to consider. To get you started, here are top tips from Dental Elite on key areas, from building the right career history to securing the perfect practice.
Top 10 Tips
1.Career History – Building the perfect CV
Gear your career up correctly, have a stable work history and give the bank manager a reason to be confident in your transition from associate to principal.
2.Finances – How are you managing your money?
When getting your finances in order and finding a deposit, you will need to consider how your personal expenditure will impact your affordability. Whether you are in debt or you own a Ferrari and a flat in Mayfair, the banks will want to know about it.
3.Get expert help
As there are a number of pitfalls that you can encounter during the transaction, it is absolutely essential that you surround yourself with professionals that have experience in doing recent transactions within the dental arena. Tapping into the right advice and support can ensure that the acquisition is as seamless and stress free as possible. After all, sinking your life savings into an acquisition is a big commitment and you want to make sure that you get it right first time. DE Finance can help with this, from giving you advice on your career history right through to completion of the sale, saving you time and money along the way. We will even act as an intermediary between the banks, solicitor and accountants and also manage the CQC process for you to make sure that everything is in place for completion.
4.Finding the right practice
You’ve made the decision that you want to purchase a practice, which is great – but with demand currently outstripping supply, it is crucial that you consider all the options if you are to successfully acquire a practice within your budget. Banks are lending to dentists, but it must be the right type of practice for you. Positioning yourself to work in a fully private practice when you have only every worked as an NHS dentist won’t give them confidence and would make lending less likely. Stretching yourself to the top end of your financial capability could also jeopardise the success of finding funding. As such you should make sure that you have experience in what you are looking to purchase and that you can comfortably afford to buy it!
5.Leasehold versus freehold
A practice can be purchased on either a leasehold or freehold basis, so before you even start looking for your practice make sure you weigh up the advantages and disadvantages of both. Normally this decision is made on affordability, though from a banks point of view a freehold is tangible security and that makes them more confident. For a leasehold particular consideration should be made to the length of lease if that is the avenue you wish to take, as the banks will only lend to the length of the lease.
6. Business plan
Creating a sound business plan is an essential aspect of practice acquisitions, as it both gives the banks confidence that you have thought about the acquisition and gives you a guideline of where you want to go with the practice in the future. Within it you should include:
- Business aims and objectives – do they fit your CV?
- Description of service/products – can you do this type of work?
- Market and competitor information – are there any threats to your business?
- What will the practice cost to buy/rent and renovate if needed – are there any hidden costs within the purchase?
- Proposed working arrangements and working hours – how are you going to run the practice post acquisition?
- Financial forecasts – make sure these are realistic and back the figures up with evidence where possible
7.Structure of acquisition
Take advice from dental professionals on the best acquisition structure for you. If you get the structure of the business wrong it can cost you more in solicitor’s fees to correct it and you may not be able to hold the NHS contract within the structure, which in turn can cause delays in the sale and incur additional costs.
DE Finance can help recommend you as a purchaser by assessing any target practice that you want to bid on. We can give you an indication of deposit levels, how much work you will need to do in the practice and also let you know if we are confident that you will be able to secure funding against it. Having a professional that really understands the acquisition will help with the smooth running of the sale and ensure that you don’t have any unnecessary delays. Many people ask us the difference between approaching a bank directly and using a broker, my answer is always the same: you can approach directly, but because we have experience dealing with the banks we have a very good idea which is the best bank manager to approach.
The other frequently asked question is whether we can secure you preferential rates; this is not true. However, because of our knowledge, experience and ability to place your application with someone that works with us on a regular basis, we tend to find that they come in with their best rates anyway. Altogether, securing the right deal for you at the best rate possible is a selective process, so you need to make sure you are giving yourself the best opportunities.
To minimise delays, your application must be submitted on time (typically 10 weeks or more before the projected completion date) correctly filled out according to CQC’s exact specifications. If there are any errors or incomplete details the application will be rejected, so make sure you read the questions carefully and give yourself sufficient time to fill in the form (roughly about eight hours). DE Finance can support you with this process to ensure minimal fuss. Our advice is to start the CQC process and apply for your DBS as soon as you have agreed Heads of Terms with the vendor.
This part of the process is essential to ensuring the practice is viable and there are no major problems that could affect business later on down the line. As a buyer, due diligence is largely out of your control, however, you must not become complacent at this stage. Review the information given to you by the seller’s team with your dental specialist solicitor, and if there any issues, raise them sooner rather than later. Other than that, the key is to be patient; gathering documentation can take a long time, with delays often expected along the way. All you can do is stay positive and ensure you utilise the services of a solicitor who knows practice acquisitions like the back of their hand. Equally DE Finance will help co-ordinate this information and handle any communication between parties to ensure that all documentation is completed and returned ready for completion.
To stay ahead of the game make sure you are up to date with dental practice acquisition processes – it could make all the difference to your outcome.