Image by George Pagan III


  • IDA UK

Buying a Dental Practice : (Author: Dr Ashish Godara)

Part 1: Initial Decision Making

The booming dental practice sales market and the nuances and complexities of embarking on the purchase of a dental practice in the UK has prompted me to write a blog series on this interesting subject. This becomes even more pertinent today when the values of dental practices have risen to unprecedented levels. This rise happened largely in the last decade after the dust of the 2008 financial and banking crash settled and the business of dentistry was viewed by lenders as a 'safe bet'. Coupled with monetary easing by the government leading to ultra-low interest rates and easy lending by banks, the values of dental practices soared. Practice valuations stabilised after the debacle of Brexit and with low interest rates here to stay for the foreseeable future; show no sign of abating.

In this series I will explore the various aspects involved in practice purchase and try to elaborate on and bring together diverse aspects such as

  • Initial decision making

  • Types of practices on sale

  • Valuations and accounting

  • Specialist brokers

  • Finance and Bank requirements

  • NHS contracts

  • CQC and other regulatory requirements

  • Costs

  • The role of specialist solicitors

It is intended that each of these subjects will be discussed as independent blog titles under this series, though it is inevitable that there will be some overlap as the processes are so interconnected.

The first question that requires considerable thought is; "why buy a practice and is it the right approach for ME". Initial decision making is perhaps the most important aspect of all as it underpins the whole process and a dispassionate and pragmatic analysis of this question holds the key whether one thrives as a practice owner or doesn't.

One may wish to buy a practice for any or several of the following reasons:

Independence from working as an Associate

Financial gain and investment

Professional satisfaction and clinical freedom

An opportunity that presents itself

The dental practice model in the UK typically involves a principal dentist/ practice owner working in tandem with one or several associates to provide dental services. The practice owner may be an independent dentist or a corporation. An overwhelming majority of practices in the UK follow this model as the days of single chair practices are surely numbered due to escalation in running costs in the last 10 years without a correspondingly meaningful rise in income and fees (this is especially true for practices that derive a majority of their income from the NHS). A second reason for cost inflation involves complying with a baffling number of ever-increasing regulatory requirements especially since the advent of CQC on the scene. This double whammy of cost pressures has made single dentist practices largely unviable with multiple dentist practices where costs can be spread; the norm across UK.

Associate dentists working in practices have also started to feel the pinch of cost pressures in their remunerations as their contract percentages have shrunk in the past decade. Earlier it was standard practice for the associates to be offered 50% of their gross earnings but it has now become commonplace for an associate to be offered 45% and in some instances 40% of their gross income. This has led to some of the associates to look to buy a practice of their own. In such an instance it becomes imperative for an associate dentist to carefully analyse and 'see oneself' as practice owner before they decide to become one. Practice ownership is onerous and costly business and one needs to reflect whether one is indeed ready to accept the responsibilities and time commitment this approach demands. A well-managed practice with a competent practice manager may need less of input from the owner, however even with the best of the managers, an owner's 'hands on' approach is essential for the success of a practice and any dentist planning to buy a practice should give due consideration to this aspect. It is nigh on impossible for a practice owner to walk out of the practice at 5 o'clock in the evening as most associates do. 'The boss always works the longest' is an adage especially true for a practice owner. Aspiring owners seeking independence of their own practice should be ready to accept the stress of greater responsibility and demands on their time and ability.

Financial gain is by far the commonest reason one may want to buy a practice. It is a widely held misconception amongst many dentists that practice ownership is an easy route to riches. This may have been true in the past, but with increasing cost pressures, this is not a forgone conclusion now and profit generation requires careful planning, upgradation of skills and intelligent effort. However, with correct planning and a sound approach, it still makes good economic sense to own the right practice. When one is looking to buy a dental practice, one must consider various factors some of which are:

How is the practice income derived: NHS/ Private/ Mixed/ Insurance Plans/ Specialist services?

Location: What are the demographics of the area where the practice is located?

Accounts: Income Vs. Costs

Competition: What do the surrounding practices offer?

Opportunity: What do the surrounding practices do not offer?

There are various types of practices for sale in the UK, each with their own unique characteristics and I will discuss this in detail in the next blog but suffice to say that the right kind of practice may indeed bring riches for the right kind of owner.

Another reason an aspiring dentist may think of owning a practice is to allow oneself greater professional satisfaction and clinical freedom. Dentists with additional skills and training may feel that their skills are not utilised fully in their current position and may seek to buy a practice where they may expand the repertoire of the services they offer. This is usually an excellent reason to buy a practice. In such instances, a would-be owner must carefully study the demographics of the area and the services currently on offer at the targeted practice. If the demography suggests that the population is currently underserved in a particular treatment modality; say Dental Implants and the targeted practice does not provide this service then it's a winning approach for a new owner with skills in Implant dentistry to buy such a practice. This will not only give the new owner clinical freedom but will also lead; hopefully to an increase in practice turnover.

Sometimes an opportunity presents itself to an associate in the form of a retiring principal who wishes to sell the practice. Such instances can be especially beneficial to the aspiring associate as the practice can be bought 'off the market' in that the practice can be bought without it being offered for sale in the wider market and without other buyers competing for the sale. Another obvious benefit of this approach is the knowledge and goodwill the associate already enjoys on account of working at the practice. Such transactions allow for smoother transitioning for the associate in the role of an owner and an opportunity thus offered should be given very serious consideration.

Finally, anyone planning to buy a dental practice must have a clearly chalked up Exit Plan before embarking upon the purchase. The idea may seem antithetical, but is of paramount importance. Dentistry is exhaustive to the mind and body and one has to bid adieu to its practice one day. As an example if all things being equal, I am offered the opportunity to buy a practice on a busy high street in a prominent town as compared to another in a small town amidst idyllic rural surroundings, I will refer back to my exit plan and think which practice would it be easier to sell and at a higher multiple; say in 20 years' time, when I would want to hang up my drills. This approach alone, untangles a lot of bewildering threads from one's mind especially when a first-time buyer is swamped with sale brochures of various practices up for sale. It puts things in stark perspective and one is able to see through the clutter of the marketing pitch as to which practice it would make better sense to buy.

In my next blog I will discuss the different types of practice available for prospective buyers, their merits, demerits and unique characteristics.