Purchasing a dental practice is an exciting landmark in your professional and personal development. However, anyone thinking of becoming a business owner must undertake considerable research and self-evaluation before turning the idea of buying into reality. If the thought of becoming your own boss has crossed your mind and you think you’re ready to buy your first practice, before going any further consider the following five steps to avoid some common pitfalls.
Understand the market
First-time buyers can be vulnerable to entering into the purchasing process without a solid understanding of the dental practice market. First and foremost, it’s important to determine which business model (NHS, private or mixed dental practice) is the right way forward for you based on your strengths and preferred way of working.
When performing due diligence, check whether your chosen practice is close to public amenities and good transport links. Does it have adequate on-site or easily accessible parking? Are the relevant permissions in place should you want to carry out refurbishments? What strengths and weaknesses do your competitors offer?
Get the right team behind you
Working with specialist accounting, legal and financial practitioners will help guide you through the key elements of buying a dental practice. They are familiar with the complexities of the dental industry and their support will help to minimise delays and overcome unexpected obstacles. When looking for finance, select a specialist provider with experience of the dental sector who can offer a range of financial products to meet your needs. These include long-term business acquisition loans and commercial mortgages with flexible loan-to-value options.
Run the numbers
You must create a comprehensive business plan which will be examined by financial lenders before they commit to backing you. It should outline your short, medium and long-term growth strategy and highlight any changes you intend to make to the practice, such as staffing levels, refurbishments and introducing new services. Conducting analysis of patient retention and attrition trends, as well as the practice’s turnover and profitability figures, will provide a more accurate picture of the business you wish to buy.
Your business plan should also include detailed profit and loss and cash flow forecasts, in addition to conveying contingency plans to evidence that you will be able to meet the repayments of any loan you secure.
When applying for finance you will typically be required to provide the following information.
- Last three years’ annual accounts for the dental practice you wish to purchase
- The practice’s latest management information
- Visibility of the last two years’ tax returns
- Details of the sales particulars
- The practice’s latest valuation
- Personal information (CV, business plan, bank statements, etc).
All funders will require a cash deposit from the purchaser. This will vary and depend on each individual’s circumstances and evidence will need to be provided of the availability of your cash contribution. It is important to talk to a finance provider at an early stage as the level of contribution may affect your plans.
Complete your CQC application
When your finance is secured you can move towards completing the transaction. A relevant CQC application will have to be served and approved in principle and exchange involves swapping signed and dated Sales and Purchase Agreements (SPAs) which creates legally binding rights and obligations for both the buyer and the seller.
Specialist finance providers can provide the step-by-step financial support for dentists who are looking to acquire a practice. As well as being able to provide funding for acquisitions, they can additionally provide flexible loans to underpin investment in new equipment and technologies, short-term working capital loans and even commercial mortgages for when you want to expand.