Your dentistry questions answered: selling your practice
Practice Plan’s Zoe Close looks for answers to the questions you’re asking.
If none of my associates want to buy my practice, what are my options?
Traditionally, when a practice owner wanted to sell their business they would look to their associates as potential buyers. And, more often than not, the associate would jump at the chance.
However, there seems to have been a shift in career paths and aspirations of associates which means the traditional ‘handover’ of a practice down the team is not as assured as it once was.
Anecdotally, often when speaking to practice owners who may be looking for an exit strategy, they suggest their associates are not keen on taking on the mantle of ownership.
And in this year’s Dentistry Confidence Monitor survey of the profession, only 11% of associates said they saw their future career as owning a dental practice. The most popular answer at 39% was working as an associate in a private practice, but that was somewhat worryingly followed by ‘changing profession’ at 35%.
Other responses included working as an associate in an NHS practice (11%), working in a hospital setting (2%) and specialising (2%).
Given all of this, I asked Lis Hughes, Managing Director of Frank Taylor & Associates: If none of my associates want to buy my practice, what are my options?
Lis: ‘It is very much a sellers’ market, and with over 5,000 associates having registered an interest in buying a dental practice, the challenge is very much for an associate rather than the principal.
Historically, the typical way for an associate to become a practice owner was to buy the practice they were already working at or create a squat practice. However, if an associate was looking to set up a practice which included NHS dentistry, the squat option disappeared many years ago. This has led most associates to prefer the option of buying an established practice rather than creating a new one.
In the current climate an associate not wanting to buy your practice is not something to be downbeat or fearful of. The demand for most practices is still extremely high with lots of practices getting cold call approaches weekly (some daily!). Cold call approaches come from corporates, local associates and smaller groups looking to grow. Whilst being approached directly is flattering it does mean that you are left to negotiate directly with the buyer (who could well have more experience than you) and in many cases the value is determined by what the buyer thinks it’s worth – never a great place to start from!
The first stop should be to use a reputable dental agent to place an independent value on the practice, that way you know the real worth of your goodwill and what figure you are likely to achieve if the practice were to be put on the open market. The open market continues to be the unrivalled way to achieve the best price. A good agent will assess each buyer on their merits and present back to you a detailed assessment of each offer. This should include the buyer’s ability to fund the purchase, and with the banks being very positive towards the dental sector this, for the most part, is achievable for most buyers.
Often an incumbent associate makes for a good purchaser as they already know the team, patients and the culture in the practice. However, as you can see above, there are a number of options if your associate does not take up the offer. It should certainly not be seen that you have an undesirable practice. The reasons for the associate not taking the opportunity forward can be varied, from a lack of confidence in their own management ability, no desire to manage a team, the price may be beyond their funding ability to just wanting to focus on their clinical work.
Where an associate decides to not take forward the option to purchase your practice they invariably stay on in their associate capacity and make excellent team members for the incoming principal. Having had the opportunity to acquire the practice and stepped aside means there is no animosity toward the buyer, and they provide all the necessary support to help make the practice move forward.
There is lots of talk about money available from private equity via corporates but the detail of any offer needs to be fully understood. It is certainly an option to be considered but there will be conditions attached to the sale, which may not suit you and your situation. There is money from the ‘bank of Mum and Dad’ which is enabling younger purchasers to fulfil their dream of practice ownership, and despite the ongoing economic unease, we have not seen a slowdown in the sale of dental practices. There is also traditional bank finance and last year, FTA Finance alone arranged over £150m of finance for dentists to acquire practices.
So, if you are a practice owner starting to consider succession planning, what should this plan look like?
- Get an independent valuation
- Engage an agent that solely acts for you – to be sure of this you will need to pay the agent to be confident there is no conflict of interest
- Build a realistic timeline of path ahead
- Start assembling your paperwork in readiness for the due diligence process
- Discuss your exit plan with your financial adviser to ensure you maximise all the tax relief available while still a business owner.
Your associates not wanting to buy your practice is not a disaster, far from it, you have only just begun on the journey of finding your perfect purchaser.’
My thanks to Lis for sharing her expert advice. Hopefully that has provided some practical ideas and options for owners who are considering selling their practice.
As is the case so often, the key is planning and preparing well in advance. A lot of investment, both in time, money and often emotions, goes into building a practice. So when it comes to selling, you want the process to be as smooth as possible.
While your associates may be in that 11% who do not want to own a practice, it’s good to know from Lis that there are still reasons to be positive when it comes to selling. Although, for the profession as a whole, we’re left wondering about the remaining 89% and what might be done to inspire the future generation of owners.
About Zoe Close
Zoe Close is Sales Manager at Practice Plan, the leading provider of practice-branded dental plans. Zoe has 30 years’ experience in the dental sector, including Group Business Manager for a corporate group, dental nurse, head receptionist and practice manager. Through this regular column, she offers YOU the chance to ask any questions you may have about the ongoing uncertainty surrounding NHS dentistry and the framework of the proposed dental contract going forwards. Simply email firstname.lastname@example.org with your question alongside your job title and location, and let us do the rest!
Lis is Managing Director of Frank Taylor & Associates, the UK’s most successful sales agent. Lis has worked in the dental sector for many years and offers a depth of understanding in what does and does not work and which pitfalls are best avoided when buying or selling a dental practice. Working with both vendors and purchasers during a transaction, Lis has a recognised knowledge and understanding of the business side of dentistry.