Buying and selling a Practice

Buying a Dental Practice

If you are considering buying a dental practice it’s critical to have a clear understanding of the practice finances and what the agreement is offering.

Here are some tips for buying a dental practice:

Establish a value for the practice:When considering buying any business, you need know what it is worth. You should also try to identify any opportunities and threats to the business that you think may affect its profitability.

Do not pay for goodwill that doesn’t exist:Goodwill is attributable to reputation, location, potential growth and recurring income. If patients are likely leave the practice once you have bought out the existing owner or shareholder, this needs to be reflected in the valuation and final agreement.

Have a sufficient handover period: By getting to know the practice and patients before completing the purchase you can reduce the risk of them leaving when you take ownership. One of the best ways to achieve this is to initially work as an associate.

Due Dilligence: If you are buying a limited company, carry out due diligence: Ensure there are no hidden liabilities or financial irregularities in the business by carrying out a comprehensive due diligence process.

Have the right business structure in place: The decision to purchase the practice through a limited company or as an individual will depend on your individual circumstances and the level of income you expect the practice to generate.

Becoming a Partner in a dental practice

There are generally two types of partnerships in a dental practice:

Expense share partnerships: you work alongside other partners and share the practice expenses.

Full Partnership: you also share information, responsibilities and generally have a closer working relationship with your partners.

Partnership agreements: can vary greatly, by getting the right advice before entering in to a contract we strongly advise seeking advice to ensure you will be receiving a fair profit share.

Acquiring a partnership or practice: for the first time is one of the biggest career decisions you will make and having specialist advisors on hand can take a lot of stress out of the process.

Get tax advice from the start: Easily avoided mistakes made at the start of a new venture can be very expensive further down the line. By having the right advice from the beginning will help you protect your investment in the long term.

Selling a Dental Practice

Being proactive in forming an exit strategy well in advance of selling your dental practice will put you in the best position. When selling a dental practice, you should carefully consider:

Practice Valuation: Your practice will be valued on the basis of tangible and intangible assets. The main intangible asset will be goodwill. If you can demonstrate that the practice has recurring revenue from patients who are likely to be retained by your successor, this will improve the overall valuation.

NHS contracts are often account for a large proportion of recurring income. Check how the terms of the transfer will work with a specialist solicitor at the beginning of the process.

How the practice is run: Have an accurate and easy to use CRM system in place along with robust administrative and financial processes. This will help you and future owners manage the practice and make the due diligence process less stressful.

Finding a buyer: Recruiting an associate partner with a view to them taking ownership of the practice is often an effective way to preserve the goodwill while maintaining patient satisfaction. Alternatively you may want to instruct an agency to help find a buyer, they will have a database of potential of buyers and take a commission from the sale.

Tax: Selling a dental practice could trigger various different types of tax liabilities depending on the existing structure of your business and the assets being sold as part of the deal. With effective tax planning early on it is possible mitigate these liabilities.

For more information on how to sell a dental practice or about any of our other services, contact us on 02392 484356

Online accountancy for dentists Move to Morris Crocker Dental Accountants