Selling a dental practice

Things to consider before selling your business


Making the decision to sell your dental practice is a big step, and one that shouldn’t be taken lightly. Whether you plan to continue working at the practice or you’re leaving dentistry for good, there are a few things you can do to ensure the sale of your business is completed as smoothly as possible.

Get an up-to-date valuation

Every dental practice is unique, which is why getting an up-to-date valuation is such a crucial part of the sale process.

As a practice owner, you will be asked to provide a range of information that will allow a surveyor to provide an accurate value for your business. This data will typically relate to your finances, property, practice services and employees.

  • Financial data includes your financial accounts for the past three years, as well as details of your income types (for example, NHS or private). If your income type is NHS, you will be asked to provide the value of your NHS contract.
  • Property data includes your current lease terms or the freehold value of the property, depending on whether you own or rent your premises.
  • Practice data includes the services that are offered, opening hours, compliance certificates and any marketing activity that is in place.
  • Employee data includes information about every person that works in the practice. Things like their role, how long they’ve been employed and their salary. This also applies to any self-employed clinicians working at the practice.

Once this data has been collated, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) can be calculated to determine the true operating profit of the practice.

This figure is then multiplied by something known as an EBITDA multiple. This is an estimated market value, based on prices achieved by other, similar practices. It will help to inform an initial valuation of your business.

Carry out competitor analysis

Another key part of valuing your practice is looking at your local competitors.

If you’re in a city centre, you may be looking at competitors based no more than a few hundred yards from your practice. If you’re in a rural area, you may need to expand your radius.

It’s important to know how many dental practices compete with you directly. If you’re in a very competitive area, this will need to be factored into the valuation.

Once you have information about your competitors, you will be able to assess it against your initial valuation. It may be wise to seek advice from a specialist valuer during this process, as comparable data is key to getting an accurate value for your practice.

Surround yourself with specialists

While you may be used to owning and running a successful business, selling a dental practice requires a whole different skillset. That’s why it’s a good idea to seek advice from a specialist dental broker with experience of finding the right price for dental practice sales.

A good broker will have access to approved lists of dental professionals that may be interested in buying your practice. They’ll also be able to provide advice on other aspects of the sale, including valuation, business ownership and optimising your tax position.

When it comes to selling your practice, it’s crucial to find a specialist with experience of the dental practice market. Without the necessary experience, there may be significant delays with the sale.

You might want to consider getting advice from a Specialist Dental Financial Adviser too, to help you through the financial implications of selling up.

On completion of the sale, it’s likely that you’ll receive a substantial lump-sum payment. A Specialist Financial Adviser can help you make the most of this money, supporting you to make well-informed decisions that are tailored to your personal circumstances.

As part of this process, your adviser will be able to offer advice on key areas of financial planning, including savings and investments, estate planning and inheritance tax.

Gather information for due diligence

Due diligence is the process that a buyer will undertake to gather information about the practice they are buying. As the seller, it’s important to provide the buyer with responses in a timely manner. This will help to avoid unnecessary delays and show that you are committed to the transaction.

The types of information you will be asked to provide include:

  • Financial records
  • CQC registration details
  • Patient records
  • Employment documents
  • Supplier contracts
  • Inventory (a list of items within the practice)
  • Copies of NHS pay statements
  • Documents showing that the practice complies with appropriate laws (for example, asbestos risk)

It’s worth noting that the actual enquiries raised will depend on the solicitor that represents the buyer, as well as the buyer’s specific requirements.

Prepare your staff

A common concern for dentists choosing to sell their practice is the impact that it will have on their employees. Retaining the goodwill of your staff is essential to a successful transition, and the best way to achieve this is by keeping communication clear and maintaining trust throughout.

One of the biggest decisions you’ll make will be knowing when to tell your staff about the sale. Only you will know when the time is right to begin these conversations, but many dentists wait until the exchange of contracts has happened so that the deal is binding upon both parties.

As part of these conversations, you will need to ease your team into the idea of a new owner and give them the chance to ask any questions they may have. This is especially important if the sale depends on key members of staff remaining in the business.

Remember too that not all dental buyers are the same, and that there are factors outside of price to consider. Choosing a buyer that fits the ethos of your practice, and someone who will look after your team, will make the process much smoother for all.

Work out your timelines

If you’re still thinking about when to sell your practice, a good place to start is by figuring out your timelines. Deciding how far into the future you want to sell will allow you to make any adjustments needed to increase the saleability of your practice and attract potential buyers.

Once you’ve established when you want to sell, you can then begin to assess any work that needs to be done. Ask yourself, how is the practice performing financially? Is it profitable? If the answer is no, what can be done to bring in additional revenue? If the answer is yes, would it still be profitable if you were no longer working there?

Answering these questions will allow you to get your financial house in order, find a qualified buyer and achieve the sale you want in the time you have.

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