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What to consider when buying a dental practice

5 min
Female dentist wearing scrubs standing in dental room with glasses around neck holding a tablet and smiling

Specialist dental practice sales and purchase solicitor, Nicola Lomas, shares her insights for dental practice owners.

Q: What advice would you give to anyone looking to buy a practice?

A: The main piece of advice I would give to any potential buyer is for them to educate themselves as much as possible. Buying a dental practice can be an extremely stressful process - however, if you have taken the time to fully understand exactly what is involved and therefore know what to expect and what due diligence to look for, it will make the whole process slicker, faster, cheaper and generally less stressful. It will also mean that you will have discovered several things about the practice that you may not have previously been aware of and will be in a better position to run the business more efficiently and more lucratively moving forward.

Q: What's a realistic expected timescale in terms of the legal process for someone selling a practice?

A: Some things are unique to certain practices; for example, with an NHS practice you have to bear in mind that 28 days’ notice is required before any amendments are made to the contract. Another factor is the Care Quality Commission (CQC), the timescales and applications. The CQC works on an eight-week targeted turnaround - therefore, even if you submitted your application on day one, when you make an offer on a practice, the minimum possible timeframe for take-over is 12 weeks.

On the most ambitious timeframe and with absolutely everything going to plan, it could be possible to complete this process in four months – provided the seller passes over all their due diligence immediately, the bank carries out the valuation as soon as they’ve accepted your offer, the offer goes in straight away and everything is perfect with your finances. In reality, the average timeframe is typically around nine months – from the day you put in the offer to taking over the practice.

Q: What does Due Diligence involve?

A: The due diligence process is extensive. Although there is an element of financial due diligence which an accountant can help with, it is legal due diligence that covers everything that you need to know about the ongoing business. This process almost guarantees that problems with the practice will be found, as most practices in England and Wales, or indeed anywhere in the world, do not run absolutely perfectly all the time. Encountering problems, for some potential buyers may be off putting - my advice here would be, rather than to abandon the process, find out exactly what the issues with the business that you intend to buy are, and to formulate a plan for those problems going forward.

It is important to get into a position where you understand the intricacies and the problems of that business and how you intend to take steps to remedy any issues in the future.

There is a whole plethora of information that needs to be found out as part of the due diligence process. Examples of issues that it covers are: the right of the employees to work in the UK, whether the x-ray machines have been properly tested and serviced, and historic NHS performance amongst many other topics. This may seem overwhelming in terms of volume, but unless a buyer can have this information presented to them in a palatable way, it can be difficult for them to imagine that they will be able to successfully operate that business. This again reiterates the point of having the right team behind you and getting the support you need – if you have a specialist dental accountant who understands issues such as NHS performance, they will be able to present that information to you in a way which is understandable and palatable and can give you a clear plan of what to do with that business in the future.

Q: Is associate worker status an issue that affects all practice owners and associates?

A: We do see people who have claims against them from associates who are claiming worker status and claiming various forms of compensation for backdated unpaid holiday pay as part of a larger claim - these come through the litigation team.

Interestingly it doesn’t matter if an associate’s contract states that they are self-employed, what actually matters is the situation on the ground for that particular associate in the surgery. This entails looking at the degree of control they have over their day-to-day working life and working patterns, hours and clinical decisions.

The BDA now produce both worker status and non-worker status model associate contracts. We would encourage practice owners to have conversations with their associates to determine which type of contract is most suitable for both parties.

Q: What should a business owner be thinking about when considering their optimum business structure for tax purposes?

A: There are some practical considerations when thinking about an optimum structure, the most obvious is whether it is an NHS contract or not and whose name that contract currently sits in. It is also important to think about plans for expansion and eventual exit (including tax planning), how the business is financed and how many people are involved with or will own the business.

Q: When considering retirement or selling a practice, what should a practice owner be thinking about?

A: From our perspective, the advice would be to get organised as early as possible. Our ideal scenario would be to be instructed as solicitors before the practice is even on the market, this way we could advise on any potential issues before they become real problems. When we have the opportunity to evaluate that business early on and consider it from the perspective of a potential buyer, we can offer advice on structuring due diligence in an effective way as well as helping you present that business in the best possible light.

Seek advice from specialists

If you would like support with your financial planning, you can speak to a Specialist Financial Adviser at Wesleyan Financial Services as part of a no-obligation financial review.

Tax treatment depends on individual circumstances and may be subject to change in future.

About the author
Nicola Lomas profile
Nicola Lomas

Specialist dental practice sales and purchase solicitor

Nicola Lomas is a partner in the corporate team at Brabners and primarily deals with dental practice sales and purchases, partnership agreements and associate contracts, acting on behalf of a broad spectrum of clients from sole practitioners to multiple site corporate groups for both NHS and private dental practices.

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