Leading Dental Accountant Geoff Long looks at the options open to young Dentists looking to go it alone, post Brexit.
Should You Buy Your Own Practice?
Over the past five years we have seen the price of Dental Practices sky rocket with Dental Corporates snapping up the larger Practices and the availability of cheap finance for Dentists. The problem is compounded by the fact that the best small viable Dental Practices rarely come onto the market. If they do they are often sold by word of mouth, leaving the Dental Press to sell the rest – which often turns out to be a selection of overpriced white elephants.
Setting Up From Scratch
Squatting is probably the cheapest way of setting up. A single surgery practice can be started from a budget as cheap as £100,000. This includes second hand equipment, units, marketing and working capital. If something a little better is sought, then £130,000 to £150,000 will buy you a state of the art Squat more akin to attracting the sought after independent patients. The cost of the squat is broadly speaking tax deductible – a major advantage compared to buying a freehold or dental goodwill and a friendly principal may allow you to bridge out your existing Associate job (spend 2 days at his practice and 2 days at your own) to ease your cash flow.
The problem with a squat is how long it will take you to start to break even. In our experience this is usually about 7 or 8 months. To set up a private squat you will need some form of reputation locally, either as a specialist or a number of associate positions under your belt. During that period you will need nerves of steel – and a clued up dental bank manager – as each month more money goes out than comes in!
As dental accountants we have never had a squat that has failed; a very different picture for existing practices purchased. A squat has a large inherent capital profit when, at the end of the day, you sell.
Don’t forget a squat is your opportunity to set up exactly how you want to, with staff chosen and trained by you. A chance to practice your own unique brand of personal patient care to your following of like-minded appreciative patients.
OK that’s fine for some dentists, but squatting is not everyone’s cup of tea. So what are the alternatives?
Buying A Small Practice
This suits some dentists as there is a patient list from day one. The small size means you can to some extent, do your own thing and usually they are not too expensive.
The downside is you may inherit problems with the existing patients, existing staff, existing equipment or the former Principal’s reputation. Another problem is insufficient patients for your needs. It should be remembered that a practice that has only ever been part time is unlikely to support a full time dentist in the short to medium term.
Buying A Multi Chair Practice
The attraction here is high profits – may be – in a stable environment with plenty of patients. Another plus is this sort of practice will have more negotiating power with PCTs than say, a one or two chair practice with a smaller pool of NHS patients.
The downside? Cost. Multi – chair practices can be quite expensive, especially the goodwill values. Are you up to all the responsibility? Particularly managing the existing staff and associates who may well be older and more experienced than you! The associates may take a dislike to you and leave; this could be a very difficult situation to handle.
Often joining as an “Associate with a view” to buying in is an ideal compromise, because you try before you buy, have continuity with the patients and you know how the practice runs. Sometimes you can negotiate a small reduction in price on this type of practice, although haggling can prove awkward in this closed environment.
Going Into Partnership
Tricky one! Buying a share in a partnership practice is a step into the unknown. You have the question of compatibility with the existing partners. You may find it difficult to implement changes in the practice, depending upon the attitude of the other dentists. In addition, the new partner is often labelled as the junior partner, particularly if he is younger than the other dentists, making change even more difficult.
A useful question to ask here is whether the other Partners want you solely for your money?
The advantages are you have an existing book to work and established practice systems and protocols and it is often easier to take a career break if the need arises. These are useful if you are a little unsure of things.
The other advantage is they are often cheap to buy into because no-one else is interested!
Geoff Long Dental Accountant is a specialist based in Hertfordshire. He advises on a wide range of dental tax issues and regularly writes for the dental press. Geoff has over 15 years’ experience with Dentist’s accounts and is recognised for his proactive approach to dental taxation and business problems.
You can contact Geoff on 01438 722224 or email email@example.com