Dentists Who Invest Podcast

Buying A Dental Practice - Here's What You Need To Know with Maja Thompson and Kimberley Parker [CPD Available]

• Dr. James Martin • Season 4 • Episode 405

Share episode

Get a free audit of your indemnity cover here >>> https://quote.allmedpro.co.uk/dental-indemnity-2025-new-proposal-dwi/

———————————————————————
Collect unlimited free verifiable CPD for UK Dentists here >>> https://www.dentistswhoinvest.com/videos/buying-a-dental-practice-heres-what-you-need-to-know-with-maja-thompson-and-kimberley-parker

———————————————————————
Stepping into practice ownership represents a monumental career milestone, yet the process remains shrouded in complexity for many dentists. This comprehensive episode pulls back the curtain on dental practice acquisition with unparalleled clarity and expert guidance.

Maja Thompson and Kimberley Parker from Henry Schein Dental Practice Sales bring their combined decades of experience to illuminate every aspect of the buying journey. With Maja's background in practice acquisitions and ownership, alongside Kimberley's 15 years specializing in practice finance, they offer a treasure trove of insights you simply won't find elsewhere.

The dental acquisition landscape has evolved dramatically in recent years. After a cooling period triggered by rising interest rates in late 2022, the market has adapted, with independent buyers and small groups now driving significant activity. This shift creates tremendous opportunities for individual practitioners looking to take their first step into ownership.

From identifying the perfect practice to navigating financing options, this episode methodically walks through critical considerations that shape successful acquisitions. You'll discover why location extends far beyond personal preference, how diverse revenue streams create stability, and the long-term implications of property decisions. The experts demystify practice valuation methods, revealing how EBITDA multiples vary between owner-occupier models (2.5-4.5) and associate-led practices (6-9).

———————————————————————
Disclaimer: All content on this channel is for education purposes only and does not constitute an investment recommendation or individual financial advice. For that, you should speak to a regulated, independent professional. The value of investments and the income from them can go down as well as up, so you may get back less than you invest. The views expressed on this channel may no longer be current. The information provided is not a personal recommendation for any particular investment. Tax treatment depends on individual circumstances and all tax rules may change in the future. If you are unsure about the suitability of an investment, you should speak to a regulated, independent professional. Investment figures quoted refer to simulated past performance and that past performance is not a reliable indicator of future results/performance.

Send us a text

Dr James:

Purchasing a dental practice is a world that is a teeny bit obscure and it really doesn't get as much airtime as it should, given that it of purchasing a dental practice in granular detail, step by step, and also focus on Kimberley's area of expertise as well, which is practice finance.

Dr James:

Looking forward to this one and illuminating this process for everyone. I'm also happy to share that there is free verifiable CPD associated with this podcast episode. Whenever you finish the episode, all you have to do is click the link in the podcast description. It'll take you right through the Dentists Who Invest website. You'll be able to complete a short questionnaire and, once passed, you fill in your reflections and we'll go ahead and email over to you your verifiable CPD certificate, which is entirely free. What that means is this podcast episode will be able to contribute towards your verifiable CPD certificate, which is entirely free. What that means is this podcast episode will be able to contribute towards your verifiable CPD hours during this learning cycle. Welcome everybody to this webinar this evening where we're talking buying a dental practice with the experts of course, Henry Schein who've been there, done that, bought the t-shirt and are responsible for how many dental practices in the uk?

Kimberley:

Kimberley hot fac oh, you put him in the spotlight. Too many to count, too many to count. Now we've been involved in, honestly, an incredible amount um across the team.

Dr James:

So we've got lots of experience in this, so, absolutely, so you know a few things about buying and selling yes, anyway, the purpose of this webinar tonight is to share a little bit of inside knowledge and how that's done, so that somebody can get the best deal on that front, whether you are just about to purchase a practice or maybe coming more towards the end of your career.

Dr James:

So we are going to be covering that this evening. 100 got a little bit of a presentation coming up in just a second and then also, as well as that, the opportunity to ask any question that you would like under the sun whenever it comes to dental practices, whenever it comes to anything surrounding that, anything that pops into mind. Of course, all we ask is that if a question does pop into your head, please do, of course, pop it in the chat so we can get to it whenever it comes to the Q&A section of the webinar. Maja, I know you've been on the Dentists Who Invest podcast before and we've done some content together. It might be nice to have a little bit of a reintroduction to the audience, though.

Maja:

Sure, sure. So Maja Thompson, I'm the Director of Practice Services at Henry Schein. Been at Henry Schein for about five years. Prior to that worked at portman as an m&a manager, so bought quite a few practices. Prior to that run my own business dental business which are sold, so kind of have the view of both sides buying and selling. So yeah, really looking forward to sharing some of those experiences here today excellent and Kimberley.

Dr James:

you are brand new to the Dentists Who Invest audience, aren't you? I am indeed, so can you give us a little bit of a hello, an introduction?

Kimberley:

Absolutely yeah, so I'm Kimberley Parker. I'm the business manager here, so I work both with practice sales and also in the financial services team, so I look after both of those aspects of the business, and this is actually the year of my 15th anniversary, so I've been in the sector for some time now, so I've seen it all and lots of different scenarios, but I'm also sure that there'll be more as well okay, let's have some fun this evening in that case wonderful.

Dr James:

All right, Maja, I know you've got a little bit of a presentation, so maybe it might be nice to kick off on that one now and let's just make sure I'm sharing the presentation.

Maja:

Yeah, does that look good? Okay, it looks great, you can see it. So we've done some of the introductions. Let me make sure that we're there. I can move the slides forward.

Maja:

So what I am planning to do is I'm going to make this pretty easygoing. It's not going to be particularly strict. So please feel free to ask questions. As James said, pop them in the chat. So please feel free to ask questions. As James said, pop them in the chat and essentially, Kimberley and I will cover the content. The plan is for me to talk for about the first, maybe third, then Kimberley will come and I'll talk about buying the practice. Then Kimberley will talk about how you actually finance that purchase. Then we will wrap that up and come back to the questions at the end.

Maja:

So that's kind of the the overview. I have some notes, so I'll occasionally look down at my notes just to make sure that I don't miss anything. But essentially we both kibbley and I, are from an era where um many so Henry Schein practice, Henry Schein dental practice Sales was essentially MediEstate up until probably officially about a year ago, but it was acquired by Henry Schein, so MediHoldings, the whole business was acquired by Henry Schein in 2017 and slowly then got integrated into the Henry Schein Group, but to many, many people on the market, just known as MediEstate, and MediEstate's been around for about 20 years and in that period bought and sold lots of dental practices, so lots of experience in the team, as you can see here just in the last. So these are the stats for the last five years. So valued 2,600 practices, brought 640 million pounds worth of practices to market, and you can see some of those other stats, but one of the really interesting stats we currently have on our database just over 6,000 active buyers. So these are buyers looking across the whole of the UK that we service, uk and Ireland that we service.

Maja:

So the other thing that I just wanted to mention. So the other thing that I just wanted to mention, we have in the marketplace over the last probably so it's been a very active marketplace and we all know that there is consolidation going on, that dental corporates started buying dental practices maybe probably as far back as 20 years ago, but in around the end of 2022, what happened is we all know that inflation went up and the government, to kind of control that inflation, started bringing interest rates up and that cooled the market off. So probably back end of 2022 and into 2023, the volume of practices being bought and sold dropped and I think you would know that across all of the brokers and majority of the corporates either renegotiated their deals that they had in the pipeline or they basically dropped out. So what we now come to see at the back end of probably 2024 is the, I suppose, market got used to the fact that interest rates are higher and they're not going back to where they previously were. The market started moving again and, in reality, what we now see more of and what we hear of that the corporates are still buying. We meet with lots of current corporates, lots of DSOs, and they are buying, but they're not buying in the volume that they used to buy, probably prior to maybe 22, 23. But what we do see a lot of activity from independent buyers and small groups. That's probably where majority of the activity is. So just to kind of position that in where we are at the moment. So just to kind of position that in where we are at the moment. So I will move on.

Maja:

So tonight the idea is to talk about some of the well, it says here all of the aspects of buying a dental practice. We will try to mention as many of those, but this is really not a definitive guide and it basically serves as a prompt to the areas that you need to consider while you're looking to buy a practice. So, moving on, I'll bring all of them up, so looking at kind of the things that are really important as you are deciding. So these are kind of probably the four things that, as you are looking to buy a practice, you would then start considering. So why is location important? You have to decide whether, obviously, it will be related to where usually where you live or where you intend to live in the future, but there are certainly implications depending on where you decide to look to to acquire a practice. So it will be things like how easy would it be to source associates for the future? How easy would it be to source your team members for the future? Is it a lifestyle business? Is it something that you are going to move for and you're going to live in the Lake District in Cornwall, and is that the reason why you're making the move? You then need to consider whether you want to be part of a community or you want to be, you know, in a central London location where you know the type of patient base that you'll be seeing will be quite transitional and obviously the competition that you have within that area. So there's quite a few things to consider.

Maja:

In terms of the location, then you need to have a look at what type of practice type you would like to buy. So I tend to say a dental practice, or a solid business, is like a chair the more revenue streams that you have, the more solid it is. If you have just one, it tends to be quite a wobbly chair. But if you have a mix of income streams, then you know it's quite good. So is the practice an NHS practice? Is that the kind of work that you deliver? Could you introduce private income, you know, to a practice? Would you want to? Is it just a private practice? Is it a specialist practice? Could you? Then, if you're you know building those revenue streams, could you? Is there a patient plan base? So that's a relatively reliable income stream. So you need to decide the type of practice that you're looking for.

Maja:

Then your practice is going to be located in a property. So would you want to acquire the freehold? Or, if a practice is if the freehold is not for sale, are you happy not to acquire the freehold? Because if you don't acquire the freehold, you then have a landlord that you have to kind of work with. So it's really important to decide whether a freehold is important for you, and there is advantages and disadvantages to both. If you are a leaseholder, obviously you have a landlord. If you're a freeholder, all the responsibility for the upkeep of the building and all of that is with you. However, you end up having the investment, so you have the building. So one day when you sell the practice, you still have that investment. So it's something that you need to consider in terms of the property.

Maja:

And if you look at growth opportunities, are you happy with a single surgery or two surgery practice, or do you need the opportunity to be able to grow that practice, to have an extra room, to be able to add more chairs, or is it simply that you want to start this as maybe your future group? So does this practice need to have, you know, at least three chairs so that it can be an associate-led practice? So it's really important at this stage to decide some of those basics relating to your practice, on the kind of things that you want. So if we move on. So the really important thing is kind of thinking about those timescales.

Maja:

So searching for a practice itself can take certainly anything from a from we might have an ideal practice for you right now for the thing that you're looking for, but it's it's usually quite unlikely that you will find something on the first go. It's like finding your first girlfriend or boyfriend. It takes, it takes a few tries to find the right one. So and I would say same with the houses you do need to really go and see quite a few. You might have an idea of what it is that you want, but actually, unless you have, unless you're exposed to different types of practices, they might bring up something that you perhaps weren't thinking of.

Maja:

So my suggestion would be register with an agent, I mean register with us, but also register with all of the other agents on the market, because we tend to have some of the similar practices but we tend to have different practices on the market. Research, research, research. Go back to those four points that I said and they need to be kind of your guiding points in the type of thing that you're looking for, and then after that go to viewings and go and learn about the practices different types of practices that are out there and review details. If you register with an agent I think majority of agents the registration as a buyer is free. They will send you information about the practices. Go and review the papers that are coming on the practices, look at the accounts that you are receiving and get some advice from either colleagues who have been through it before or some of the specialist advisors that I will mention later.

Maja:

So let's say you've got to a place where you have found the practice that you like. So that search is over and that negotiation process then starts. And this is where a really good broker comes in where, because they have been in that position before quite a few times, they understand how the market works, they understand what the seller is looking for, they understand, they obviously discuss with you what you are looking for and they're a really nice intermediary to actually make the deal work. And at the point where kind of that negotiation as the negotiation progresses, you will get to a stage where you both meet somewhere in the middle and you agree that that is the practice for you and the seller has found the ideal replacement for them. Once the sale is agreed, then the first legal document is drafted and it's usually either heads of terms of memorandum of sale, which are the basic documents that outline what you have agreed and it's a willing agreement that you will get into legal negotiations or legal process and that's the start of the due diligence process. So that's this kind of middle bit, agreeing the sale.

Maja:

I think I said around a month, but actually it's probably a little bit longer than that. When you kind of take all the negotiations in, some deals move really quickly but in reality it takes a little while to actually move from negotiating to sale, agreeing the sale and signing those documents, and then you enter the due diligence process. I'll talk a little bit more about that, what that involves, but it's essentially we have found that it takes probably four months. Some of the it takes probably four months. Some of the most slick dental corporates or DSOs are very good. They have professional buyers and they will go through the process of acquiring practice really quickly and that's, if they don't find any problems, kind of skeletons in the closet. So you know things don't come out of the sale that nobody was expecting. If things go smoothly, four months is probably the shortest space of time on a normal deal, and that can go up to anything. Really, it depends on how prepared, how dedicated the buyer is, how prepared the seller is for the sale. We now find that majority of sales take about eight to nine months to complete, with kind of eight and a half months being the average for a deal to complete from the point when the heads of terms are signed, and I think that's probably the market average. So if I'll bring the points up, so if we have a look at some of the key things that are to consider once those agreements are signed, so once the sale is agreed which means that either heads of terms or memorandum of sale, which can be used interchangeably as terms, are signed, that's the official start of the due diligence process. Both parties have agreed that they will move forward.

Maja:

So I would say that one of the most important things and things that can make or break a deal is selecting the solicitor. Now we have a list of solicitors that we work with. They're specially solicited within the healthcare sector. There is no commercial agreement with us, it's just that they are really experienced at doing what they do. Their healthcare transactions are all they do, and we will provide you with a list of those solicitors. You're more than welcome to go and use your own or somebody else if that works for you. But the most important thing is that making sure that your solicitor is experienced in the type of transaction that you are undertaking Super important and also it's a transaction that you are undertaking Super important and also it's a transaction that's really important. It's a really important moment in your life.

Maja:

You are potentially buying one and only practice. You might be buying a whole series of practices, but it tends to be a really big decision. So you want to go with somebody where you have a gut feeling that things are going well. Apart from the gut feeling, shop around, make sure that you get a fixed quote. Majority of solicitors will do a fixed quote for the work that they do. That there's chemistry there that you can work with this person to get through to the end of that transaction. Ask them about their workload, ask them about the experience and how many transactions they have carried out in that space, and also ask them about the size of their team. How many people are dedicated to kind of that dental space. And one of the things that we've also found is really important Do they have a property department? So if you are looking to buy the freehold, you really want to have somebody in-house that will be able to advise on that, because otherwise, when you start adding other solicitors to the party, it tends to extend that buying process. So really super important to check that you have the right team on your side, because they will be playing on your team.

Maja:

The next thing is so your solicitors. Once you've agreed on who your solicitors are, what they will do is they will open up a data room and in the data room they will store all of the information that relates to that sale. So initially they will send out, or as part of the process, they will send out, the purchase agreement for the purchase of the process. They will send out the purchase agreement for the purchase of that, for the purchase of the practice, which will contain all of the kind of legal agreements with regards to the sale. But they will also, in the data room, be checking that the business that you are buying is the actual kind of business that is on the paper being sold. So they will check who the employees are, whether the contracts are in place, the compliance for the practices in place. They will check that, all of the kind of details with regards to the property, that the financial stack up, so they're effectively checking the purchase for you. So that's really important. It's a due diligence process quite onerous. There's a lot of paperwork going on, especially on the seller's side, because it's down to the seller to provide all of these documents and it's down to the solicitor on your side to make sure that those documents are checked. So really important process, really important to have the right solicitor on your side.

Maja:

When it comes to the property, so we would say that probably two things that can slow down the purchase process the most are the property, certainly if the property is with a third party landlord, which means that the person who is selling the business isn't the owner of the property. So sometimes that will tend to slow down the sale because the third party solicitors for them they already have a tenant. So really it's just making sure that they are involved in the process early on so that they can transfer the lease to the new owner. So that's really important. Also, the CQC making sure that the CQC process is started really early.

Maja:

Sometimes it's not that important, but usually in the asset sale it's really important that the CQC process is started early, because from the application to transfer the registration from one person to another, it can take three to four months, and so it's quite a slow process and tends to be the one that almost dictates the speed of the deal. So you start the things that take the biggest amount of time. You start the discussions about the property, discussions about the CQC, very early on so that the other stuff can kind of run in the background while all of the kind of the CQC and property are being dealt with. So those are really important ones. Also, the NHS contract If the practice has an NHS contract, the transfer of that contract needs to be handled carefully and also just making sure that the NHS contract is being fulfilled, so whether there are any breach notices or anything like that. So it's really important to focus on that.

Dr James:

UK dentists, if you are just starting out on your investment journey or you're already investing and want to know if your strategy is 100% foolproof and optimized to reduce fees and maximize growth, then you might like to know. I have teamed up with independent financial planner Lukeley to create the Dentist who Invest Academy. The Dentist who Invest Academy fully documents the process that a financial planner would normally perform for a client behind the scenes and reveals it to you. This means that you can implement it into your own life, therefore pulling your financial freedom date forward by years. If you wish to set up and manage your own investment portfolio, then this is designed to give you all the tools and knowledge you need to perform this properly. This means that, when viable and appropriate, you will have the know-how and skill required to build and manage your own investment portfolio, plus ensure that it is 100 optimized. If this sounds like your thing, then keep an eye out on the denison invest mailing list, where we'll be announcing the details of the next intake very soon.

Maja:

So, moving on, I talked a little bit about, obviously, the buying process. Now, these are all of the bits that you would need in terms of, kind, of starting the due diligence process. But you've decided, so you have found the practice, the process is going on. You then have to be able to afford to buy that practice. So Kimberley is now going to talk about what all the bits in terms of finance are involved in practice acquisition. So over to you, kim.

Kimberley:

Absolutely so. This is the good stuff. How can we afford the practice? What do you need to do and how can we support you with that as well?

Kimberley:

So assessing your financial position, firstly. So one of the key things is savings and capital, and so the banks will assess, alongside the business, your personal circumstances as well. So that will include your savings and capital, and that includes both cash and property. But it's really important to say here that that doesn't necessarily mean that they want to utilize that. It just gives them a really good feel for you as an individual, and that's something that we can support you with with how we present that to the banks as well. And so, moving on to credit score, which always sounds scary um, but it truly isn't so. Um, what we will do initially is obtain what we call indicative terms from the bank, and I think the easiest way to describe what that is is it's a proposal of what the banks can do. So it's effectively like your decision in principle when you're buying a property, so there's no credit score done at that stage. Like I say, it really is just a highlight of what the banks feel they can do for that particular practice and because the terms that you get for one practice might be a little bit different to what you get for another, because it is also based on the financials of that business as well. So we'll go to the banks and we'll talk more about what the banks look like later on and we will obtain the very best rates that we can for you, the very best terms, discuss that with you, review that and together we'll decide on the lender that you'd like to move forward with, and that is the point at which a credit check will be done when it goes to their credit team. So if you're looking on the market, I would suggest, at the viewing stages, come to us. We can assess that with the banks. No credit check is done, so we can do that on as many as you like before you decide that you actually want to move forward with a particular practice. So just moving on to budgeting.

Kimberley:

So this will give you a feel for, when you're looking at practices, what you should be looking for before you go and view the practice. Is it even one that I can actually afford? There's a lot of flexibility here as well with the bank. So it's certainly something to consider and, again, certainly something that we can support with case by case. So each practice is assessed on its own merits, alongside your personal circumstances, which again we'll just route into that a little bit further later on. As well. As a general rule, just to give you a feel for it, I would say that the banks are looking for around 10 to 20% as a deposit. So that gives you a good feel for where you sit with particular practices. However and this is where the flexibility comes in, which is great Some of the banks at the moment look to go up to 95% lending, where they will take on the existing debt with you as well. So there's quite a lot there for flexibility. So, just going back to the savings and capital aspect, where the deposit is smaller, again the banks will consider what your assets look like. So even though they might not take a big cash deposit, they will again have a feel for what your assets look like in the background.

Kimberley:

So one of the key things to consider when budgeting is rates. So let's have a chat about what the banks are doing at the moment. So as low as 1.8% at the minute for a first time buyer and that's above the Bank of England base rate, and I'm sure you've seen a lot of that in the news. So 2023, 2024,. It was at the high at 5.25%. It has now gone down to 4%, which is fantastic. So really good support. With that affordability as well For those who are existing owners, we're actually getting into this sector.

Kimberley:

It's considered one of the least riskiest support, which is fantastic. What I would suggest, that being said, is perhaps just stress test at about 3%, so you get a feel for what it might look like should rates increase at all, and then you'll understand if you truly can afford that practice. So just moving on to this slide here with bank loans, so, as I say, the banks really have given the green light for go with this sector, which is just wonderful, and we can look at the products that the banks are looking at with you as well. So what I would consider with products, there are a number out there and that's where our expertise comes into play and when we get the terms back from the banks, we can really discuss those with you. And one of the key things that we'll discuss is what is your plan? Are you looking to take on a practice and stick with that practice and potentially just own one, or are you looking to grow a small group, because from there it might depend which practice you move forward with, but also which lender you move forward with, and also which product as well, so we can review those at the stage when you find a practice.

Kimberley:

So, specialist lenders what does that mean? So we use a panel of specialist solicitors and lenders as well. So what I'd say about that is it can sound scary like it's you know, perhaps lenders that you won't know of, but you absolutely will. So these are high street banks, but they actually have a specific department for healthcare within those as well, and the great thing is we work with the head of healthcare at each of those banks so we can put your case to the credit team in the most possible, in the most positive way, and then the head of healthcare can support with that as well, and that's where we get the flexibility and the very best outcome for you as well. It just effectively means that we can really foster that movement where possible, which really is great.

Kimberley:

So, loan terms what do they look like? Maja mentioned a few of the property types earlier today. So that does impact which kind of loan terms will be available to you. So if you were purchasing on a leasehold basis. So if you were renting the property, a goodwill repayment term would be up to a maximum of 15 years, and goodwill, that is the business itself, so that is the business that you're purchasing. So if you were purchasing the freehold, which is the property of the business as well, it depends which bank you move forward with and there'll be options there. So some of them might put the two together, so goodwill and the freehold loan together, and do an average term of 20 years. Or, because it's a tangible asset, it's a physical asset they might actually do the goodwill over 15 years and then do the freehold property over 25. So that just means that it makes it more affordable. Maja mentioned earlier about considering the affordability on that. So the banks want to support with that as well, and it just means that they can extend that and bring the repayments down for you as well.

Kimberley:

Next slide Thank you very much, Maja. She's reading my mind. We've worked with each other long enough now. So the business plan really is key when looking at a practice. And again, this is something which always sounds a bit scary. It's business admin, it's life admin. We don't want to do it, do we? But it's something that we can support you with. So we actually have a template specifically for the business plan and it effectively maps it out with different sections. All you need to do is complete that a sentence or two here and there, and that will build up a position of how we'd like to put that to the banks so that we can make sure that, again, we get the very best outcome for you.

Kimberley:

So the financial history pretty simple with regards to this. So nothing much that you'd need to do here. So it's effectively what will be provided by the broker or by the seller, and this is something that we will put to the banks alongside your personal circumstances, and they'll assess that as one as well. So the personal and financial standing we we've covered that a little bit, but I just wanted to go into that in a bit more detail. So what we do is when we pass the documents to the bank that we request from you, which I'll go into those documents shortly we call it a portfolio, so we will put that portfolio to the banks, and a key consideration within that is how much you'll actually draw from the practice itself.

Kimberley:

So one of the considerations might be what's your plan to work in the practice. Do you plan to work in the practice at all? Are you working in another practice part-time alongside working in the new practice that you're purchasing part-time as well? So what we'd like to show the banks is what you would like to draw from the business. Initially, it might well be that you want to keep as much in the business whilst you're growing it and make your drawings a little bit smaller. But if we do that, we just want to make sure that you are still maintaining the same lifestyle and you're able to cover that. So that is something that the banks will consider. So for that they have what they call an asset liability form. So that maps out the assets that you have property, cars, things like that but then also what your outgoings are. So it just means if you say I want to take X amount from the business, that actually your outgoings support that as well.

Kimberley:

At the end of the day, we want you to take over a practice and thrive. We want to make sure that we're not taking away so the experience. So this is always the challenging piece is the CV. Look, I've worked in a practice for 20 years. I don't have a CV. That's fine, we can support with that no problem. But I think the key thing is is really your managerial experience. So even if you provide us with a paragraph about what that looks like alongside your clinical experience, that is very useful. So I suggest, if you don't have managerial experience within a practice, just get involved in some of those tasks in the practice that you work at the moment and that will build a picture for the bank of what you can do and it will support the application as well.

Kimberley:

And then security. So one of the key pieces of security that people think that a bank wants is the property itself. So your residential property, your home property, but actually that is very, very rarely required, so, a charge being that they would take a second charge on the property, your mortgage provider owns the first charge. So largely what we will look at is if you've got a limited company that might wish to take a debenture on that. But, quite frankly, one of the key bits of security is simply a life cover that is related to the loan itself, a little bit like with your mortgage, and that is one of the key pieces of security that they require. They will map that out in the requirements of the loan as well, and that might be one of your considerations which enables you to help choose which bank you move forward with as well.

Kimberley:

Next slide, please. Which enables you to help choose which bank you move forward with as well. Next slide, please. This is the good stuff, this is the juicy stuff. So what happens when your offer is accepted and you move through to the sales process? The fun stuff legal and regulation considerations, the stuff that we all want to do, and so this will be covered in the due diligence process. So I'm going to list a few different things here about what will be involved in the due diligence process. So I'm going to list a few different things here about what will be involved in that, and then we'll come to that again shortly. So within this sector, we will drive the focus with the solicitors to ensure maximum efficiency as well, to make sure that everyone's on track at each stage.

Kimberley:

Like Maja says, time is one of the key pieces with the transaction, and we want to ensure for you and the seller as well. You know that we can complete as soon as possible. It is within everybody's interest. So, within this period of the legal and regulatory considerations, there are a number of things that we do, so we'll review the contract specific to the practice staffing agreements, due diligence, insurances, relevant certification, compliance and regulation documents, whilst also establishing the practice sale documents. So that might be the sale and purchase agreement, which sets out the conditions and agreement for that sale itself, which is very specific to that sale, and also, within that period we arrange if a lease is applicable. We'll arrange the lease where needed. So I know that this does sound like a lot of organisation, but this is where the broker really provides key value to ensure, again, that both sets of solicitors really are pushing forward and that they cover all of these pieces.

Kimberley:

Up for you to take the rubbish stuff away, and then we can handle that. So it is important to note that, while there is a standard set of due diligence that a lot of the solicitors that are specialists will use, there are nuances depending on the practice that you're purchasing. So that covers most of them, but again, there might be a few additions based on the practice that you're purchasing. So, with regards to maintaining the compliance when you take over a practice, we do actually have compliance partners that we work with. So when you're then a practice owner, they can support with all of the certifications that you need with that, all of the training, etc. So that you can remain compliant as well, and they are absolutely fantastic. We use a number of our practices, use those and swear by them as well. So they are great. And that is me in a nutshell with regard to the regulations great thanks, kim.

Maja:

So thank you, um, I just wanted to cover this. Uh, I wanted to mention a partnership that we have with uh. So this is mark toppopley. He runs a website called Great Boss and he has a program which is for new practice owners. It's a 100-day program. I mean, mark has a lot of experience he used to be the CEO of Bridge to Aid, has lots of experience in that field in terms of leadership and management and this particular program. You can use either the QR code or go to his website and he has a program which is like a 100-day program that basically, as you're about to purchase a practice and embark on that first journey, he will take you through how to set up the cornerstones of your new business so that you can thrive, make you through how to set up the cornerstones of your new business so that you can thrive. So things like he'll focus on actually getting to grips with your financials very early on super important because that will either you know your business will either succeed or fail, based on the numbers Team. So you have acquired a new business. It comes with a team. It's all about change management and making sure that you know that process goes smoothly, that they are on your side and you're all rowing in the same direction. Things like operations you know how do you set up an efficient business so that it can it can grow for the future. Things like marketing so he will work with you for those first hundred days. I think he has all of the costings on there, so it's definitely worth checking out if you're embarking on your first practice.

Maja:

Ownership, and I will just do a really quick recap of the things that we've covered. So I said from the beginning, we have tried to outline as many of the essential considerations while buying a practice and then affording that practice through the practice finance. But it's not a definitive guide. So these are some of the kind of key topics. So, in terms of understanding the buying process, those relevant timescales, the people that are involved in the process, the parties that support you through it, some of those key considerations. And then I think at the start of the presentation we talked about what are the things that you need to know about the market, what are the things you need to know about your requirements and where your future is, so that you are looking for the right types of practice. So test, try, view, you know, make sure that you do all of that groundwork. And then Kimberley has just gone through a whole set of lending requirements and what those lenders look for, the types of documents that you would need to prepare and all the background that you would need to, I suppose, have to be able to progress with that purchase. So some really important things.

Maja:

But what I really wanted to say is that, as a broker, what we do is we hold your hand through the process, so it's free to register as a buyer. It's free to register to kind of receive that advice about practice finance. We have done this lots of times with lots of buyers over many, many years. We have a team that you know do this day in, day out, so we hold your hand throughout the process to make sure that it's really nice and efficient. So this is us, our contact details, some of the qr codes where you can register as a buyer or you can book a final financial consultation.

Maja:

What's really important to mention is that you might have seen a practice somewhere else. You might have seen a practice with another broker. We can still provide the practice finance for it, so it doesn't have to be a practice that you purchase through us. So those two are not connected. They're two services that we provide, so thank you very much. So, James, are there any questions? Is there anything that we should have covered, that we haven't covered? That you've kind of spotted.

Dr James:

You know what? That was really comprehensive, and I'm sure there's, but I do have a few things to add on top.

Dr James:

But I think before we do that, we owe everybody here always definitely both of you a clap up for doing such a third job this evening, and Kimberley as well, yeah, of course, Kimberley, Maja, both of you absolutely clap up and being so comprehensive that tonight that was like literally everything covered that you could really possibly think of, from the top down, and even having it laid out on the screen as well, graphically like that like this happens, and this happens and this happens.

Dr James:

I really enjoyed it, so thank you so much, but yes, anyway, I'm sure I speak on behalf of the audience as well. Guys, now is the opportunity to ask any question that you can think of, whenever it comes to the process of purchasing a practice, or even selling practice as well, right?

Maja:

yeah, right, marlon.

Dr James:

Yeah, both Two sides of the same coin Two sides of the same coin right, and the finance side of things too, which is obviously Kimberley area of expertise. Kimberley, you know what I find really interesting, and I know you said this, but I remember the first time that I came across this I found it interesting or curious. So the way lending works correct me if I'm wrong you borrow for the freehold, as in the actual building, and then you also borrow for the goodwill as well.

Dr James:

So there's actually two separate loans that go on there right and they both have, like, different limits and different interest rates. Would you mind divulging and sharing a little about that?

Kimberley:

Yeah, absolutely right. So I did mention on the presentation that the terms can look different. So you're absolutely right, and it does depend on the bank as well. So again, there is a lot of flexibility there. So we've got some of the banks that put them together. So we've got some banks that will do, say, a 20-year term. The rate will be the same. But then most of the banks will do separate elements for them. So the reason they do that is they tend to do a maximum of 15 years for the goodwill.

Kimberley:

The goodwill will be in the business itself. So if you see a brochure from Henry Schein Dental Practice Sales, for example, we'll show you what the goodwill is on the front of that. So we'll say I don't know, the marketing price might be 500,000. But as you go through to the next page you'll see the property and if the property is also available for purchase, it will say that it's a 250,000 subject to valuation. So put those together, you've got the 500 and the 250, that makes you 750.

Kimberley:

So the banks will say look at the 500,000, we can do, say, 95% lending on that and we'll do a rate of 1.95% above base, let's say. And then they'll look at the property and they'll say actually we can do the full 250,000 on that, which is really common. So that again means that it makes it more affordable for people to look at the property because budgeting-wise they don't necessarily have to put as much of a deposit down but there might be a slightly different rate for that. I mean, rates are really low anyway. So they'll be relatively similar but they will be, as you say, very slightly different because the policies for a property which is tangible versus business will be slightly different. But saying that, a lot of the time, strangely enough you get a lower rate on the goodwill rate because the banks really, really want to want to lend on their dental businesses at the minute interesting.

Dr James:

There we are. Well, thank you for just clearing that one up and adding a little bit more detail. I see that the questions are coming in, yeah, fast in the chat, so let's hit it towards those, shall we? So first question has come in from ayaz. Ayaz sabir, shout out to ayaz this evening. Is there a rough average multiple that solo owner that practices tend to be sold for? I would assume that the multiplier increases if the practice is also associate led? I believe it does, but there's a little bit more nuance to it. It doesn't always mean the business is worth more, right?

Maja:

Yeah. So, Kimberley, do you want me to pick this one up? Yeah, go for it and I can activate it after if you like. Yeah, sure, so it's really. I suppose the way that the practices are valued, the way that we value and majority of the market now values practices, is based on something called EBITDA, which is effectively the operating profit of that practice Earnings before tax.

Kimberley:

Income yeah, and depreciation amortization.

Maja:

So it's EBITDA. And the smaller the practice, I suppose the multiple could be considered the level of desirability of that practice. So you would have for a practice that is quite appropriate. If in the market there are more buyers for that practice, it will tend to attract a higher multiple. So things like location, how easy it is to bring staff in, retain staff kind of marketing, the building that it's in, all of those things will define what the multiple for the practice is.

Maja:

And there are two ways of valuing practices. So one is whether a practice is going to be owned by an owner-occupier. So a single dentist or a dentist who will have maybe one or two associates will run that practice and that will be their main source of income. The other type of valuation for a practice will be the associate-led model, which tends to be for groups and corporates and they will tend to have a different level of. So one will have an assumption. The owner-occupier model will have an assumption that the owner will be taking an income from that practice and that will be treated as basically profit within the practice.

Maja:

In an associate-led model all of the costs are included in terms of servicing that practice. So the multiples on the owner-occupier will tend to be lower. So I would say they are anywhere in the region of two and a half to maybe four and a half and for the corporate-led model they tend to be higher. They tend to be between if you ask the corporates they'll be lower, but in the real world the way that they're valued is between six and let's say six and eight or six and nine.

Maja:

You know, for the single site practices and the way that you can distinguish the two types of practices, anything up to maybe two plus surgeries or three surgeries really is owner-occupier and we will tend to value on both, but it tends to work on owner-occupier and we will tend to value on both, but it tends to work on owner-occupier. Anything three surgeries plus can be can potentially be an associate-led practice where there is no, it's kind of a group practice and they will tend to be valued on that associate-led model. I hope I've answered that question kind of. At least it gives you an idea of how those practices are valued.

Kimberley:

And I think one of the key things there is that we're super transparent with our valuations.

Kimberley:

So it will be very clear what we have calculated the EBITDA to be, and then you can either work it backwards or we can provide you with the multiple that we've used and there are sort of commentary around that as well.

Kimberley:

So we can always let you know and if you're looking at potentially either of those so whether you're looking at maybe owner-occupier or associate-led, depending on what your plans are for the future you might be planning to grow a group, so initially you might be sort of owner-occupier with the view that eventually you'll go to associate-led. So we can always give you an idea of how it works on both of those models as well. Sometimes and mine mentioned the three surgeries it can work on both really well, um, but we'll normally indicate that on the brochure as well if we feel it can work that way, and so we'll be very, very clear on the brochure. But if you have any other questions on it, we'll be very happy to share any commentary around our valuations so just one other thing to sorry, just one other thing to add In terms of the valuation.

Maja:

so our team will use the kind of the sales valuation or the multiples that have been achieved in a particular area. So they will tend to use that as a reference guide. So some of the practices in that area in the past have sold for this or this type of multiple was used. So we tend to use the guide within the market to make sure that we calibrate those valuations correctly nice.

Dr James:

Thank you so much. Yeah, I definitely think we got some good answers there to that question, so thank you to both. Next question is from jono. Jono says hi, great talk, thank you. What are the costs for your services, especially with regards to the brokering financial services slash finding uh lenders? Thank you so much, do you?

Kimberley:

want me to take this one.

Kimberley:

Yeah, yeah, yeah, lovely, and so I'll go with buyers first. I know that you mentioned the finance piece, but I'll cover both off. So we have a general market, which is the. The practices that Maja discussed on the owner occupier fit the general market really well. So that's kind of where our independent buyers will sit. So there's no fee payable for that. So the fee will be paid by the seller. We do have other tiers that maybe match more the corporate models and things like that. So if anybody is interested in the much larger practices, that's certainly something that we can discuss. But really the independent piece sits on the general market, so no fee for that.

Kimberley:

With regards to practice finance and so the, this is really interesting actually. So the lenders will charge what they call an arrangement fee and that's the same if you go directly to the, to the bank. It's between about one and one and a half percent of the loan amount. So they'll charge that, and sometimes they can tap it onto the loan as well, so you don't have to pay that straight off the bat. Um, but what they'll do, they'll provide us with a proportion of that, so you don't pay anything extra at all for using our services. If you go to the bank directly, the fee fee is precisely the same, and we don't want to make this transaction, you know, any more expensive for you. We want to keep it as streamlined as possible, so for that reason, this is effectively a service we want to provide. We don't charge anything on top of that at all, so the fee comes from the bank and it costs absolutely no more than if you go directly, so you don't need to worry about that, and that, again, is very transparent.

Dr James:

So when we provide the initial indicative terms, we'll be very, very clear of what that looks like as well. Cool.

Maja:

Maja, anything to add? Happy.

Dr James:

No, I think Kim has covered that really well. In from bavik. Patel, shout out to bavik this evening for lending. If you have multiple properties but shared with different people, will this make a difference or will they just use half for their affordability calculation?

Kimberley:

yeah, it really is case by case. So if you can give a real good presentation of what that looks like and normally we'll put that on the asset and liability form so that you can add in there that you do own that with other individuals and but I think the key piece with that that I mentioned in the presentation, which hopefully does help you, is that they largely don't actually require a charge of those properties. It is quite rare. I'm not saying it doesn't happen again very case by case, but what that will do is just give them a very good picture of you as an individual. So I've um invested within these properties and that will give such a fantastic look at what you've done with your, with your cash and and what your you know your asset rich, clearly, um, so that can really support with the bank. So they might not actually need to use any of it at all. In fact it's quite unlikely. It just enables them to understand you as an individual. So I hope that helps excellent.

Dr James:

Thanks so much, and you know what. We probably have time for one, two more questions here. We'll see how we fare, shall we? Next question from vidya. Could you please clarify the regulations around non-dentist ownership of dental practices, provided that licensed dentists are employed to deliver care?

Maja:

So, as far as I understand, the regulation currently is that part of the ownership of the practice needs to be somebody who's GDC registered. I can't quite remember what the percentage is of ownership of the practice, but it has to be a GDC registrant. It doesn't have to be a dentist. I would have to check those regulations 100%, but I think that that's kind of currently where they stand. Would you know, James?

Dr James:

I actually, incidentally, do think I know this one, because I remember it came up on a podcast once upon a time. But before I jump in Kimberley, were you going to say something?

Kimberley:

No, no, that's fine, I'll pass to you, James.

Dr James:

This is an interesting one because I remember this coming up and there's a little bit of a quirk here. Ok, so apparently when the GDC wrote the legislation for this they wanted it to be 51% of the directors had to be GDC registered. The shareholders is not part of what they legislated for, apparently it's the directors. So I was told anyway what they intended. I don't quite know how this panned out, but they intended to make it so that it was 51% of the directors. So it was always the majority were GDC registered. But apparently because of how they worded the legislation, it's actually 50% unintentionally, so it can be split between someone who's GDC registered and also not GDC registered. There's a little bit of a quirk there. I remember thinking, oh, that's interesting and I like little factoids like that. So it stuck in my head. But before anybody rushes off and forms partnership with somebody who's not GDC registered, maybe, just maybe, just want to double check yeah, I do remember that little factoid coming up before.

Dr James:

Is that congruent with what you guys heard? Have you come across that?

Dr James:

before yeah yeah, there is a little quirk in there somewhere. Anyway, vidya, we helped as much as we could on that one. Hopefully, uh, hopefully that will uh help in some way, uh, but listen, it's definitely a place to look and you know, you know video, you know who that is a great question, for actually, the exact person I would ask that question to is a dental specialist accountant, because they will know the answer to that 100, because that's what they do all day long cool.

Kimberley:

Anywho, sorry, James, but we do work alongside um specialist accountants, so if anybody needed any details for somebody, we've got someone that we can pass you. Pass you to, of course, do your research with accountants. It's all about um.

Dr James:

You know the person that you connect with as well, but we can certainly provide you with details that might be useful yeah, yeah, fair enough, babbitt is chipped in so you can have 95% ownership non-registered and five directors with one percent, like I guess. Yeah, in that case, as long as the majority of the directors are gdc registered, I believe. Anyway, definitely want to look up, definitely, because if you think about it, like, if you think about the corporates and stuff like that, there's no way that 50 of their shareholders are gdc registered. Like it's just, that's just not going to be a thing. Maybe the directors is how they get around that, basically. But anywho, next question is from jappy. Good evening, jappy. I was looking into a practice whereby the current owner has a license rather than a lease. Okay, okay, this acts as a three-year term whereby the practice owner or the landlord, which is a medical practice, has to inform either party if there are to be changes, slash cessation to the license. Will there be issues to receive the lending? Slash loan in this case yeah.

Kimberley:

So just to give you a bit of a feel for what that might look like, um, it does depend because the, again, there are nuances, nuances within the uk itself, so in particular locations, um. So they tend to lend over the term of the lease. So the property lease. So when you purchase a practice, they'll largely be I don't know say it's six years remaining, but actually, um, when the practice completes, the solicitors will have arranged for you a 15-year lease, so they'll tend to lend over that. And what the banks will also consider is nhs contracts and things like that as well. So you've mentioned licensed and things there. So they will consider that when looking at the lend.

Kimberley:

But, for example, harley Street, sometimes it's often quite different there and there are flexibilities within their policy. So I would always say if there is something that's a little bit quirky, a little bit different, let us have a look at it and let's see what the banks will do. Because, again, there's absolutely no obligation. We'll just request a couple of bits from you. If you can just give us a real overview of what that looks like, we can go to the banks with that query because it can change. So I wouldn't like to say no.

Kimberley:

For example, we've had it with different types of NHS practices and contracts where six months prior it was slightly different. Within their policy, they're always looking at it because they do want to lend and the banks are in real competition with each other at the moment as well, so this really supports buyers. It's great news for buyers, really. So get in touch. I know that our details are on there, so if you're just booking a financial consultation, let's have a little bit chat more about the details and see what we can do for you lovely jovley, and I think we probably have time for one more cue before the final whistle.

Dr James:

So surya has just got in there. Hi, surya. Surya writes hi. How about valuing the equipment with the practice? I guess this comes from the point of view of the finance side of things. Do you do equipment finance as well, Kimberley? Is that what you do? Yeah, we do equipment finance as well.

Kimberley:

Kimberley, is that what you do? Yeah, we do equipment finance. So it does sit with a slightly different department, but it is sort of within the same. But I actually have expertise in that as well. So you've come to the right person there. So, with regards to the equipment finance itself, firstly so, what I'd always suggest is, if you're looking to purchase anything, go to one of the hemishown reps and they'll actually just arrange that for you. So it works a little bit different to practice finance. We actually have vendor partners for that. It's just a different type of lend, which just means you get low rates based on the vendor partnerships that we do have and that will just be linked to the, the practice at the equipment that you're really interested in. So we can certainly do that for you. Um, amaya, more so on the equipment valuation piece, did you want to cover that?

Maja:

yeah, yeah so. So what I was going to say is that there is usually I mean, equipment is not necessarily given uh a huge kind of proportion of the value in terms of the transition, for once the practice is sold, so there's a fixed amount that's allocated to each surgery and I think that's generally how the valuers do that, and I can't remember exactly what the amount is maybe 5,000 pounds per surgery or something along those lines and if there is any specialist equipment so if there's a CT scanner or if there's some really high value microscope or something like that that is of significant value, that will be named in the sale. But majority of the value that comes through the actual sale itself is in the goodwill. So it's in the patients, then, and the flow of those patients coming through the practice.

People on this episode

Head Shot

Dr. James Martin

Host