The process of buying or selling a dental practice is a famously complicated one
The process of buying or selling a dental practice is a famously complicated one but it does not need to be so, if you use professional advisers. This is not the time to experiment and save on the advice as it may cost you much more in time and money in the long run.
Care Quality Commission (CQC) compliance, financial stress-testing, the NHS contract transfer process, tax planning, due diligence, profit and loss surveys, business plans, and finance applications are a few of the many processes that may be involved depending on if you are a buyer or a seller, and your circumstances.
The process involves many different parties and typically takes about six to nine months to complete. The dental practice market is also unique, with its own set of rules and regulatory bodies, which both buyers and sellers must satisfy.
Given it’s complicated and specialist in nature, buyers and sellers should ensure they use specialist dental financial and legal professionals for every aspect, including specialist dental accountants, solicitors, and business advisors.
Dental practice brokers
A specialist dental practice broker is the experienced facilitator keeping all the parties moving towards the same goal. Although they are instructed by the seller, they also offer advice and assistance to the buyer to keep the process moving. They can put the buyer in contact with dental financial advisers to help them access the best healthcare lenders and identify those most likely to offer good lending terms to dental practice buyers at the time.
Dental practice brokers work closely with solicitors, accountants, CQC and lenders to ensure the transaction proceeds in a timely manner. Their expertise has been built over many years and they facilitate the negotiation between the buyer and the seller.
Practice owners and prospective buyers should make sure they use a specialist dental accountant who is registered with the National Association of Specialist Dental Accountants and Lawyers (NASDAL). Even before a buyer has identified a practice to buy, the accountant can get an idea of the buyer’s financial circumstances and use sector knowledge to advise them on the type of practice that is within their affordability.
Once the buyer has identified a practice, the accountant can help with producing budgets and forecasts, and perform a stress test – which projects a worst-case scenario and tests the strength of the business plan. Apart from accountants, there are now companies that will act as a hired partner in your business, helping the buyer set the business up in the right way ensuring the income, costs, team and goals are aligned. An example of a company like that is Spot On Business Planning, specialising in the dental sector.
Once the sale is agreed, and during the due diligence process, the specialist accountant or financial advisor can check the financial due diligence aspects alongside the solicitor and review the all-important sales and purchase agreement (SPA), which contains the financial details of the transaction. In addition, the accountant will advise on any relevant tax matters, including any tax liabilities resulting out of the sale. This is particularly important should the individual need to decide about selling shares or assets and tax planning as part of the purchase.
Specialist dental solicitors are experienced in all the intricacies of the dental practice market and know what is required by third party bodies, such as the CQC and the NHS local area team if the practice has an NHS contract. They are also key in helping clients negotiate the SPA, as they have a sound understanding of buyer requirements and what may be acceptable as part of a transaction.
Timing, and keeping the process moving, is crucial in a practice sale as. A good example is if a buyer misses the stated deadline on the CQC application for sale completion, they have to start the entire process again adding a further three months onto the transaction. Dental solicitors are also familiar with dental language and know the right questions to ask when performing due diligence on behalf of the buyer.
A specialist wealth manager can advise on whether it’s a good time to sell from a financial point of view, and what level of valuation the client should look to achieve.
A wealth manager analyses the entire financial circumstances of the seller, including the practice property, loans and pensions. They will advise the client on the best ‘lifetime plan’, which includes analysis of what the post-sale plans look like in order to achieve the desired lifestyle.
As part of this analysis wealth advisors look into specialist areas such as when would be the best time to take out the NHS pension. Wealth managers have an understanding, not only of the dental market, but also the entire financial market – and will advise on tax implications of the sale. In essence, they work out how to the make the seller’s money work as hard as possible.
We recommend our customers use specialists because dental practice brokers, accountants, solicitors and wealth managers deal with dental practice sales every day, and the combined expertise can ensure the sale goes through in a timely manner and to everyone’s benefit.