Dean Barker explains why selling now could be the best option.
We all know that times change, and the dental market is a prime example of this. The last two years have seen unprecedented challenges for dental professionals, with the Covid-19 pandemic creating added pressure. With the many changes to how dentists are able to operate their businesses, these last couple of years will no doubt be remembered as some of the most challenging in the history of the profession.
Although lockdowns are now thankfully over, dentists are still subject to a significantly higher amount of regulations than ever before – from the requirements for more stringent hygiene protocols and restrictions on the number of patients that can be seen on a daily basis. Such regulations are likely to continue for the foreseeable future.
Increased costs and an uncertain future
The cost burden of these new regulations only adds to the already high cost of running a dental practice. Dentists have had to adopt new technologies, update their equipment and hire additional staff to meet these demands and obligations. In addition to these challenges comes a lot of uncertainty about the future. This has led many dentists to reconsider their business model and question whether they can continue providing high[1]quality dental care at a sustainable profit.
The uncertainty and change have prompted some dentists to consider their options and explore whether now might be a good time to sell their dental practice. If you are feeling overwhelmed by these changes and unsure about what the future may hold for you and your dental career, selling your dental practice may be a good option for you. When done correctly and at the right time, it can provide you with the financial security you need to 3 The Dentist March 2022 Practice Management retire or transition into another career.
Is now the right time to sell?
When it comes to selling a dental practice, timing is everything. Sell too early, and you may not get the best return on your investment – sell too late, and you may miss out on the current high demand. Selling your dental practice is a big decision. It’s typically not something that dentists think about often, but if it is something you have been considering, there are many reasons why now may be the optimum time to do so. Here are six reasons why selling your dental practice now could be the best decision you ever make.
Goodwill values are at an all-time high
One of the main reasons why now could be a great time to sell your dental practice is because goodwill values are at an all-time high. This increased demand for private, mixed and NHS practices is due to demand exceeding supply. Sellers can capitalise on this high level of goodwill by commanding a higher price and being able to negotiate a better deal.
The market multiples being paid have never been higher
Dental practice valuations are calculated by using financials, practice information, operation information, patient numbers and types, plus any assets that are included as part of the sale. Industry multiples are then applied to these figures to establish a sale price. The dental practice market is red hot right now with high multiples being paid for practices. Sellers can therefore be confident that they are receiving a maximum price for their hard work and investment in the business. Reports from various industry sources, all point to a trend of increasing prices being paid for NHS, mixed and private dental practices.
Get out now while it’s a seller’s market
The current market conditions make it a seller’s market, which means you can be assured of achieving a good price for your practice. Sellers are in the driver’s seat and can command a higher price than they could have even a year ago. The longer you wait, the bigger the risk that market conditions could change and reduce your potential selling price.
More buyers registered than ever before
Over the past year, more buyers registered to acquire dental practices than ever. Demand is significantly higher than supply in most areas. Remember also; it is not only private buyers interested in purchasing dental practices but also corporate dental groups whose main aim is growth by acquisition. Sellers looking to exit their practice for more flexibility or retirement can take advantage of this heightened interest and maximise their selling price.
NHS contract is posing more pressure on dental practices
To add to the burden of the last two years and all its effects, dentists in England have now to deal with an NHS contract which has been described by many as onerous. The key areas of concern are that practices will be penalised if they fail to meet the newly set targets of 85 per cent of pre-Covid activity levels targets. For many smaller practices, this is simply unachievable.
In a recent survey commissioned by the BDA, more than 40 per cent of NHS dentists have signalled an intention to pursue early retirement or a career change due to the current pressures imposed on dental practices by the NHS contract.
If you are having the best year in revenue, it means you will have the best valuation
If your dental practice is doing well and you have seen an increase in patients, your practice is likely becoming more valuable. Sellers who can demonstrate a pattern of growth and increasing revenues are typically rewarded with a higher valuation. So, if your revenue this year is the best it has ever been, you can be sure that your dental practice is worth more now than ever before.
If your revenue is not at its peak; but is growing steadily and in line with what other similar dental practices are achieving, there should be no worry about any impact on value or saleability either.