Owning a dental practice is, for many dentists, the ultimate career aspiration. Practice ownership can undoubtedly be extremely rewarding both financially and in terms of personal and professional development. The acquisition of a dental practice, however, can be complex, and requires detailed and careful planning and consideration.
From a financial planning perspective, there are a number of aspects to consider. If you are buying an established dental practice with one or more other partners, or joining an existing partnership, what should you consider?
I would say in the first instance it’s important to undertake market research on the location, premises, equipment, practice value, the existing dental team, the patient base and financial performance, and then consider if all of these elements fit with your expectations, plans and aspirations for the future.
If this is the case, the next step would be to gain a detailed understanding of the structure of the business and the terms under which you are buying, and to then review these with a legal professional.
Business agreements
Ensuring that the appropriate agreements are in place is very important, whether this be a partnership or a shareholder. That agreements are underpinned by the appropriate protection is a crucial aspect of business protection. The business agreement should detail how the business ownership would be handled if any of the partners or directors wished to retire (as it is unlikely that all partners/ directors would retire at the same time) or were to become seriously ill or pass away. The agreement should not only clearly stipulate what would happen to this partner/director’s share of the business should the aforementioned occur, but also how this would happen in practice.
Which leads us to the next point, and this is ensuring that the legal agreements are underpinned by the appropriate business insurance. Having this in place makes sure that monies would be available to meet the terms of the business agreements and that the profits, continuity and succession of the business are protected.
Reviewing practices
Anyone buying a dental practice or a share within an established practice, should carefully review the existing practices within the business and understand their liabilities as an owner. This should include gaining a thorough understanding of the contracts in place for any contractors with self-employed status, for example associate dentists, hygienists, therapists and so forth, and how these are handled within the business. If, for example, contractor sickness is covered within the practice by others, this is generally an indication of a red flag as it could compromise the self-employed status of the individual and could lead to the business being liable for costs of the contractor such as maternity/paternity pay, backdated unpaid holiday pay, pension contributions and up to six years of employers national insurance back pay. Contractors should, in line with the terms and conditions of their contracts, be able to demonstrate their financial ability to provide a locum either via their own means or via a locum insurance policy.
It is important to understand your liabilities as the new practice owner, including any outstanding debts or legal issues associated with the practice and to ensure that any commercial lending is fully protected for all eventualities to minimise the liability to the business.
Conclusion
I would encourage anyone considering buying a dental practice to start with the end in mind – this means having a clear idea of what you would like your exit strategy to be. If for example this is selling your share in the future and retaining the profits to fund your retirement, ensure that this is reflected in the business agreements and take the time to carefully review the details with a dental specialist financial planner or adviser to understand how best to achieve this over time, whilst taking advantage of the tax efficiencies and opportunities for growth, along the way. Specialist support can help you to understand your financial position and ensure that your business, retirement plans and your legacy are protected.
For more information visit https://www.wesleyan.co.uk/financial-advice/dentists