Have you found your ideal practice? Viewed it, loved it and now ready to take the next step? Whether you are ready to go or still searching for a dental practice to buy, you should have a professional team behind you. PFM Dental are the one-stop-shop for you. You can choose to use of all our buying a dental practice services, or pick the ones most suitable for you.
Dental practice valuation and financial review
You may have found a practice in the desired location, potentially with the ideal mix of NHS and/or private fee income. However how do you know that this practice makes financial sense for you?
PFM Dental have launched a valuation assessment service in which we assist buyers in reviewing the practice financials. We understand that as a buyer you may not want to arrange a formal valuation where the valuer visits the practice. This is often the case if: first you haven’t yet placed an offer, or second you want reassurance that your offer is at the right level. The service allows us to review the practice based on the available financial information (usually a prospectus and the latest set of accounts).
In addition to a guide on what the practice is worth we will also raise any necessary questions and identify potential errors (trust me these happen more than you would think). For example, in one of our latest reviews, we found that an agent.
- Understated the staffing costs by £45,000
- Incorrectly accounted for hygienist costs
- Reduced certain costs unjustifiably, such as computer expenses and repairs and renewals
Consequently, the above incorrectly enhanced the profitability of the target practice and because dental practice values are based on a multiple of this profit, the stated value was not justified. In most cases as above this would either result in the new owner discovering that the profit is nowhere close to what was promised or result in an aborted purchase part way through the legal process and after considerable cost had been incurred.
Further to this we will consider how the practice works under your ownership. For example, the practice may be being sold as an ‘associate led’ practice but you are looking to work in the practice. Or the principal is undertaking 10,000 UDAs, but you will be looking to do 7,000 UDAs. We can model the financial details around how you will work the practice to ensure that the practice works for you.
PFM Dental undertake this ‘buyers review’ for a fixed fee of £250 plus VAT (per practice review).
Arranging competitive dental practice finance
You have reviewed the practice (with or without our assistance), have placed your offer and now need to finance the practice. You want to ensure that you get the best rates and terms. This is where our knowledge and experience once again excels. We will gather the information on the practice and your personal situation (assets/liabilities, incomes/expenditures, deposit levels, other security) and put together a lending report of how the practice will work under your ownership.
This will be sent and discussed with a number of specialist healthcare banks, and then we will collect multiple offers of interest rates, charges and terms to discuss with you so that you can pick which suits you best.
We will guide you through any bank loan preconditions such as the requirement to have certain insurances in place. Often these include; life cover, suitable income protection, surgery insurance and practice overheads (locum) insurance. Our independent financial advisers we can search the whole market and put all of these in place for you as per the bank’s requirements.
Our legal service for your dental practice purchase
The next step is to instruct solicitors and not just any solicitor. You need someone who undertakes dental practice sales and purchases on a regular basis so that they understand fully the due diligence enquiries and protect you appropriately in the sale purchase agreement (SPA).
Your solicitor will start by issuing a ‘due diligence’ questionnaire to the vendor’s solicitor. This will ask everything you would want to know about the practice and more. Our experts will review the due diligence and offer the necessary guidance. Our dental solicitors will also prepare a dental practice sale purchase agreement covering all aspects of the purchase including any ‘warranties’ which you might expect the seller to agree to.
Warranties are legally binding ‘promises’ of information about the target dental practice. They offer financial protections should you find that these are not correct after the purchase has completed.
Using our dental accountants for your practice purchase
Most dental practice purchasers recognise the importance of a specialist dental accountant. This is someone who understands, for example how NHS pension is allocated to associates and dental practice principals. It also helps to have an accountant who help you proactively tax plan. With over 850 dental accountancy clients PFM Dental are now one of the UKs largest dental accountants.
For most it would also be useful to have PFM Dental’s accountants involved from outset. If you are buying a limited company then you are taking on the past (financial and accounting) liabilities of the dental practice. As such it is vital that your accountant has the dental specific knowledge to review this effectively.
If you are buying a private dental practice, then it may be advantageous to raise finance through a limited company. This way your limited company can repay the business loan and you avoid personal income tax. Having PFM Dental’s specialist accountants in place at the start of the purchase will ensure that you buy the practice in the ‘best’ way.
Banks can often ask for projections based on the practice working under your ownership. To demonstrate to the bank that the loan is ‘serviceable’ these need to take account of loan repayments and tax liabilities. In my view this should not be just seen as an exercise to satisfy then banks but one of the most important parts in deciding whether you should purchase the practice.
How can PFM assist your purchase?
- Valuation of practice
- Arrange finance
- Arrange insurances for finance
- Undertake legal work
- Undertake accountancy work
To find out more about how our services can help you, visit PFM Dental today.