Business in Focus - Summer 2021

BUSINESS

IN FOCUS EDITION 05 | SUMMER 2021

It’s in our nature to grow your business.

THE MEDIESTATES MID-YEAR REVIEW FINANCE

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THE PROPERTY MARKET

VALUATIONS

mediholdings.co.uk 01332 609318 contact@mediholdings.co.uk

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ADVICE

A YEAR TO REFLECT ON •

RECRUITMENT

UPDATE

A year to reflect on

By Maja Thompson Welcome to the latest edition of Business in Focus.

Business in Focus was established just over a year ago so that it could provide insights about the market we operate in. Interestingly, at its inception no one realised that the upcoming year would be as turbulent as it has been. Despite the turbulence, we continued to record, analyse, and share data collected for the benefit of our clients so the decisions they make can be based on up-to-date market knowledge and development.

In this overview, I will summarise the changes that have happened over that time and emphasize some of the current trends in the three areas we operate as a unit.

Dental practice brokerage While the onset of the pandemic dampened practice completions, it did not dampen the appetite for dental practice acquisition and consolidation of the market. Dental practices and dentistry are sensed as a ‘sound investment’, and a ‘safe haven’ for investors. While the volume of transactions, practices bought or sold reduced in 2020, it has certainly picked up speed again in 2021. Propped up by private equity funding and spooked by potential changes in capital gains tax (taxation you pay when you sell an asset), certain parts of the market are as buoyant as they have ever been. This market bouyance can also be seen from the annual press conference held by The National Association of Specialist Dental Accountants and Lawyers (NASDAL) (accessible at www.nasdal.org.uk). NASDAL act for approximately 25% of dental practices in the UK. There have been some changes as a result of the way the pandemic affected the dental sector and the way the financial support for dental practices was handled by the government. Some of the key changes have been: • An upsurge in new practice set ups – Many associates were disillusioned by their position as the pandemic unfolded so they decided to take matters into their own hands.

• NHS targets – While the NHS targets remain below 100%, there is very little incentive to sell a dental practice holding an NHS contract.

• With the growth of the ‘super practice’* tax planning has become an important consideration.

Recruitment This has been a tough year for recruitment, well job market, and the sector in general. Unemployment rates have risen by 1.2% during 2020 and in April 2021 the national unemployment rate was at 4.9% according to the Office for National Statistics (ONS). A large rise in unemployment rates was largely mitigated by the substantial level of Government support through the furlough scheme and in the dental sector by the reduction in NHS targets.

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What has been noticed is that with the reduction of NHS work carried out, this naturally stimulated the level of private work undertaken leading to a need for additional dental hours to fulfill the demand. Larger private practices, multi-site operators and corporates adapted to the changing landscape by spreading out appointments, expanding opening hours and increasing the number of dental hours offered. This has led to a reduction in recruitment requirements within the NHS sector but an increase in recruitment requirements in the private sector. The key feature of this increase in dental recruitment in the private sector is that the roles are very rarely full time roles but a combination of hours leading to 2-3 days work. In addition, in some areas where associate competition is high, rates offered are higher for the first 3-6 months, with a reassessment after that period.

There also seems to be a shortage of Dental Nurses as some are still on furlough with NHS practices but there is not enough nurses to fill the expansion of hours within private dental practices. Dental Nurse pay rates are low, in some cases just above the living wage, and are leading some Dental Nurses to leave the profession, especially following the time of reflection that most of us have had.

Raising finance for dental practice purchase or to re-finance loans Finance rates are at an all-time low when combined with a very low Bank of England base rate (BEBR). As a comparison, in 2019 BEBR rate was 0.75% with average bank lending rates around 2.8% +BEBR. In 2021 BEBR is at 0.1% with average lending around 3% + BEBR, so as a comparison, total average rate in 2019 was 3.55% while it is 3.1% in 2021.

In 2021, lending rate offers tend to be around 2.4 – 3.5% + BEBR for amounts over £250k however for amounts lower than £250k they can be as high as 5%. The positive in 2021, is that banks are much keener to tailor the lending offers to the individual’s circumstances, much more than they were before occasionally stepping away from their own lending policy to secure the deals. *Super practice – practices with turnover higher than £5M

If you would like to find out more about any of the items mentioned in this article please contact MediHoldings on: 01332 609318 or directly on maja.thompson@mediholdings.co.uk

MARKET INSIGHTS

The Mediestates mid-year review

By Lorraine Hunt The year so far has shown plenty of positive trends in the dental market. Lorraine Hunt, Practice Transitions Supervisor, reveals why the future looks so promising for both buyers and sellers of dental practices.

The activity, we at Henry Schein MediEstates have seen on the dental market so far in 2021 demonstrates the sheer determination of our clients to return to normality. As an end to COVID restrictions gradually becomes a reality, this reaction looks set to continue.

When we compare this year’s practice valuation and sales activity to those pre-COVID, there seems little doubt the pandemic has influenced dental practitioners across the UK into taking control of their careers. Whether venturing into practice ownership or deciding to exit the business, practitioners are intent on creating a positive future for themselves.

Buyer confidence In excess of 30% more new buyer customers are registering with MediEstates every month compared to 2019. Our three buying tiers – Regular, Priority and Premier – have all gained members due to increasing confidence in the market as restrictions ease. Our buyer customers range from entrepreneurial individuals to well-established corporations, meaning sellers of independent practices up to the largest groups can benefit from the growing appeal of practice ownership.

Increasing confidence translates into positive action as viewings, offers and agreed sales have all risen. The number of viewings has increased by “double digits” compared to this time last year which might not be too surprising considering the situation in the first half of 2020. However, the increase has contributed to total offers for dental practices exceeding £200m so far in 2021. This value growth not only surpasses 2020 but also improves on 2019. Similarly, compared to the same period in 2019 and 2020, practice sales agreed subject to contract are over four times higher than last year’s figures and 30% higher than those in 2019, while completed sales have maintained absolute consistency throughout. The attraction of strong lending potential from keen investors in dental offices has significantly contributed to this increased activity.

If the expectation for the first half of 2021 was cautiousness, our figures conversely reveal an encouraging sense of optimism and determination from buyers ready to thrive post-lockdown.

Seller opportunities Practice sellers are also acting now and taking important decisions they were contemplating throughout lockdown. The higher numbers of valuations we saw in 2019 and 2020 reflect a period of consideration. Since January 2021, sellers who have used this time for reflection, have proceeded to move away from practice ownership. For some, the pandemic has acted as a catalyst to focus more on dentistry or preferring to exit the industry entirely.

On the other hand, the increase of new buyers registering with MediEstates signifies a great time for budding owners embarking on their dental practice ownership journey and for current practice owners increasing their exit options.

Countrywide growth

Opportunities are not limited to certain areas within the UK or even to practice type. Offers received on practices cover 34 counties across the UK and the Republic of Ireland, and new clients registering with MediEstates span the same wide area. Our numbers also indicate an almost level balance between sales of leasehold and freehold practices, and between NHS, private and mixed practices. Sale prices ranging from £225,000 to £21.5m, with practice turnover ranging from £71,000 to £8m, give a good indication of the variety of dental businesses sold.

Market activity in the first half of 2021 has rebounded very well.

Adapting to an uncertain future has left practitioners determined to regain control by creating opportunities for themselves. As restrictions ease and excellent lending potential continues, 2021 marks a year for positive action within the dental market.

For more information and to find out more about our buying tiers, please visit our website at : 01332 609318 mediestates.co.uk

About Lorraine

Lorraine Hunt has more than 18 years’ experience within the Dental Sector. She joined MediEstates in 2003 and currently works as the company’s Practice Transitions Supervisor, working closely with the Internal Estates Transitions team and the Practice Valuation Managers. Lorraine’s expertise ensures buyers and sellers are provided with the wraparound care they need throughout their journeys with MediEstates.

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A review on 2020

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MARKET INSIGHTS

The property market

By Gavin Burrows

The road ahead - Mortgage Adviser, Gavin Burrows account of personal mortgage approvals Who has completed on the acquisition of these practices in Q1 of 2021?

April 2020 - Lockdown (part1) To say we’ve been through some uncertain times in the last year would be an understatement. The lockdown has affected everyone differently but from our perspective as mortgage brokers it has been quite a ride.

Click here to view the video There is often a preconception that if you are self-employed, getting a mortgage will be unobtainable. However, so long as you have all the relevant documents to support the declared income, getting a mortgage if you’re self-employed shouldn’t be a huge problem. Ultimately it is about proving that the income is sustainable.

Every lender will assess a mortgage in their own way, and they all have varying criteria whether it be income, age of applicant, property type, adverse credit etc. Some lenders want to see 3 years self-employed accounts. However, we have access to lenders that are happy to consider a mortgage application from someone with only 1 year’s accounts. Some will underwrite the case based entirely on the applicant’s personal income, which for sole traders is simply the annual net profit. Whereas for Limited company directors, it would typically be a combination of salary and dividends. This can be evidenced with Tax computations (SA302) and tax overviews, whilst some lenders prefer to request a reference from the applicant’s accountant to verify self-employed income.

We also have access to lenders that can assess a mortgage application based on the directors share of the company’s profit, rather than the salary and dividends drawn. This can make a huge difference for limited company directors that have a very profitable business. There are normally a lot more options than you may realise.

My company, Fifty Nine Financial, are specialist mortgage brokers. We help people who are self-employed and people in other complex situations obtain mortgages. We’ve helped people obtain mortgages when they were convinced it wouldn’t be possible. It’s what we do. Pre March 2020, if we had an enquiry from a self-employed applicant so long as they could produce the documents, I was always confident we could help.

Initially the housing market ground to a halt. Mortgage lenders slashed the maximum ‘Loan to Value’ that you could get on a new mortgage. Some lenders going as low as 60% LTV as the maximum for new applications. First time buyers were completely derailed. Some specialist lenders even stopped lending all together for around 6 months.

One area of mortgages that was affected significantly was selfemployed mortgages. With all the uncertainty around lockdown, underwriters were extremely cautious around the sustainability of any income, especially that of a self-employed applicant.

With some lenders shutting the doors completely to the selfemployed.

As mortgage providers started to re-introduce the higher LTV for mortgages, some lenders still maintained the restrictions for self-employed applicants. Underwriters were requiring more evidence around self-employed income, and if sole traders had taken any COVID grants, that would create other problems around affordability. Several mortgage companies were completely declining applications where the clients had taken any assistance. Although this has generally improved across the board, there are still lenders now that will decline a case if the applicant has taken any grant support and will require much more in terms of supporting document for any self-employed application along with a ‘COVID Impact questionnaire’.

It has been a paradox of scenarios for my self-employed clients.

Tradesmen reporting that they have never being busier and having record years. Whilst on the flip side many of my clients in the service industry have been devastated. Ultimately it is still our job to find people a mortgage based on their own circumstances.

The good news is there are now plenty of options again for self-employed mortgages. Although some lenders still have COVID restrictions in place, we have had great success with self-employed lately. Recently, I had a mortgage offer agreed the same day we submitted the application for a self-employed client that was looking to borrow some extra money on their residential mortgage to pay off a bridging loan. From our side it is about finding the most appropriate mortgage deal for the client’s circumstances and a big part of that is knowing the lenders who are most likely to not only approve the application but get the offer out quickly.

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MARKET INSIGHTS

5 reasons why using a specialist recruitment agency could be cost effective

By Phillip Barker In the event recruitment is not an ongoing process (eg, for small practices), in-house recruitment is likely to be an additional task and potentially a burden to practice managers and their core job. For small groups of practices, using a recruitment agency can be the best way to access pools of dental professionals, including those not actively seeking new employment. So, here are the key reasons why you should use a recruitment agency.

Knowledge of the market The best recruiters will have their finger on the pulse regarding the dental industry, and can give the employing managers an insight in to what is happening. They should know the available talent, where they are and how to reach out to them; salary rates; career expectations; available skill-sets; and current employment complexities.

If other practices are struggling to find the same people as you they should be able to advise on alternative solutions. The best will act as partners and an extension to the current practice team, and should be your eyes and ears in the industry.

Talent reach

Some candidates are very hard to find. They may be passive or they may be particular with the position they require. If they aren’t responding to job advertisements, don’t see themselves as part of your ‘talent pool’ and are too busy to search full time, then the chances are that they may have relationships with trusted specialist recruiters within the dental industry.

Even if they aren’t currently active, there’s a strong chance that a good agency will know who they are and how to reach them.

Agencies have many networks – each consultant, candidate, client or partner has the potential to leverage their networks to help connect you to people with a range of skills and experiences, many of who would be off the radar of an in-house team or employing manager using traditional media/online methods.

Candidates, not applicants

A lot of vacancies are aimed at attracting applicants, whether they are responding to an advert, applying on spec, or through your website. A lot of these people may not be good matches for the role, hence a lot of time will be invested in filtering, assessing, matching and communicating with them.

When we talk of a bad candidate experience, it’s normally an applicant experience that we are referring to. Time, resource and poor recruitment teams may not be able to run a thorough matching process. Using a proven industry-specific agency should mean that you see only candidates who have been preselected to match all the criteria that you are looking for and who are worthy of consideration and interview.

Time and money

Money and resources are two of the biggest concerns for most practices, but when budgets tighten recruitment agencies can prove particularly valuable – searching for candidates on your own uses valuable time and resources that could be better spent; but an agency can filter through the applicants for you, meaning you’ll only have to interview the very best.

Nothing to lose

Ultimately, you have nothing to lose. There is no initial outlay, no marketing costs to absorb, and the best agencies offer a rebate so, if the candidate who is placed isn’t the right fit, you’re given a full/partial refund of the fee paid, depending on how long they have been in employment or in some cases a free replacement can be sourced very quickly. This gives peace of mind that there has been no waste of expenditure during the process with a fee only due on a successful placement.

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INVESTMENT

Find your dream practice We’ve done the searching for you

Practice for sale

ID 57130 West Midlands

ID 59003 Carmarthenshire

Mixed

Mixed

•• NHS in excess of £195.000, private capitation scheme income •• Sought after affluent West Midlands location •• Situated on main retail parade •• Year on year growth •• Two well equipped surgeries including recent upgrade investment •• Fully computerised using SOE •• •• •• •• •• ••

52.4% profit margin Town center location Good split of NHS, Private and capitation income Large property with ample room for expansion internally Newly fitted decontamination and treatment room Lots of parking and easy access to local amenities and transports links

•• •• •• ••

Freehold or Leasehold Surgeries: 3 Turnover 2020: £359,477 Profit: £191,359

£474,576

•• •• •• ••

Tenure: Leasehold Surgeries: 2 Turnover 2020: £341,951 Profit: £170,743

£615,505

ID 59600 Tunbridge Wells Fully Private •• Long and well established practice for over 30 years •• Fully computerised with SOE software •• Further potential to increase practice revenue •• Modern practice with state of the art equipment •• Further room for expansion within the practice

•• High end practice not to be missed!

•• •• •• ••

Tenure: Leasehold Surgeries: 3 Turnover 2020: £673,777 Profit: £282,825

£1,300,000

Practice success stories ID 58040 London

ID 52598 Cheshire

Fully Private

Mixed

D L

O S

•• East London high street location •• Five fully operational surgeries with scope to expand further •• Associate lead •• Predominately general dentist with some cosmetic treatments offered •• Capitation scheme available to patients

•• Modern and digitalised practice •• •• •• ••

Tenure: Leasehold Surgeries: 5 Turnover 2020: £817,536 Profit: £290,135

£1,240,000

•• Modern state of the art practice •• Thriving business with extra chair time available •• Affluent area •• Ideally located being just a short distance from the town •• Situated on a busy main road •• Free Parking

•• •• •• ••

Tenure: Freehold Surgeries: 3 Turnover 2020: £482,541 Profit: £189,319

£625,000

ID 50880 Bristol, Avon

Predominantly NHS practice. Freehold Sale •• Income derived from NHS contract and has potential for private •• Well established and set up from squat •• Room to develop and expand the property •• Plenty of local development •• Located near historic cities •• Parking outside the practice

•• Good passing trade and walk in patients •• •• •• ••

Tenure: Freehold Surgeries: 2 Turnover 2020: £170,000 Profit: £62,000

£120,000 7

MARKET INSIGHTS

Business Insider Dentally

By Shelley Withington People use cloud technology in their day to day lives now more than ever, often without realising it. From video calls with family and friends, streaming entertainment or for online video consultations with dentists and doctors alike. The need for cloud-based practice management has never been more prevalent. Whether you’re simply trying to streamline your practice workflows or in need of an agile and flexible solution that allows you to respond to lifestyle changes like the turbulent year that COVID-19 presented. Cloud-based practice management provides dental practitioners with software that is as flexible as they are.

The recent State of Dentistry Report 2021 showed that more than 60% of practices would be able to treat fewer than 25% of the number of patients they would see pre-COVID. This demonstrates how important it is that dental practices are shifting towards more agile forms of practice management. Ones that allow for themselves and their team to work remotely, securely and with fewer costs involved.

With this in mind let’s take a look at some of the key reasons why making the switch to cloud-based practice management and leveraging the power of technology can help you build a better practice.

No bulky, costly servers involved.

One of the key benefits of switching to cloud-based practice management is the fact that there is no need for a space-consuming, money absorbing server system. Cloud software simply runs off of the internet. All you need is an internet browser and a connection, it will even run on 4G. Software updates within the cloud are also effortless and automatically completed.

Work remotely, any time.

With the lack of hardware required to run cloud-based practice management software, the system provides you and your team with flexibility not offered by alternative hardware-based systems. You can work remotely by securely logging into your cloud-based software - giving you a better work-life balance. Say goodbye to finishing up long patient notes at the end of the day and take them home with you to finish in your own time, after dinner with the children or a visit to the gym.

Integrate and organise Dental practitioners already have a long list of things to do and cloud technology assists you in these tasks rather than hindering you. API within cloud-based practice management systems means that you can securely integrate your PMS with several third-party solutions so that you have an end to end clinical and practice workflow in place that will not only save you time but money too.

Build a practice as flexible as you The flexibility that cloud-based practice management software can provide you is undeniable. From working remotely, contactless patient journeys, managing admin, automating patient communications and so much more you can be sure that you’re saving time for the important staff - patient care with the cloud.

If you can see how switching to the cloud would help to streamline your practice, save you time, money and provide you with the ability to build the business you want, why not find out a little more about the effortless switch with the UK’s best cloud-based provider - Dentally at hello@dentally.co

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FINANCE

Growth & Expansion – New spaces

By Kimberley Parker New opportunities

growing your business without the pressure on repayment. The

and consider business plans for significant growth. What’s more, many have implemented those plans and are already experiencing successes.

basis; utilising our service will ensure that you have access to our knowledge in endorsing your application.

This past 18 months has allowed business owners to step back, breathe

This is amplified by the world that we find ourselves in where individuals

have saved their cash and are looking to spend in the Dental sector. For this reason, it is also an exciting time for those who are in the early

stages of considering a plan. We speak to groups (both small and large) on a regular basis who are striving to expand into new spaces within this sector of growth.

As we know, growth in a particular area often has its limits. What if we

were able to support you by facilitating growth into a new space?

Expansion into Republic of Ireland (ROI) allows for great opportunity in an energizing market, allowing the group to continue with its growth

trajectory. Likewise, newcomers to the market would benefit from exploring these wonderful prospects.

The market

The belief in the ROI market resonates in the banks policies whereby

lending is available on an unsecured basis for opportunities that fit this type of lending. With freehold sales, the banks will also consider funding for the property. For the right fit, some banks may lend up to 100% of the purchase price as funding is assessed based on maximum affordability for the purchase. We would suggest considering a deposit of 20-30% as this fits most polices. However, based on the aforementioned,

assessment on start up projects will be considered on a case-by-case

Our support

MediEstates can provide sales particulars, to your specification for practices that they are currently marketing in ROI for your perusal. We at Henry Schein Financial Services are delighted to also bring our uniquely personalised service to those looking to purchase practices in ROI, sourcing the most competitive rates and terms available. This is a particularly strong market for which we work with the key Irish banks that have an appetite to lend in the healthcare sector.

Our approach is based on consultation with customers and lenders throughout the process to provide a bespoke service. As with purchases that we facilitate in the UK, we undertake a fact-finding task to compile a portfolio for presentation to our panel of lenders. This will include getting to know you, your experience and business goals and expectations. Through our expertise, we propose the opportunity to the banks in the most positive light to secure the very best outcome.

Moving forward to greatness

If you are looking to actively cultivate success and expansion within

your group, starting a group or are looking to buy for the first time, please do contact us now to discuss the opportunity available.

we will request maximum lending if you are unable to pledge this amount of cash or if you are looking to hold this back for cash flow.

For those looking to create their own stamp on a practice from the outset, the ROI banks will consider lending for start-up projects. In fact, some of the banks are in great support of such developments as they consider Dentistry as one of the lowest risk sectors. Furthermore, there are potential options to add a low start element to the funding so that the first 6 months payments are much lower, allowing you to focus on

About Kimberley

Kimberley Parker is the Business Manager for the Henry Schein Financial Services team.

Her expertise covers the arrangement of practice finance loans for the purchase of dental practices and asset finance facilities for the purchase of dental equipment and consumables.

With over 10 years’ experience within the Dental Sector, Kimberley has an in-depth understanding of customers’ financial needs.

HSMH080-07-21

Speak to our expert financial team today 01332 321702 contact@henryscheinfinancial.co.uk

mediholdings.co.uk 01332 609318 contact@mediholdings.co.uk