Business In Focus - Winter 2021

BUSINESS

IN FOCUS EDITION 06 | WINTER 2021

It’s in our nature to grow your business WHY HAVE A PRACTICE VALUATION? PRACTICES SOLD IN 2021

WHY IS THE CANDIDATE POOL STILL SHRINKING?

FINANCE

•

VALUATIONS

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

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ADVICE

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RECRUITMENT

10 REASONS WHY every practice owner should have an up-to-date practice valuation.

ASSOCIATE/ PARTNER ADDITION

INCREASE PRACTICE VALUE

To attract the best

Measure your performance

against other similar dental practices and identify

opportunities

FUTURE PLANNING

in eventual ownership.

Develop a plan of

the buy-in price and

to increase profitability

action 5 to 10 years

dental practice

to retire or sell

and value of your

candidates who have a vested interest

Need to determine

proof that the

before you plan

buy-in price is

realistic for candidates

.

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2 EMERGENCY EXIT STRATEGY Protect the equity in

your practice for your

family, should the

unexpected happen.

It can make the difference

between selling your

practice and having

it become unsaleable

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4 ADDITIONAL PRACTICE ACQUISITION FINANCING Many lenders require this to support a

purchaser’s loan

request and enable your ability to expand your

ownership portfolio

.

Most practice owners tend to value their practice only when they are ready to make a change, which could be selling or refinancing the business or buying a similar practice. Really savvy business owners value their practice(s) regularly, as this allows them to make more informed decisions about their (usually) most valuable asset and take action to improve its value.

PRACTICE SALE/SET ASKING PRICE INSURANCE FUNDING

An assessment of what

insurance coverage

realistic asking price

your practice is worth in the current market will help you set a

To ensure adequate 20

20

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08 20

09

20

19

20

14

.

20

10

20

13

20

16

20

1 4 5 75 0% % %

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6 TAX PLANNING Allows you to make

the right choices for

your business based on the budget driven

changes and HMRC policy adjustments used to determine tax allocations

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ESTATE AND FINANCIAL PLANNING

PRACTICE MERGER VALUE

A critical part of

Be ready to decide

well as thinking

so you are ahead

wealth planning as about funding

your retirement

.

or instigate a merger, of the game

.

.

3

A MEASURE OF SUCCESS JANUARY - SEPTEMBER 2021

33,327

PRACTICE INFORMATION

Deals sizes varying from

£65,000

leaflets sent out

to

£22,000,000

Offers received in 2021 were

£438,391,040

66,974

page views on mediestates.co.uk

757

viewings arranged

42% INCREASE

44% INCREASE

(from 2019 - 2020)

(from 2019 - 2021)

in new buyers registering

“

in new buyers registering

I found MediEstates to be by far the best and ultimately I feel got the best price possible.

Erik Foster

4

”

65% 80% 67% buyers looking for NHS

buyers looking for Mixed

All data is from 2021

buyers looking for Private

Why is the candidate pool still shrinking?

What can we do to bridge the gap?

By Philip Barker

We take a look at key differences using our associate survey from April - September 2021.

We have all seen the highest level of recruiting difficulties in the industry, at MediCruit this is the most severe we have seen since we started in 2001.

Salary requirements

It isn’t surprising that salary demands have increased: the supply and demand for new dentists is misaligned.

Dental practices haven’t been assigned current dental students to work as trainees at their practices.

Reports from around the UK concur that this may take till March 2022 to fully roll out.

See the results below...

For about 15 years up to 2018, we’ve had a steady flow of overseas dentists here in the UK. But due to Brexit and the pandemic, this number has declined rapidly.

Applications for positions has declined vs 2019, in some job groups we have seen a huge 58% decrease.

Passive candidates on agency databases are the main source of candidate attraction.

The following stats are from MediCruit’s Associate survey taken in April and September of 2021, and the most striking statistic is that only five months on from April, zero respondents had made themselves available for £11 per UDA and under.

This is going to influence practices in a few different ways: • Dental practices which used higher UDA salaries to attract candidates are now facing competition from ones that didn’t before.

• A dental practice in a city will find it very hard to get someone to work for £10 per UDA. •

•

Associate Payment Expectations £10+ per UDA £10+ per UDA £11+ per UDA £11+ per UDA £11+ per UDA £11+ per UDA 40% + Private split 40% + Private split 45% + Private split 45% + Private split 50% + Private split 50% + Private split Locum Day Rate £300+ Locum Day Rate £300+ Locum Day Rate £350+ Locum Day Rate £350+ Locum Day Rate £400+ Locum Day Rate £400+ Locum Day Rate £450+ Locum Day Rate £450+

If practices are on the lower end of the UDA scale (£22 - £25), they will find profitably tough that could lead to practices handing the contract back to the NHS. The average day rate for locums could rise to £425 per day, while the average day rate for permanent dentists is £350. Locum day rates are generally on the basis the associate hits 30 UDA’s per day, the equivalent of £11.66 per UDA. With demands for £12/£13 per UDA on a permanent basis, this makes it more attractive than the £350 per day.

To find out more and how we can help please contact us on: 01332 609318 medicruit.co.uk

April

September

0 0

20 20

10 10

30 40 50 30 40 50 Percentage Percentage

60 60

Current Notice Periods

70 70

80 80

April

Available now Available now

September

1 week 1 week 2 weeks 2 weeks 3 weeks 3 weeks

0 0

10 10

20 30 20 30 Percentage Percentage

40 40

50 50

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How working with a broker can ensure you achieve the best deal structure

By Alison Bates When you consider selling your practice, direct approaches from fellow dentists and corporates can be very appealing.

After all, a letter through the door from one of these interested parties indicates that there is grounded interest in your practice already, meaning that the selling process has the opportunity to be straightforward and less stressful.

But are you potentially limiting the value you can receive for your practice? What about the post-sale requirements being offered? These are important considerations, especially if you want to achieve sale terms that are in line with your future goals.

The risk of selling without a broker When corporates or dentists approach you directly as a buyer, they will often have a set idea of what they think your practice is worth and a deal structure in mind that is most beneficial to

them. Therefore, by only exploring this one avenue, you could

be settling for less money and may even enter a deal structure that would not be in line with your future expectations.

For example, say a corporate has offered you a certain price for

your practice. This price is likely calculated by what the corporate can afford to pay rather than what your practice is actually worth

on the open market. The figure will also be based on their proposed operational structure post-sale, and as corporates utilise an

associate-led model, this means that they may offer less than an

independent dentist as they have to factor in their associate costs.

A buyer is also likely to offer a lower price if they aren’t aware of any

direct competition. Consequently, the price you receive from a direct enquiry is rarely the maximum deal possible. By enlisting the help of a broker, you can attract other buyers and open up the competition.

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Often when selling a practice, the principal dentist is expected to carry on working for a period of time post-sale to maintain the financial performance of the business and ease the transition for patients. For many dentists, the deal structure is almost more important than the sale price, especially as these terms will dictate how they work for the next few years and what this means for their earnings.

Deal structures come in many forms. You may be expected to work between 3 to 5 years in your practice and part of the sale price may be deferred and paid to you over this time as an incentive to optimise income. This deferral payment can be as much as 30% of the sale price. You must also consider the remuneration being offered to you post sale - while it may seem like the wise choice to take a higher remuneration rate, it may actually be beneficial to receive a more substantial lump sum at time of sale, as this is typically taxed less and can save you more.

By enlisting the help of an independent broker during the sale, they can ensure that various deal structures are on the table and negotiate the one most suited to your requirements.

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What sort of deal structures are available?

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14

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20 1

3

Supporting your practice sale

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7

5

%

4

0

%

1

5

%

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Ultimately, the services of an independent broker are beneficial for numerous reasons. They not only attract more interested buyers for your practice, but can also help you to achieve a higher sale price and negotiate the most suitable deal structure.

The team at MediEstates has years of experience supporting principal dentists with practice sales and works closely with you throughout the process. Clients who have worked with the team have seen up to a 27% increase in sale price compared to selling direct. As such, when you make the big decision to sell, you can rest assured that they can help you achieve the best deal for you.

To find out more and how we can help please contact us on: 01332 609318 mediholdings.co.uk 6

PRACTICES JUST SOLD D L O S Location

Hampshire

D L O S Location

Berkshire

D L O S Location

South West

Wales

Sale Price £940,000

Type Computerised Mixed Yes, SOE NHS & Private

Turnover £604,071

No. Surgeries Three

Property Leasehold

Type Sale Price Computerised £2,975,000 Yes, SOE Predominantly Private Property Leasehold

Turnover £1,384,512

No. Surgeries Four

Sale Price £975,000

Type Computerised Yes, SOE Predominantly NHS

Plus £225,000 for freehold

Turnover £1,024,182

No. Surgeries Six

Property Freehold 7

Success Stories W I T H D R M E L A N I E G R AY

We spent some time with Dr Melanie Gray, dentist and former owner of Grays Dental Practice, to find out about her experiences with MediEstates, why she decided to sell and what it was like selling to Scotland’s largest dental group, Clyde Munro Dental Group, during lockdown.

How did you come to sell the practice and how did MediEstates help?

We had a family-run practice for over 30 years so when my Dad (Eric Gray) and I discussed selling, it was a really big deal for us. We found out about MediEstates from a letter we received around the time we were having our discussions. Our first contact was Peter [Peter Cummings, Practice Valuation Manager]. He was really good. There was no pushiness; it was just a case of meeting for a chat and taking things from there.

He came round to my parents’ house near to the practice because we wanted to keep things between us at first, so it was great that he could do that. He talked us through the process of getting a valuation, how it goes through the valuing panel and what happens from there.

When we decided we wanted to know what the practice was worth and how to move forward, Peter was really patient and helpful, particularly when it came to gathering the paperwork we needed. He took it all to the panel and things moved really quickly. We had our valuation figure within a week but there was no pressure to sign up with MediEstates or to sell immediately. We really appreciated that because it was such an important decision. In the end we took about three months to decide that selling was right for us.

Tell us about your experiences with the MediEstates team?

Peter put me through to Shannon (Shannon Loonam, Senior Transition Specialist) who was great at setting up practice visits in the evenings and weekends. She also told me about the people coming to see the practice. I was really quite nervous before the first showing, but Shannon reassured me that the viewers were lovely and not intimidating at all, and she was right. I think she knew I was anxious and decided to ease me into the whole process! She must have done a lot of work behind the scenes because I had a huge number of viewings, probably around 20 to 25 in the space of a month. Shannon would always contact me after viewings to chat about how it went.

She would also pass on any feedback from the potential buyer, which was really helpful. When I decided to go with Clyde Munro, I didn’t know a huge amount about bigger dental groups. Again, Shannon was reassuring and told us how MediEstates had worked with them before and had positive feedback from other clients.

How was your experience of selling to a bigger dental group?

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

The biggest challenge was trying to complete the sale during the first lockdown. We were supposed to complete in February but of course the pandemic hit and there was a delay. COVID in practice was stressful enough, never mind the added stress of wondering if the sale would go through!

However, as lockdown eased we moved towards completion and by October everything was resolved. Shannon kept in touch and reassured me when I was concerned. She was great with us from start to finish and I was really pleased with how it all went.

Did you find there was a service from MediEstates that you valued above any other during the selling process?

I valued everything but I probably valued Shannon’s input the most. Even post-completion she kept in touch and sent me some lovely flowers and chocolates, which I felt was a really nice touch. I was made to feel like a person throughout the process, rather than just part of a business transaction.

It was great for me because I appreciate that connection with people and it made a huge difference to how I felt about selling my practice.

What made you decide to sell your practice?

I find it very difficult to switch off.

My mind is always active. As a practice owner, you never really have that opportunity to relax and leave your work behind at the end of the day. I felt it wasn’t worth all the anxiety and extra stress, and I wanted to enjoy more time with my family without feeling exhausted. When you’re at Uni, you don’t learn how to run a business or how to manage a team of employees. I have a great team, but every team has its challenges and after 10 years I felt like I wasn’t enjoying it enough. I wanted to focus on being a dentist rather than having to focus on running a success story?

Want to create your own business.

Let MediEstates show you how, contact us on 01322 609318 or contact@mediestates.co.uk And finally…would you

HSMH097-10-21

I found it to be a positive experience and the people working for Clyde Munro made the whole process easier. Above all I felt more secure throughout the sale, especially at the height of the pandemic when everything felt so uncertain. After completion I knew I wanted to stay on, so we didn’t really discuss my walking away from the business immediately. Dad and I still work at the practice.

Did you come across any challenges during the process?

“

We had our valuation figure within a week but there was no pressure to sign up with them or to sell immediately