Buying a dental practice can be one of the best moments of your career. Unfortunately, it can also be a hugely daunting, stressful and complicated experience. For those reasons, it is always best to know exactly what you want and how you're going to get it. To do that, you're going to need to do your research, know the market and assess your financial situation. There is no point wasting your time looking for a practice that doesn't suit your personal or financial needs.
Thus, before you even view a potential practice, be frank with yourself about what you want, what area you want to buy in, what type of contract you desire and whether you have the skills to manage a practice.
Once your personal checklist is complete, the next step would be to assess your finances – a task that is always best done with the aid of an independent financial adviser. Before approaching the bank, there are also a number of factors that should be taken into consideration, including whether the practice that you're looking to buy is financially viable. The bank will also consider the viability of the business during their assessment by calculating some sensitised repayments on a loan and taking in to account the deposit you possess.
Timing is also a key element of buying a practice, particularly when it comes to base and loan rates. With banks currently offering exceptional interest rates – with present figures typically standing at 1.98% to 4% on top of the 0.5% base rate – opportunities are plentiful for potential buyers. In the event that there is a rise in the base rate, you can rest assured that the bank will have carried out a 'stress test for loan' to ensure that you can repay your loan on a basic income.
It is also important to consider the impact that goodwill values will have upon the goodwill premiums that you will be required to pay on top of the valuation price, not to mention the possibility that your goodwill values might change after your purchase is complete. Although it may seem like a separate part of the sale, it would be prudent to add the cost of the premium into your budget during the loan process. The last thing you need is to realise that you are over budget and need to find the remainder of the money yourself – it's not a good start for the business. Worse still, it could be the difference between whether or not you could afford your dream practice.
Even when you do eventually find a practice, secure a loan and start the acquisition process, issues may occur that delay the completion of the sale – and as we all know, time is money. One of the most common problems that can add an unwanted waiting period is the due diligence (DD) process. This is an audit that the buyer must complete on the practice prior to signing a contract. Due to the complicated nature of DD, it is often wise to utilise a service that can assist with the legalities of the acquisition and liaise with the seller to promote communication and minimise potential tension. Another potential issue that can cause delays is the CQC application process. As this is a process that has to be completed by the vendor, however, there isn't much that can be done if the sale reaches a stand still, except to maintain communications with the seller's team of legal and sales representatives.
Alongside all of this activity, it is important to consider the tax implications of buying a dental practice. If you are taking on a business that employs other members of staff you are not only responsible for paying your staff, but also for a tax known as employers' national insurance, which stands at 13.8% for the 2016 to 2017 tax year. For those that plan on making improvements to the practice, it is essential that you seek guidance of what gets tax relief and what doesn't during building works.
It is also important to think about your income, as it is likely to take a hit during the infancy of the practice. If that is the case, there are actions that can be taken to assist with cash flow and help you save on tax. For instance, when your profit in the tax year is less than the previous year, your accountant can submit a claim to reduce your tax payments on account of that tax year.
Companies such as those within the 4dentists group can help assist with all aspects of the acquisition process and beyond. Indeed, purchasing a practice can be a strenuous experience, which requires constant advice and guidance to ensure that the foot isn't taken off the proverbial pedal. To ensure that you find the right practice, secure the necessary funding, complete the process with minimal stress and get your taxes in order once your up and running, utilise a company that can help you every step of the way.
For more information please call 0845 345 5060 or 0754 DENTIST.
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