Posted by Jenny Notley on 05/06/2019
Taking the huge step of looking to purchase a dental practice is daunting as it may well be the biggest investment you make, so it has to be the right investment. Finding a practice that suits you on every level will be key to your success, here’s some practical advice highlighting the factors to consider.
What are you looking for in a practice? Spending the time to establish what your long term aims are will form the foundation of your business plan. Have you decided on the different services you wish to offer once you’re fully established? Can you identify who your patients would be and their interest in those services? Have you researched the market to understand the current state of play and whether your practice will thrive in the local market?
Once you’ve got a good picture of your business plan, you’llunderstand the business model and structure that you require. It will help you support your decision in regard to whether you’re looking for an existing practice with an NHS contract or if a private practice would better suit? There’s no right or wrong answer, it’s more about what your vision for the future of your practice is and how would you achieve that? For instance, an NHS contract, although very reliable in terms of income and patient goodwill, will have restrictions that may clash with your aims. Alternatively, a private practice gives more autonomy and flexibility but patient loyalty is harder to gain and they may be shopping around for specialised services.
Your business plan will also support your conversations with those you’re approaching for finance. They’d need to see that you’ve understood and analysed the market you’re going to be working within. If you’re also planning to invest further money into the equipment and technology in the practice, you can demonstrate how that fits with what you’re trying to accomplish.
Finding the right location for your business can make a huge impact on its performance. By considering who your potential customers are and how important their proximity is to your location, you can analyse whether a sufficient amount of the population local to the practice matches your customer profile. If in your business plan, you see your practice appealing to young families with the services you offer, it wouldn’t work well in a location where the average householder is older than 50. We can help you to analyse the postcode area you’re considering buying your practice, by creating a profile report that demonstrates the population segments in the area. This includes insight into the patient’s lifestyle, behaviour and attitudes.
Next step; consider the logistics of the location. Is the building easily accessible? Does it have adequate parking? By driving past the location at different times of day you can get a feel for the traffic patterns of the area and a gauge for how suitable the parking is. Also consider if the practice is accessible by public transport; this will impact not only your customer base but also how your employees will commute to work. See if you can benefit from nearby businesses through the customer traffic they generate, but also ensure you research the market place to ensure none of those business will be competitors that reduce your potential market share.
The suitability of the building itself is also important. For your business plan, do you need street access and easy visibility to raise awareness for your services? Many older buildings don’t have the necessary infrastructure to support the high-tech needs of contemporary operations. Make sure the building has adequate electrical fixtures and fittings, air conditioning and telecommunications service to meet your present and future requirements. It’s always worth consulting experts and surveyors to understand how structurally sound the building is and whether it’s fit for purpose.
Location not only impacts your patient base but also your pool of potential employees. If your practice is ‘off the beaten track’ this could impact the availability of skilled staff. Don’t forget your own work-life balance; does the location suit you and everything you juggle on a daily basis? Will the commute and traffic mean you won’t be home until late? Will this become wearing after a while?
If you buy a property outright, it’s called a freehold but approximately half of all dental practices, generally due to their prime sites, are likely to be leasehold. Acquiring the freehold means you will accumulate the capital gain in the freehold in the long term and you won’t be spending money on rent and other obligations of the lease. However to buy the freehold may make your practice purchase unattainable financially.
If the business you are buying is leasehold, a bank would expect to see a lease of 10-15 years duration in order for them to allow their lending over that period. A copy of the lease must be available and the landlord may want references from you. Ensure the obligations of the lease are transparent and understood, generally service charges and building insurances will be charged to contribute to the building maintenance and may be an additional expense that wasn’t anticipated.
There are many aspects to taking on a lease and you should always look for specialist advice before doing so. In your discussions you may consider a pre-emption to prepare for a time when the landlord looks to sell the freehold. It will allow you to have a right to purchase the property before it can be offered to another. You may also consider an ‘option to purchase agreement’ in which you’re given the right to buy the property for a certain period of time or if a specific trigger event occurs.
It’s always wise when taking on the lease of any premises to ensure that it has planning consent for the use for which you are leasing it. If not, can the use be established easily or does the lease place any restrictions on the use to which you want to put the property? And if you’re considering changing the use of premises to a dental surgery it’s essential to establish what the position of the local authority is before signing the lease. Having got permission for a change of use, do not assume that the council will automatically grant other consents. Check that any planning permissions for your practice are clearly in place, for building works, signage and listed building status.
If you’re planning to buy a practice with Denplan patients, and want to know more about buying a Denplan list, get in touch with us at [email protected] or call 0800 169 7660.