COVID-19 and dental practice ownership
Andy Acton from FTA, and Kirsty Hague from Hague Dental, discuss the options for dentists surrounding practice ownership following COVID-19.
COVID-19 may have torn apart the global economy but, according to a recent article in The New York Times, the unique positioning of dental practices makes them stable businesses.
Indeed, in the eyes of some economists, they are the ‘perfect barometer for gauging the country’s recovery from the shock of the pandemic’.
Here in the UK, the business of dentistry was briefly stymied when the virus forced shut practice doors on 21 March 2020, to then reopen on 8 June.
Many dentists are now back practising. Albeit with a plethora of additional infection control challenges, a much-reduced footfall and a backlog of cases.
And, while it’s not quite ‘business as usual’, orders from one dental manufacturer would appear to suggest that the market has already started rebounding.
Stephen Price, managing director at Belmont, believes: ‘The steady flow of new business is promising. It would indicate that the dental market remains a worthwhile investment for those seeking to buy a practice of their own. There is also significant activity amongst existing practice owners, wishing to modernise their surgery’.
Dental practice demand spike
Frank Taylor & Associates (FTA) has been selling dental practices for more than 30 years. It has conducted more than 10,000 valuations in that time.
Hague Dental is a family-run dental equipment supplier. It has helped hundreds of dentists to design, build and project manage the development of their own new practices from the bottom up.
Both have seen little let-up in the number of dentists purchasing practices. Indeed, quite the opposite.
At the back end of last year, FTA took a litmus test of the profession. This suggested there remains optimism among dentists about the future. This was despite the fact that nearly 60% of practice owners also admit that the pandemic has had a: ‘Significant or severe impact on their business’.
FTA director, Andy Acton, says: ‘The demand to buy dental practices has spiked in the past year.
‘Pre-COVID-19, there was strong interest, but it has definitely stepped up a level. I put this down to associates feeling vulnerable. There has been no government support (for most), it has been a slow return to work, pay rates have reduced and, ultimately, without a business of their own, they have no asset for security.’
Kirsty Hague, of practice refurb specialists, Hague Dental, agrees. She suggests the market is more buoyant than ever, particularly with regards setting up squats.
She says: ‘We have been involved in developing squats for a very long time. But the confidence from individuals to build their “own” new practice has come on in the last five years.
‘Involvement in new developments has doubled over the last two to three years. With enquiries for design and site feasibility surveys quadrupling in the last four months.’
So, is the pandemic itself responsible for igniting this interest in the possibilities of creating a squat as a pathway to ownership?
Kirsty says: ‘Associates – even those in long-term positions – are finding that practices are not needing them as much as before so are seriously considering their next move.’
Indeed, the statistics speak for themselves. FTA reports that, since March 2020, the number of associates looking to buy has increased from 5,000 to 5,500.
But Andy offers a word of caution. ‘I would urge anyone thinking about buying a practice to really consider what this entails. This should never be a knee-jerk reaction.
‘Remember that this pandemic will pass. Dentistry is in a good place, and being an associate remains an incredible career.’
Building a squat practice
So, for those brave and keen enough, what are the benefits and drawbacks when it comes to squat developments versus buying an existing business?
Kirsty says: ‘The chances that taking over pre-existing practices will satisfy your long-term ambitions is low. Dated layouts and equipment and a limited downtime to make necessary changes may restrict you. There is sometimes no chance to sync with your ambitions until a practice refurb happens later on.
‘Starting with a squat allows you the freedom in achieving a unique practice with your stamp on it. It gives an opportunity for long-term expansion, with all the modern-day legislation incorporated.’
Andy and Kirsty agree to a degree. ‘A squat enables a purchaser to create their own vision – and is ideal for those looking to put their mark on a practice, with all the small details that make it unique.’
But Andy adds: ‘A cold squat requires the owner to build the patient base from scratch. This can take nine to 18 months to break even.
‘Squat practices require more than being a fabulous dentist. You need to demonstrate leadership skills, the ability to motivate and manage a team and be the business development lead so that you get off to a flying start.’
‘When buying an existing practice, there is obviously room to change it over time and to evolve ideas in order to get it where you want it to be. Inevitably, this is more of a challenge and may not be perfect. However, buying a practice does come with an existing patient base and, with that, income and profit.’
‘Courage and conviction’
Whether buying a practice or setting up a squat, both agree that purchasers will inevitably need a supportive team.
Kirsty says: ‘Build a team around you that can support you for the long term. Not just your practice team, but others in the industry. Developing a squat takes courage and conviction, so surround yourself with people you can trust.
‘Find a company to help support you to find the right site and design a practice that works for you ergonomically, as well as create one that reflects your personality and your brand. Take time to consider the entire space and the detail. A good supplier will provide numerous concepts, until it’s right.’
She adds: ‘Budgets are so tight on large-scale projects such as these. Ensure you work to future proof the space. Buy equipment that is reliable and if you look after it, it will look after you. Add the services in phase I, so you can add further surgeries and upgrade to digital when you are ready as the business grows. Consider pre-owned equipment as an option. My list goes on….’
Andy adds: ‘First and foremost, you need your own vision and then build around this the guidance of others. There are experts who will have trodden paths smooth with years of experience; so use them. This can be design and fit out companies, solicitors, practice sales agents and specialist finance brokers.’
The right time to invest
With the pandemic affording us the luxury of time to consider what we want our futures to be, many associates are looking to take control of theirs – ‘especially when good locations become available on the high street,’ Kirsty adds.
But there is no quick fix. As Kirsty says: ‘We can sometimes be in contact with individuals five years before they find and open the door to that new business. We take time to ensure it’s right and give them space to consider their options.’
You can choose the most suitable location, the best building and start off in the right direction. But, without tapping into the wealth of experience of the experts, it is overwhelming.
Simple advice: follow your heart. But do lean on those with experience in the process. COVID-19 notwithstanding, now seems the right time to invest.