As the economic climate continues to prove challenging for businesses of all types, Practice Plan’s sales and marketing director, Nigel Jones, caught up with dental business coach Chris Barrow to canvas his opinion on the shape of dental practice ownership.
Nigel Jones (NJ): What does the landscape for practice ownership look like now, Chris? Not that many years ago, many were predicting we were going to go down the veterinary route and we’d see 80 to 90% of practices consolidated into a handful of big corporate players. What’s your sense of what the future landscape might look like now?
Chris Barrow (CB): The fashion since lockdown has been to build a micro corporate. So, there are more people out there than there were pre-COVID-19 saying: ‘Right, I’m going to have five, or 10 or 20 practices.’ So, there’s been a proliferation of micro corporates.
They all seem to have the same idea, which is that they’re going to build to a certain size and then do what the corporates do, which can be best described as the well-known phrase, ‘flip, flog, or float’.
What ‘flip’ means is you flip from one institutional investor to another. ‘Flog’ means you just sell it and walk away, and ‘float’ used to mean that you floated it on a recognised stock market. Although it’s a long time since market conditions were suitable for any dental business to consider a flotation.
To flip or flog?
So, the marketplace at the moment is flip or flog. If you ask the majority of these people building their micro corporates what the end game is, the answer is flip or flog. And my question is, ‘To whom?’
Things changed a lot towards the end of June when the Bank of England raised interest rates following the news that core inflation had risen again in May. So, now we have to ask who are the owners of these micro corporates going to flip them to? If they go from one financial institution to another, at the moment that would be going from the frying pan into the fire!
What about flogging it? Well, who is there to flog it to? I have clients who have been in due diligence with some of the larger corporates over the last six to nine months, and that due diligence is doing one of three things. It is either grinding to a halt, being withdrawn, or they’re moving the goalposts and the offer is being changed to a lower one. So, it’s a very disrupted area right now.
A blog I wrote recently with the title ‘It’s really important that you don’t sell your dental practice at the moment’ provoked quite a reaction from some independent valuers. They weren’t happy with me! But I stand by it.
Recruitment and conversion
NJ: Things seem to be a little counterintuitive here. Corporates are finding things tough, even with the benefits they’ll see through economies of scale, to find staff, marketing etc. Sense would say it should be difficult across the board, but that’s not what we’re seeing.
CB: I agree, Nigel. It’s not harder for my independent clients to attract staff. Our recruitment is working. It’s not harder for those independents to attract new patients, nor for them to achieve a higher conversion rate on treatment plans presented. It isn’t harder for them to achieve a higher average treatment plan value per patient. And, as I’m sure you’ll agree, it’s not harder for them to convert from NHS to private. It’s arguably better than it’s ever been.
Competitive advantages of independent ownership
NJ: That’s true. We had a practice hand back a £1.5m contract recently, and in the first week they’d signed up 2,000 patients to plan. So, the receptiveness of patients now to private dentistry is phenomenal. And in Cumbria, we have a practice that is still open because it went entirely private. It was about to close because of a lack of NHS associates. They advertised for private associates, filled the positions almost immediately and have managed to convert 10,000 NHS patients to 7,000 or 8,000 plan patients across two sites. So, you are right, and I’m sure some of that is due to the scarcity of practices taking on patients, whether they’re private or NHS.
CB: A great example. I totally agree that a corporate can achieve economies of scale. However, let’s not lose sight of the benefit of having patients coming in through the door, seeing clinicians and spending money. And that’s a competitive advantage in the marketplace right now for the independent. I’m 30 years in dentistry this year and I can rarely remember a time when I felt more excited, confident, and inspired by the opportunities that exist in independent private practice. That’s where I see the future of practice ownership.
NJ: Thanks, Chris. You may be right.
If you’d like to work with a membership plan provider who thinks about your needs and supports your business, helping you to find solutions to the things that matter in practice, why not have a chat with Practice Plan on 01691 684165 or visit practiceplan.co.uk to find out how easy it is to join the Practice Plan family.