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HS Financial Services - Why have a dental practice valued every year?
Why have a dental practice valued every year?

 

Why have a dental practice valued every year?

 

Following on from the top 10 reasons to value your dental practice, it would be good to explain how the process works and what the result is.

 

Every practice owner should have their dental practice valued yearly, as this will help them stay in tune with the market and take action to achieve a desired outcome. If you start with this process early in your ownership tenure, you will feel more in charge of the end result then leaving it to the last few years. To put this into context, if each year during your ownership you improve the profit by 10%, in 20 years your profit would have grown by 215%. See example to see what that looks like over the period.

 

Table 1. 5% growth over 20 years                                                                                          Table 2. 10% growth over 20 years



Both examples use a starting yearly profit figure of £100,000 and each year’s growth is added to the previous, compounding the interest. In the first example, 20 years of continuous 5% growth yielded nearly £1.5 million more profit over that time. In the second example, over the 20 years period, the business yielded £4.3 million more profit then without the intervention.

 

Continual growth is not easy, however by valuing the business every year, you can identify parameters where growth is possible and act on those to continue the cycle. Small changes over a long period amount to a large change. This works in all businesses and positive impact builds over time.

 

So how do you begin this cycle?

 

Start with a valuation as this is an in-depth analysis of where the business is and how it compares to other dental businesses of a similar size and location. To value a dental practice, you will need:

 

  • Accounts for the last 2- 3 years
  • Income breakdown preferably by:
    • Income stream (NHS, plan, private etc.)
    • By clinician/associate/hygienist
    • Associate/hygienist payrates, working hours and lab/materials percentage
  • Practice team list including:
    • Hours worked
    • Hourly rates
    • Pension details
  • Approximate value of the Freehold or Leasehold annual rental

This looks like quite a list, but these are some of the basics you should be on top of to ensure you are actively and effectively managing the business. If you get into a routine, having the items above will become second nature. Most of the items listed below are readily available from the accounts and practice management software, and if you are using SOE data access could be even quicker as a partner company, always only with your permission.

 

Once I have the data, what happens then?

 

A practice valuation manager will analyse the data and tell you what the value of the practice would be in the current market, taking into account market conditions in operation at the time. Most importantly, the practice valuation manager will:

  • Benchmark your practice with similar practices in the area and be able to tell you whether the parameters you operate under are in line with the market. A couple of examples:
    • If your dental nurse hours are double the number of dentist hours, you may be overstaffed, and your employment costs may be too high.
    • If you own the property and your rental is set too low, or your are not charging rent at all, you may be able to take cash out of the business in a more tax efficient way.
  • If you are looking to grow the business revenue but are unsure how to, practice valuations managers can help recommend revenue growth routes which you may not be aware of.
  • If the cost of the services you utilise are high, practice valuations manager can suggest partners who will be able to optimise service costs.
  • If you are looking to expand your practice, or acquire an additional practice, the practice valuations managers can recommend financing options and engage our partners who can secure funding for you. Ensuring the best lending rate is secured for you, increases the profitability, and value, of the business.
  • If you are looking to expand a specialist service, our practice valuations managers can work with our partners to secure the right team and equipment for you.

 

Each dental practice is different, and each dental practice valuation is unique so the solution to help you reach your end goal will depend on your personal circumstances. Regardless of the starting position, we can work with you to find the right path for your Dental practice.

 

New year, new start so there is not better time to plan. Contact MediEstates for a free, evidence-based dental practice valuation to open the path for your future growth.

 

If you are interested in finding out more, please contact the MediEstates team on 01332 321692, contact@mediestates.co.uk or visit www.mediestates.co.uk

 

 

 

Posted by: Maja Thompson on

General Buyer Terms

This agreement is in relation to MediEstates Limited whose registered office is at 1st Floor, Pacific House, Stanier Way, Wyvern Business Park, Derby, DE21 6BF acting for and on behalf of our clients ("the Vendors"); and yourself (Buyer's Name) in relation for an introduction to a prospective sale of a business as a going concern. By registering through this agreement I agree to all terms set out below:

  1. Definitions
    In this Agreement the following terms and phrases shall have the following meaning unless the context otherwise requires:

    Business
    Dental Practice business providing dental care. This business is under the MediEstates Ltd sale terms.
    Confidential Information
    Means the actual Vendors identity and all confidential information in respect of the Business, including, but not limited to, any ideas, business methods, prices, accounts, finance, marketing, research, development, manpower plans, processes, market opportunities, intentions, design rights, product information, customer lists or details, employees’ details, trade secrets, computer systems and software, and other matters connected with the products or services manufactured, marketed, provided or obtained by the Vendor, and information concerning the Vendor’s relationships with actual or potential clients or customers and the needs and requirements of such clients’ or customers’ operations.
  2. Obligation of Confidentiality
    The Prospective Purchaser agrees to treat as confidential, information supplied by or on behalf of the Vendor in connection with the sale of the Business.
  3. Exclusions
    The obligation of confidentiality set out in clause 2 does not apply to:
    1. any information received from a third party who was legally free at the time of disclosure to disclose it;
    2. any information which was already lawfully in the Prospective Purchaser’s possession prior to receiving it from MediEstates Ltd on behalf of the Vendor; and
    3. any information which is in its entirety already in the public domain.
  4. Duties of Prospective Purchaser
    1. The Prospective Purchaser shall take such a reasonable security measures to protect the Confidential Information and trade secrets.
    2. The Prospective Purchaser shall not, without the prior written consent of the Vendor, permit any of the Confidential Information:
      1. to be disclosed, other than in confidence to its legal or professional advisors;
      2. to be copied or reproduced;
      3. to be commercially exploited in any way;
      4. to be used for any purpose other than in connection with the prospective purchase of the Business;
      5. MediEstates is registered under the Data Protection Act 2018. Upon Signing this agreement you agree to follow the legal obligations of this act to protect the details of the information supplied to you, with it no to be passed outside of the control of you the prospective purchaser.
    3. The Prospective Purchaser agrees to keep a record of Confidential Information received.
    4. The Prospective Purchaser will return to MediEstates or the Vendor all documents containing Confidential Information and all copies of those documents on demand at any time which are in its possession or under its control, and for this purpose the term “documents” includes computer discs and all other materials capable of storing data and information. The Prospective Purchaser agrees that such documents remain the property of the MediEstates on behalf of the Vendor.
    5. The Prospective Purchaser must not jeopardise or re-direct the sale under any circumstances.
    6. The Prospective Purchaser must not contact the Local Area Team or CCG regarding any practice sale, by any means of media unless written permission is granted from the Vendor.
    7. To carry out own due diligence on practice purchases and accepts that any information MediEstates has supplied is information provided by the vendor and is not responsible for its accuracy or completeness.
  5. This Agreement
    The existence of this Agreement and its terms are confidential and neither MediEstates nor the Purchaser may disclose anything about this Agreement or its subject matter or implementation to any person other than in confidence to their legal or professional advisers.
  6. Duties of Prospective Purchaser
    When buying Dental practices, finance is normally needed. Our organisation operated over more than one of the MediHoldings brand, by completing this from you agree that the information can be shared to our other organisations to avoid the need to register independently and provide the best possible service.

    MediEstates will refer you to the specialist dental lending team and MediFinancial who will contact the necessary banks, whom have preferential healthcare lending rates in some cases, to ascertain which funding is available to you.
    By signing this agreement you do not have to use any of the banks MediFinancial contact, it is just another service which we provide.
  7. Deposit for Dental Practice
    If you are interested in putting forward a formal offer in for a practice, once the offer is accepted there will be a deposit required to secure the practice sale which is dependant of the practice size. This deposit is held in a client account and will be returned to the buyer on completion of the practice sale. You the buyer, will be required to sign a deposit schedule which will cover the buyer and the seller in the event that the practice sale does not proceed.
  8. Changes to this Agreement
    Any changes made to this agreement must be authorised and signed by one of MediEstates Ltd Directors.
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