Why Purchase a Dental Practice?

For many associate dentists, becoming a practice owner represents an exciting next step in their career. After years of developing clinical experience, building relationships with patients and working within someone else’s business, purchasing a dental practice can provide the opportunity to take greater control over both professional and financial decisions.

Practice ownership is a significant commitment and is not necessarily the right choice for every dentist. However, for associates who are considering the move from clinician to principal, understanding the potential benefits – and having the right professional advice – can make the journey considerably easier.

PFM Dental has specialised exclusively in professional services for dentists since 1990, with services covering practice sales and valuations, practice finance, dental accountancy, financial planning and dental legal services. Its experience therefore spans many of the key areas an associate needs to consider when contemplating practice ownership.

Moving from Associate to Practice Owner

As an associate, your income and working environment are influenced by the practice in which you work. Purchasing your own practice changes that relationship. Instead of simply providing clinical services, you become responsible for the wider business.  That can mean greater involvement in decisions about staff, equipment, patient services, marketing, working hours and future investment. It can also provide the opportunity to shape the practice around your own professional ambitions.

For an associate who enjoys clinical dentistry but also has an interest in business ownership, practice acquisition can therefore represent a natural progression.

The Potential for Greater Financial Control

One of the major attractions of practice ownership is that an owner can potentially benefit from both their clinical earnings and the profits generated by the business.

Practices can be considered using both a Principal Led EBITDA and an Associate Led EBITDA models. Principal Led EBITDA assumes that a full-time principal works clinically within the practice, whereas Associate Led EBITDA assumes that clinical work is undertaken by associates.

For an associate considering a first acquisition, understanding this distinction is particularly important. A practice that appears to generate one level of profit under an associate-led model may produce a different financial picture when the purchaser works clinically within it.  The difference has to match your ambitions with the practice.

This is why looking beyond turnover alone is essential. A prospective purchaser needs to understand the underlying profitability of the practice and how that profitability could look under their proposed ownership structure.

Building Something of Your Own

Practice ownership also gives a dentist the opportunity to develop an asset over the longer term. An associate generally earns from the clinical work they undertake. A practice owner, by contrast, owns a business that may be developed, improved and ultimately sold.  This does not mean that practice ownership automatically produces a financial gain. The purchase price, borrowing costs, operating expenses, performance of the practice and future market conditions all matter. However, owning a practice creates the possibility of building business value alongside generating an income from clinical work.

For an associate thinking about their long-term career, this can make ownership worth considering as part of a broader financial and retirement strategy.

Greater Freedom to Develop the Practice

A practice owner can make decisions about the future direction of the business.  That might involve investing in equipment, introducing new treatments, developing private services, recruiting additional clinicians, improving the patient journey or making better use of available surgery capacity.

The opportunity will vary considerably from one practice to another. Some practices may already be performing strongly, while others may have identifiable opportunities for growth.

For an entrepreneurial associate, purchasing an established practice can therefore offer something that starting from scratch may not: an existing patient base, established systems and a trading history, combined with the opportunity to introduce their own ideas.

You Don’t Have to Find the Process Out Alone

Buying a dental practice can initially appear daunting, particularly for a first-time purchaser. There are financial, legal, regulatory and commercial considerations to navigate.

This is where specialist advice can be particularly valuable.

PFM Dental’s practice purchase service includes buyer assessments and valuations, designed to help purchasers review the financial information and practice prospectus before making a decision. The firm also provides access to practice finance services and specialist dental legal and accountancy expertise.

Its finance team works with healthcare banks and can assist with areas including first practice purchases, partnership buy-outs, associate buy-ins, refinancing, equipment and practice renovations.  As finance brokers we can approach multiple banks as part of the process.

Having these services available through a specialist dental adviser can help an associate understand the complete financial picture rather than considering the purchase price in isolation.

Finance Doesn’t Have to Mean Navigating Banks Alone

For many associates, the biggest question will be how to finance their first practice purchase. 

PFM Dental’s practice finance service is specifically aimed at dentists and covers first-time purchases as well as more complex transactions.  A finance broker can help a purchaser understand how much they may be able to borrow, what information lenders require and how the proposed practice is likely to work financially under new ownership.

This can be particularly important when preparing an offer. PFM Dental recommends that buyers establish an Agreement in Principle with a lender and be prepared to provide evidence of their deposit and financial position.

Specialist Accountancy and Financial Planning

Buying the practice is only the beginning.

Once ownership has been secured, an associate-turned-principal will need to consider taxation, business structure, cash flow, remuneration, investment and longer-term financial planning.

PFM Dental provides dental accountancy and financial planning alongside its practice sales and legal services. The firm states that its accountancy team works with dentists ranging from newly qualified associates to experienced practice owners, while its financial advisers provide advice throughout a dentist’s career.

For someone buying their first practice, having access to professionals who understand the particular financial characteristics of dentistry can be useful both during the acquisition and afterwards.

Dental Legal Expertise

A practice acquisition also involves specialist legal considerations.

PFM Dental has an in-house dental legal team covering areas including commercial law, property law and CQC processes. Its practice purchase service is designed to bring together the relevant professionals required throughout the transaction.  This can help a purchaser navigate the legal and regulatory aspects of the transaction alongside the commercial and financial considerations.

Is Practice Ownership Right for You?

Moving from associate to principal is a major career decision. It brings additional responsibility and financial commitments, and purchasing a practice requires careful due diligence rather than simply choosing a practice that appears attractive.

However, for associates who want greater control over their working environment, an opportunity to develop a business and the possibility of building an asset for the future, practice ownership can be an important career milestone.

The key is preparation.

Understanding what you can afford, identifying the type of practice that fits your ambitions, assessing its underlying profitability, arranging appropriate finance and taking specialist legal and accountancy advice can all help you make an informed decision.

For associates considering that next step, PFM Dental offers a specialist service covering the journey from finding and assessing a practice through to finance, legal work, accountancy and longer-term financial planning. With its services dedicated specifically to dentists, it provides a single source of specialist support for those considering the transition from associate to practice owner.