Strength in numbers – the benefits of investing in multiple practices
Scott Gidman explains why it is a great time for practice owners to expand their business portfolios
At MediEstates we are seeing a flourishing market for a certain group of buyers with the will and means to increase their number of practices. Perhaps surprisingly, the fastest area of growth is not in corporate but in the mid-market, proving the time is ripe for entrepreneurial enterprise despite the difficulties many in the industry have faced this year.
Who are mid-market buyers?
This broad definition includes individuals and small groups with at least one practice. Some are non-dentists or retired clinicians with a specific interest in expanding their practice portfolios. Individuals or groups with between two and ten practices will often situate themselves in central locations with a higher population density. The advantages of this are clear, not only for greater patient numbers but also for more recruitment options.
The importance of location
Understanding location can significantly enhance growth potential. Location will almost certainly affect the type of treatments a practice can offer and the level of growth which can be realistically achieved. MediEstates compile comprehensive reports on locations and pricing that provide valuable insights into population density and earnings within specific areas. We also provide information on property values and calculate rental yields for practice owners aiming to rent their business properties. When we build our client’s tailored business plan, we include the rental figure for more accurate forecasts, giving the buyer greater financial visibility before applying for loans or finance.
Why invest in more than one practice?
Owning multiple practices can boost profits by reducing day-to-day running costs through bulk buying and staff sharing. And if the thought of finding that initial lump sum seems off-putting, remember that interest rates are low, so it is a good time to take out a loan. Despite changes to the lending landscape due to the pandemic, in which a larger deposit on a property may be required, the healthcare sector always presents an attractive lending prospect to banks. These ventures present low-risk business models and banks are therefore more willing to approve loans. Once the practice is established and running costs drop, the return-on-investment increases and debts are repaid at a faster rate. With that return-on-investment retained following the repayment of debts, plus the additional benefit of available assets, expansion appears a very attractive prospect to many at this time.
Financial transparency with MediEstates
Going ahead with expansion is an exciting undertaking, but preparation is everything. MediEstates holds an extensive archive which enables us to advise on all aspects of the dental marketplace, including what people are paying for practices and what banks are prepared to lend at any given time. As part of our service, we provide detailed practice information on staff costs, both clinical and non-clinical, which can affect tie-in periods when considering post-sale agreements. It is the buyer’s responsibility to honour existing staff contracts upon sale, so MediEstates will forecast the total wage bill, including National Insurance contributions and workplace pensions, to give the buyer the financial transparency to make informed decisions.
One support network – multiple solutions
Working together as one company, MediEstates, Henry Schein and Software of Excellence can provide a complete, bespoke service to buyers. If further funding is required, Henry Schein Financial Services can offer a range of finance solutions for practices and equipment, in addition to life insurance and income protection for self-employed clinicians. Henry Schein can also supply a huge range of dental equipment and consumables to keep practices well-stocked and running smoothly.
Software of Excellence provides cloud-based dental software that allows practice owners to track data remotely across all sites. So, for example, they can monitor the number of UDAs completed or the private revenue being generated at any time. Staying connected remotely is a business lifeline for millions of people right now. With the current working model set to continue and increasing demand for virtual appointments, SOE’s cutting-edge dental software is a sound long-term investment option.
MediEstates can also use SOE software for valuation purposes by requesting practice diagnostics that provide real-time information on patient numbers and failure-to-attend rates. No other broker has the kind of network to offer such a comprehensive service. Our analysis is completely free of charge up to the point of sale and customers are under no obligation to buy or sell. It enables me and other Practice Valuation Managers at MediEstates to build great relationships with long-term clients. It is a pleasure to watch their businesses flourish and to play a part in that growth.
Scott Gidman is a Practice Valuation Manager who has been with MediEstates for seven years. In that time Scott has valued over 1,100 different dental practices across the UK and Republic of Ireland, so he has extensive experience in all aspects of the dental valuation process.