Financing a multi-site business

For many practice principals, the time often comes for growth and expansion of the business. This might involve an extension within the existing premises, adding a new surgery or two, or taking on an additional location. A multi-site business brings with it new challenges, opportunities and rewards, making it even more essential to retain a comprehensive and up-to-the-minute understanding of the finances.

 Benefits and challenges to consider

There are various potential advantages to enjoy when building a multi-site business or mini dental group. More surgeries bring more clinicians who can deliver safe and effective dental care to more patients. This also creates greater potential for profits, which can be used to fund further growth or be invested back into the local community. A larger business will also benefit from the economics of scale, facilitating enhanced buying power and increased cost-efficiency for everyday expenses.

Of course, with greater power comes greater responsibility. Two practices will likely require double the managerial responsibility, with aspects like recruitment, marketing and maintenance needed for each location. At least in the beginning, there will also be more pressure on the business owner to ensure that both clinical and non-clinical standards are achieved and sustained across both practices.

Most of these challenges can be reduced or overcome by effective delegation to trusted team members. For example, a good practice manager can ensure smooth daily operations at multiple sites, allowing the principal to focus on other things. An external account will also be crucial for managing the books in way that benefits the business as a whole.

Securing funds

Many principals wishing to purchase a second location will refinance their existing practice in order to release the funds for growth. This might be a sound option for some businesses as it allows for the consolidation of debt and may offer more attractive terms than starting again from scratch. It is particularly suitable for those whose existing practices have been performing well and have exceeded their profit goals.

Though lenders are commonly open to refinancing successful businesses, it is still important to ensure all your accounts are in order and completely up-to-date, just as you would if buying your first practice. The turbulence of the past few years means that lenders will be looking at even the smallest details to make sure you are a low-risk borrower. In addition, it is necessary to create a comprehensive business strategy and rationale to support the proposed purchase or expansion. The lender will want to review future plans and ambitions for the business, confirming that realistic and achievable forecasts are in place. This will instil greater confidence in the lender and may further lead to favourable terms. Working with an expert in the financial field will afford the benefit of unbiased advice and ensure the very best terms are secured for any given deal. Doing so will also afford peace of mind that the new debt will be serviceable with the anticipated profits from both the existing and new practices.

Know all your options

Refinancing might be common, but it is not the only solution available. It is vital that principals are aware of all options before making such a big financial decision. For instance, if the loan on the exiting practice provides highly competitive rates that could not be replicated in the current market, then it might be preferable to leave this alone and secure a second loan for the new practice. This is why it’s so important to understand exact market conditions at the time of purchase, because they can change quickly.

If sufficient reserves have been built within the existing business, or an individual has access to other funds, it is always possible to buy a new practice in the normal way. This means putting down the 10%-20% of the practice value as a deposit and operating the practice separately from a loan perspective.

Expert support

The support of a financial expert can be pivotal at various stages of the process when looking to purchase a second practice or build a portfolio of locations. Not only do they have the latest market information, but they can help steer principals in the right direction for their unique circumstances. The multiple-award-winning independent financial advisers at money4dentists have a wealth of dental-specific experience and expertise, meaning they appreciate the exact nuances of the dental market and how to get the very best deals for their clients. Now part of the Ruby Group, they have even greater capacity to help dentists secure the right funds for their business growth.

If the time has come for you to expand your business and you’re thinking about securing a second location, it is important to take a measured approach to your finances. Working with experts can unlock the potential you need while protecting your future.

For more information, please call 0845 345 5060 or 0754DENTIST.

Email info@money4dentists.com or visit www.money4dentists.com