How can the corporates buy practice after practice but I’m still looking two or three years later? Leah TurnerFeatured Products Promotional Features
Posted by: The Probe 6th November 2018
Practice Sales Director of Dental Elite, Leah Turner, considers why it can take longer for independent buyers to find a suitable practice.
As an independent buyer, it can be harder to find the ‘right’ practice that ticks all the boxes. This invariably means that it takes longer to find somewhere – often years – while for corporates it may only take months. Though frustrating, there are a number of reasons for this that are important to bear in mind.
First off, although each individual company will have their own strict criteria, most of what they’re looking for is financial. As such, corporates are invariably a lot less picky about the practices that they’ll look at and tend to have a wider selection to choose from – even once they’ve ruled out those that don’t fit the corporate model.
They’re also less inclined to worry about business growth, particularly with NHS practices. Instead, they will tend to focus on what’s there at the time of purchase, ensuring that the business is financially sound and profitable as it is. Of course, if there was a chance to develop a service and grow private revenue, corporates would no doubt seek to capitalise on that opportunity in the same way any other buyer would; it’s just typically not the main priority.
Some companies are a lot more particular about which practices they are willing to add to their growing empire – particularly when it comes to image and branding. As such, you do see corporates turn down opportunities from time to time because a practice doesn’t fit in with their brand identity. Generally, though, the main driver is the figures – especially for the larger, NHS-based corporates. As long as the practice is profitable and sustainable, other factors are negotiable. Corporates have also got better accessibility to money, as their pots are much bigger and they have much greater support from venture capitalists. This naturally makes the process of purchasing a practice much simpler, not least because it cuts out the need to undergo an affordability test with a broker and bank.
For you as an individual purchaser it is a much different story, as it is most likely the case that you will be relying on financial support from lenders to acquire a practice. This immediately limits your options, because what you want may be outside of your price range. Likewise, the practice that you choose has to be able to provide adequate returns to cover the loan repayments and pay yourself a decent wage, otherwise you won’t secure the loan from the bank – nor will you be able to turn a profit. So if, for example, you came across an NHS practice that fit the bill but had a history of underperformance, you would likely have to leave it as you simply wouldn’t have the resources to make it work. However, for a corporate that has a lot more manpower to throw at making a business work, this wouldn’t be an issue. It is because of these reasons that corporates are in a much better position to buy.
What you’ve also got to remember is that your criterion is probably a lot more restrictive than a corporates would be, as your acquisition is a personal investment that will have a direct impact on your day-to-day personal and professional life. It’s got to be in the right area, have the right potential, and suit your personal and clinical needs. As such, it’s always going to be much harder to find a practice that ticks all the boxes.
It is usually harder for first time buyers who have less experience in being able to identify what is and what isn’t a suitable practice and analysing financial eligibility. Indeed, by the time everything has been taken into consideration, an extensive search has been carried out and potential practices have been narrowed down, the process could have taken as long as three years – at least that’s the average time frame in our experience. That’s the reason why corporates are able to buy practice after practice but an individual buyer like yourself might still be looking several years on – not because they are preferred by vendors or able to complete the sale quicker, as is sometimes believed.
Still, there are steps to be taken to put yourself in a better position and speed the search process along. Firstly, recruit the help of a reliable sales and acquisitions agency that has an unrivalled knowledge of the market and access to practices throughout the UK, such as Dental Elite. It can also help to have guidance from a specialist broker. Conveniently, Dental Elite also operates a brokerage service, DE Finance, who can help you to establish your affordability and what practices might be suitable. That way, when the right practice comes along, you will be able to move quickly and decisively.
So if you’re stressed about how long it’s taking to find a practice, don’t despair. With the right help and patience, you’ll find ‘the one’ in due course.
For more information on Dental Elite or DE Finance
visit www.dentalelite.co.uk, email email@example.com or firstname.lastname@example.org,or call 01788 545 900