Dental Times - Practice Sales Intelligence - December
01332 609318
26 May 2019

Practice Location -
situated just off the town’s high street, the practice benefits from convenient access for patients due to the close proximity of local amenities, car parking and public transport services. A wider network of A-roads, motorways, bus and rail service links to the wider outlying areas all draw patients from outside of the town, bringing associated trade and additional footfall to the locale. There is a high concentration of families and young professionals resident in the immediate area, attracted by the reputable schooling provision in this convenient commuter location.

Practice type – with over 50 years’ trading history in this location, this two-surgery mixed practice has been under the ownership of the current principal for approximately 25 years and offers general dental treatments under the National Health Service contract, and on a private fee-per-item basis. The principal currently works a four-day-week, supported by a part-time associate working one-day per week and a part-time hygienist working 1.5 days per week. A small amount of orthodontic treatments are also undertaken by the principal under a separate NHS PDS contract with an expiry date of early 2016. Although a reduction in working hours is desired by the principal, there is no intention to fully retire and he would be happy to continue in any capacity, including the delivery of the orthodontic treatments with a view to securing a new contract in 2016 for the practice.

Traditional in character and décor, the two-storey converted residential premises is available on a freehold basis and provides a base canvas for an incoming buyer to enhance and modernise the business image to provide an attractive platform to entice registration of additional private patients.

Agent’s comments – due to the current principal wishing to reduce responsibilities as retirement approaches, the practice has essentially been ‘ticking over’ in recent years, with the many opportunities to expand and improve the business not having been at the forefront of the operational agenda. The stability of the turnover and profits evidenced are therefore a solid base from which growth is certainly achievable with a focused and enthusiastic owner, particularly if specialist treatments could be introduced. It is estimated that a minimum of £60k of gross value is easily referred out of the business to specialist clinicians each year, and this therefore presents the ideal opportunity to bring these treatments in-house. An analysis of chair time available during the present opening hours reveals approximately 18 hours per week, which could be utilised for this purpose. An incoming buyer with specialist skills could perform these treatments personally to further maximise profit, or alternatively, specialists could be brought in to the practice with market rate remuneration on an ad-hoc basis in response to patient needs/demand.

Financials – averaging gross fees of £320k over the last three years evidenced, the business delivers a net profit of 42%, demonstrating the profitability of this owner-occupier model where the principal carries out the majority of the treatments. The GDS and PDS contracts collectively contribute c£258k in return for the delivery of almost 10,000 UDAs and 230 UOAs, with the remainder of the income being generated from fee per item treatments, including hygiene. With the associate remuneration at £1.50 higher than the average £10.00 per UDA for the geographical area, this does have a reducing effect to resulting profit and it would be reasonable to expect an incoming buyer to realign this rate in line with the market norm. Of more critical importance, the hourly rate of £30 paid to the self-employed hygienist equates to a percentage cost of 89% when compared to fees generated from that source. It is therefore recommended that the practice manages the hygienist’s diary effectively to ensure that there are no gaps and downtime is eliminated, perhaps in conjunction with a renegotiation of pay structure to a ‘percentage of gross’ based arrangement (35% maximum) to incentivise activity. Laboratory fees and materials are slightly higher than expected for a practice of this size and type (12.7% of turnover). Economies and effective stock controls that have recently been implemented are producing positive indications that these will be reduced in the current financial year and beyond.

Price achieved – £768,411 including freehold, goodwill, equipment, fixtures and fittings – and sold in just 17 days from instruction.
Practice location -
within a 45-minute commute from the centre of London, this suburban practice is in an excellent trading position opposite a parade of shops in this highly regarded area. The leasehold premises are well presented and adequately signed, ensuring good visibility from passing traffic and footfall. Set over two floors, the public areas are spacious with particular attention given to the floorplan to ensure easy access (by its older and less able patients) to the fully equipped surgeries on the ground floor, with external ramp access being a further recent addition by the current principal.

Practice type – this busy mixed practice operates a total of five surgeries, with three being fully utilised by longstanding associates over the five days of opening. The principal works a three-day-week and the two part-time hygienists operate from the remaining surgery over a total of four and a half days. Historically almost exclusively an NHS practice, the owner has proactively used in-house TV monitors in the waiting areas to educate patients on preventative care as well as promoting specialist and cosmetic treatments for aesthetic benefits, and this has resulted in a successful increase in turnover and profit.

Agent’s comments – an acquisition opportunity of this type appeals to many types of buyers and this particular practice generated huge interest from owner occupiers, partnerships, small groups and larger corporate buyers in this highly competitive market. As the current principal favoured a sale option whereby he was able to continue working post-sale at the practice, a number of potential buyers were quickly identified and shortlisted whose own business models could support this wish. As a result of the comprehensive and professional negotiation undertaken by us, an asking price offer from the vendor’s preferred buyer was made and accepted within two days of viewing. This offer also included attractive personal remuneration terms for the principal to remain as an associate for a period of two years post-sale, with a longer term available if he so wished after that time. This arrangement sensibly assists the successful incoming group buyer with preservation of the goodwill of the business, ultimately protecting their long-term investment.

Financials – with almost 70% of the £834k practice income derived from the NHS contract for the delivery of approximately 19,300 UDAs, the practice benefits from a steady monthly income and high level of patient throughput from which to offer other treatment choices. The practice has seen incremental growth in fee per item private treatments and hygiene, with around £230k per annum now being generated from these sources, and there is a definite increase in patient demand for the competitively priced implants being offered – particularly with the further benefit of financing being available. With rent of the premises set at £40k per annum, which is representative of the market rate for the area, net profit margins (after adjustments for non-relevant costs and depreciation) average 24.1% over the last three years evidenced, which corresponds to expectations due to the income levels generated personally by the principal working on a part-time basis. Although laboratory and materials costs are higher than expected for a practice of this size and type, the incoming buyer (a multi-site operator) would be able to eradicate these higher costs immediately through scale of economies and sheer buying power.

Price achieved – £1,374,700 including goodwill, equipment, fixtures and fittings (and sold in just 10 days from instruction).
Posted by: Anne Barker on