Dental Tribune United Kingdom Edition

CAD/CAM SYSTEMS | INSTRUMENTS | HYGIENE SYSTEMS | TREATMENT CENTRES | IMAGING SYSTEMS T h e D e n t a l C o m p a n y Telephone: 0845 0715040 e-mail: info@sironadental.co.uk www.sironadental.co.uk Sirona Dental Systems Ltd., 7 Devonhurst Place, Heathfield Terrace, Chiswick, London W4 4JD ORTHOPHOS XG Tomorrow’s digital technology today Enjoy every day. With Sirona. XG family 390x90 ad 29/1/10 14:15 Page 1 S ince the 2006 dental con- tract was imposed upon the profession the Department of Health no longer allowed den- tists to set up practices within the NHS without its expressed say so. A plethora of new words such as ‘commissioning’ and ‘tender- ing’ came into force on the basis that new practices could be set up based on local need rather than where dentists want to live. Whilst the cost/benefit of this exercise has been heavily de- bated, the reality of modern day dentistry now means that the traditional evolution of dental associate to principal has been messily severed. A few associates might be able to compete with tenders from current practice owners or corporate bodies, however the vast majority will probably not. Recently the Carlyle Group (Carlyle) announced that it has signed a binding agreement to acquire Integrated Dental Holdings (IDH) and simultane- ously merge it with Associated Dental Practices (ADP) in part- nership with private equity firm Palamon Capital Partners (Pala- mon). The Carlyle group clearly sees growth opportunities within the NHS and private sector. So when this merger goes ahead, what are the chances that an in- dividual associate or group of associates can compete with a group that has close to 450 prac- tices treating 3.5 million patients between them? At present, the number of den- tists looking to buy a dental prac- tice far outweighs the numbers of practices put up for sale - and the list appears to be growing. With such high demand, those dentists who decide to make the invest- ment now have to face a tough set of choices ranging from acquir- ing finance (albeit at extortionate bank rates), judging the valuation of the goodwill and entering into a workforce which is probably the most over-regulated industry in the UK. GDP Mohammad Ishaq of the Dental Studio and Implant Cen- tre, Cottingham, made the transi- tion between associate to princi- pal a few years ago and points out that, unlike buying a house, those looking to buy a dental practice should be very aware that the valuation of a dental practice can go down based on the skill and experience of the buyer, and not just on external market forces. According to Mr Ishaq, securing the goodwill of the practice is an important part of the business of dentistry and, unless the buyer can provide a similar level of den- tistry to the seller, the goodwill of the practice may go down. The process of buying a den- tal practice can in some ways be similar to buying a house. The valuation of a house is based on more than just the costs of the bricks and mortar - essential- ly it is based on what the highest bidder is prepared to pay. When buying a dental practice, a large part of the cost comes down to the goodwill paid to the seller in order to carry on the busi- ness concerns of the practice, such as having a patient base to work from. In many cases this goodwill is based upon the gross fees received by the seller, so it is important that any prospec- tive buyer must consider whether or not they can keep their patients based on the type of dentistry they provide. It is also important to look at how the goodwill valuation is broken down. A low good- will value based on a seller who mostly provides advanced den- tistry such as implants or aes- thetic dentistry may actually be very expensive if the buyer cannot ‘match’ the level of den- tistry provided, likewise a high goodwill value based upon relatively simple day to day den- tistry may seem cheap, espe- cially if the buyer can offer the pa- tient base more advanced forms of treatment. Rajesh Varma from Hitchin Dental Care has been a practice owner for the past six years and points out that in this time much has changed with regards to the legislation of how a business is run. Rajesh recommends that young dentists should seek to undergo some form of business training and look at companies such as Business Link for further help and advice. Rajesh also en- courages prospective associates to compare the operational costs of dentistry as a whole as an asso- ciate and as a principal, because not all dentists who have made the transition have found that they are making as much money as they thought they would be. Rajesh highlights an important point that most practice own- ers are already aware of, which is that not all associates make their principals a profit and these dentists would probably be fi- nancially better off remaining as an associate. As a dentist who has recently made the transition between as- sociate and principal I can say that there are quite clear advan- tages and disadvantages of both pathways. For many the allure of having a higher degree of control over their clinical practice and a higher financial reward seems greater than the business risks associated with being a practice owner. However as practice valu- ations continue to rollercoaster in an upwards direction, the risk/benefit ratio becomes much closer, making the transition from associate to principal riskier than perhaps it may have been in the past. The fact that banks are still lending for new practices highlights that they consider the dental sector to be a safe bet, but gone are the days when putting up a sign saying ‘accepting new NHS patients’ was enough to secure a patient base to work from and just being a safe pair of hands was good enough to satisfy the regulatory authorities. Asso- ciates who are currently looking to buy a dental practice must re- member that in the modern day it is just as important to under- stand ridiculous business indus- try terms such as ‘outcomes’ and ‘quality frameworks’ as actually fixing teeth. DT ‘Outcomes’, ‘frameworks’ and actually fixing teeth Neel Kothari discusses the advantages of taking the leap from associate to principal About the author Neel Kothari qualified as a den- tist from Bristol University Dental School in 2005, and currently works in Cambridge as an associate within the NHS. He has completed a year- long postgraduate certificate in im- plantology at UCL’s Eastman Dental In- stitute, and regular- ly attends postgraduate courses to keep up-to-date with current best practice. ‘The number of dentists looking to buy a dental practice far outweighs the numbers of practices put up for sale ’ March 14-20, 2011United Kingdom Edition