MediEstates - Staying Profitable
Staying Profitable

Probably the single, most cherished benefit of owning your own dental business is ‘being the boss’ – you know, no-one telling you what to do, dictating your own schedule, holidays, days off, etc. After all, you do need something to compensate for the management responsibility, stress and paperwork mountain you endure on a daily basis!

Another key driver for business ownership is that the boss ‘calls the shots’ and gets to keep the profits. Assuming the basics of the company structure are already in place to maximise your potential tax savings, as the ‘head honcho’ it’s your choice how you wish to run your practice – what gets done, who by and at what cost. Quite simply, this is your business model.

Choosing the right business model for you and the practice needs careful consideration, and can vary depending on the stage of your dental career. In the early years of practice ownership, you are likely to have to satisfy investors (banks, family or both) with serviceability of loan repayments, but you are also likely to have the drive, ambition and energy to be clinically active during the majority of opening hours to generate maximum levels of income personally.

Later on in your career, with loans repaid and retirement on the horizon, you may feel that you have earned the right to slow down, deserve more time off to pursue leisure interests, and are happy to delegate more of the daily workload.

Covering your costs

Margaret Thatcher once said: ‘Pennies do not come from Heaven. They have to be earned here on Earth.’ If you are a single-handed practitioner, you need to generate enough income to cover fixed costs (rent, staff wages, etc) and to pay for the costs directly related to the provision of treatments (laboratory fees and materials) as well as general expenses like light, heat, cleaning, waste removal, advertising, telephone, etc… the list goes on. This is all before you can pay yourself!

Although the day to day running of this type of business may be considered by many to be less stressful due to the reduced management time involved, it can be a risky proposition for many buyers and banks due to the onus of performance relying on a single clinician. If you were able to expand into a second, or even third, surgery, increase the number of patients and treatments provided, this will have a direct positive impact on turnover. And this will mean more profit. Right? Not necessarily.

The structure of your business and the split of the workload between clinicians is a key driver to profitability, in addition to the careful management of the operational expenses incurred by just being able to open the doors to patients.

A leap of faith

Engaging the services of an associate is a leap of faith for many – will the patients like the new dentist?

If you were able to expand into a second, or even third, surgery, increase the number of patients and treatments provided, this will have a direct positive impact on turnover. And this will mean more profit. Right?

Will he/she be reliable and ‘fit in’ with the practice team? Will they add to profit or (unthinkably) actually reduce profitability?

The concept of an associate actually costing the practice money can be a relatively contentious one – particularly, and not surprisingly, for the associate. If an associate is paid around the national average of £10 per unit of dental activity (UDA) and/or sub 50% of gross (current average is 45-47%) after the contribution to laboratory fees, then surely the principal is keeping the rest as profit?

If that is your understanding of the principal/ associate profit relationship then it really is time for a reality check.

Take a moment to consider your answers to the following questions. Would your associate be able to generate an income in your practice if:
  • You didn’t provide the practice premises, hadn’t bought the freehold/paid the mortgage or didn’t pay the rent. What if you forgot to pay the insurance premiums?
  • You didn’t provide a surgery with working and safe equipment? Could he/she work without a chair or hand-pieces? What about the X-ray machine? Who pays for the electricity and water? What if you forgot to order and pay for materials, gloves, drugs, etc?
  • You didn’t employ a receptionist to welcome patients, manage the appointment book, answer the phone? What if you didn’t pay the phone bill?
  • You didn’t employ a nurse to work with the associate? Don’t forget that’s an ongoing 52-week commitment each year with Employers National Insurance contributions on top – and employees need to be paid even if the associate is sick or on holiday
  • You stopped all advertising activity and took down the website – perhaps the biggest generator of new patients enquiries in this web-led world?
  • You removed the decontamination room/equipment that you paid for? What about the ongoing costs of Care Quality Commission (CQC) registration and compliance? Would they clean their own surgery and part of other communal areas at the end of the day so that you didn’t need to pay a cleaner?

The list of scenarios is endless but I’m sure you get the picture. There is a cost to running a dental business, and there is a cost to you for providing the platform for an associate to generate additional income for the practice and a living for him/herself.

The burden of costs

A business owner needs to ensure that each associate’s contribution to the business profit is a positive one and a proper analysis per associate is the only way to fully understand the position.

Using an allocated costs and apportioned cost technique, this effectively clarifies the true profit (or loss) being generated by the clinician. Each cost is analysed and either ‘allocated’ to the clinician in whole (for example, a laboratory fee for a particular treatment) or is ‘apportioned’ between several clinicians (for example, a nurse who divides work time between more than one clinician throughout the week).


Mixed practice with principal and two associates in the south west.
Turnover of £785k with net profit of £75k, falling year on year.

By learning how to make the right decisions and implement the necessary changes, moving to tactical pricing, repositioning the brand, monitoring marketing, changing associate remuneration, changing the people structure and streaming the cost base, this business in three years now reports a net profit of £185k from a significantly higher turnover of £900k.

Client comment:
‘SOBP undertakes every financial exercise that exists within your business and you begin to see patterns emerging. I very quickly learnt to stop saying “I think,” – everything has to be evidenced, just like your dentistry. ‘It wasn’t a single exercise. I can only describe our practice as “a sieve”, lots of little holes that all needed plugging. One by one we sorted out the problems and began to see the figures changing. It’s like turning an oil tanker around slowly. ’Everything made a difference: we learnt to be more efficient with stock; we learnt to improve our marketing and our reporting; we improved our appointment book utilisation; we checked our pricing was correct and profitable. We distributed the work more efficiently; we increased sundry sales and made the most of our new patients. Our company structure was even sorted too.’
If the resulting figure shown after this analysis is shocking, don’t act in haste! It’s not a case of immediately terminating the associate’s contract – that could have further catastrophic effects as the burden of fixed cost payment then falls solely on the remaining clinician(s).

I have seen many businesses where the principal’s income is actually subsidising one or more associates but, don’t despair, it can generally be turned around to everyone’s advantage.

As they say, ‘knowledge is power’ and with robust facts and figures opening up communication channels to successful and, most importantly, fair renegotiation of terms and expectations, a mutual agreement with incentives for all parties to achieve a win-win situation is entirely possible.

A business owner needs to ensure that each associate’s contribution to the business profit is a positive one

As part of our forthcoming Business Planning seminar* in association with Spot On Business Planning, we look at associate profitability in particular detail, and delve into every facet of the everyday running of a real life dental practice.

Whether you attend as an existing practice owner, or in readiness for a forthcoming purchase, we will help you to fully maximise the potential and profits of your business, exemplified by the case study above of a dental practice owner who increased profits by over 250% in just three years (most clients double their profits in three years) by implementing the tools and knowledge learned.

With profitability being intrinsic to practice valuations, ensure that your business is in the best possible condition for the new financial year ahead and is worth the maximum amount possible in readiness for your future exit strategy. It will (probably) be the best investment of your time so far this year!

Over the next few months, as well as our regular Practice Sales Intelligence feature with details of recent values achieved, we’ll be focusing on key areas for profit improvement in your business. Including shining a spotlight on practice managers. Does yours effectively ‘manage your practice’?
Posted by: Anne Barker on

General Buyer Terms 

This agreement is in relation to MediEstates Limited whose registered office is at 1st Floor, Pacific House, Stanier Way, Wyvern Business Park, Derby, DE21 6BF acting for and on behalf of our clients ("the Vendors"); and yourself (Buyer's Name) in relation for an introduction to a prospective sale of a business as a going concern. By registering through this agreement I agree to all terms set out below:

  1. Definitions
    In this Agreement the following terms and phrases shall have the following meaning unless the context otherwise requires:

    Dental Practice business providing dental care. This business is under the MediEstates Ltd sale terms.
    Confidential Information
    Means the actual Vendors identity and all confidential information in respect of the Business, including, but not limited to, any ideas, business methods, prices, accounts, finance, marketing, research, development, manpower plans, processes, market opportunities, intentions, design rights, product information, customer lists or details, employees’ details, trade secrets, computer systems and software, and other matters connected with the products or services manufactured, marketed, provided or obtained by the Vendor, and information concerning the Vendor’s relationships with actual or potential clients or customers and the needs and requirements of such clients’ or customers’ operations.
  2. Obligation of Confidentiality
    The Prospective Purchaser agrees to treat as confidential, information supplied by or on behalf of the Vendor in connection with the sale of the Business.
  3. Exclusions
    The obligation of confidentiality set out in clause 2 does not apply to:
    1. any information received from a third party who was legally free at the time of disclosure to disclose it;
    2. any information which was already lawfully in the Prospective Purchaser’s possession prior to receiving it from MediEstates Ltd on behalf of the Vendor; and
    3. any information which is in its entirety already in the public domain.
  4. Duties of Prospective Purchaser
    1. The Prospective Purchaser shall take such a reasonable security measures to protect the Confidential Information and trade secrets.
    2. The Prospective Purchaser shall not, without the prior written consent of the Vendor, permit any of the Confidential Information:
      1. to be disclosed, other than in confidence to its legal or professional advisors;
      2. to be copied or reproduced;
      3. to be commercially exploited in any way;
      4. to be used for any purpose other than in connection with the prospective purchase of the Business;
      5. MediEstates is registered under the Data Protection Act 2018. Upon Signing this agreement you agree to follow the legal obligations of this act to protect the details of the information supplied to you, with it no to be passed outside of the control of you the prospective purchaser.
    3. The Prospective Purchaser agrees to keep a record of Confidential Information received.
    4. The Prospective Purchaser will return to MediEstates or the Vendor all documents containing Confidential Information and all copies of those documents on demand at any time which are in its possession or under its control, and for this purpose the term “documents” includes computer discs and all other materials capable of storing data and information. The Prospective Purchaser agrees that such documents remain the property of the MediEstates on behalf of the Vendor.
    5. The Prospective Purchaser must not jeopardise or re-direct the sale under any circumstances.
    6. The Prospective Purchaser must not contact the Local Area Team or CCG regarding any practice sale, by any means of media unless written permission is granted from the Vendor.
    7. To carry out own due diligence on practice purchases and accepts that any information MediEstates has supplied is information provided by the vendor and is not responsible for its accuracy or completeness.
  5. This Agreement
    The existence of this Agreement and its terms are confidential and neither MediEstates nor the Purchaser may disclose anything about this Agreement or its subject matter or implementation to any person other than in confidence to their legal or professional advisers.
  6. Duties of Prospective Purchaser
    When buying Dental practices, finance is normally needed. Our organisation operated over more than one of the MediHoldings brand, by completing this from you agree that the information can be shared to our other organisations to avoid the need to register independently and provide the best possible service.

    MediEstates will refer you to the specialist dental lending team and MediFinancial who will contact the necessary banks, whom have preferential healthcare lending rates in some cases, to ascertain which funding is available to you.
    By signing this agreement you do not have to use any of the banks MediFinancial contact, it is just another service which we provide.
  7. Deposit for Dental Practice
    If you are interested in putting forward a formal offer in for a practice, once the offer is accepted there will be a deposit required to secure the practice sale which is dependant of the practice size. This deposit is held in a client account and will be returned to the buyer on completion of the practice sale. You the buyer, will be required to sign a deposit schedule which will cover the buyer and the seller in the event that the practice sale does not proceed.
  8. Changes to this Agreement
    Any changes made to this agreement must be authorised and signed by one of MediEstates Ltd Directors.
Your shortlist contents will be included in this contact submission