The only way is up!
As the value of Scottish dental practices continues to rise, Ian Simms explains why now is a great time to buy or sell a dental practice in Scotland
Goodwill and practice valuations by Mediestates for Scottish dental practices have risen by an incredible 200% since 2011, with NHS and mixed practices attracting a significant premium when compared to private practices.
Owning an NHS or mixed dental practice in Scotland has become an increasingly attractive proposition for a number of reasons.
Along with generous NHS Scotland practice allowances and rent and rate reimbursements, running costs remain substantially lower than in comparable practices in England and Wales. Plus, dental examinations and prescriptions remain free in Scotland, which makes an NHS practice appealing to patients and owners alike. When considering these benefits, it’s no surprise that according to the latest figures the number of Scottish people registered with an NHS dentist has almost doubled over the past decade and now stands at five million people, according to bbc.co.uk (2018).
The business of dentistry is thriving in Scotland with a strong market for practice sales and no shortage of buyers, especially in the major cities and central belt. As well as individuals now looking to purchase more than one practice, there is also increasing interest from the dental corporates.
Whilst it may not always be a vendor’s first choice to sell to a corporate, it can actually be very beneficial, particularly if the vendor wishes to stay on in the business post-sale. For example, remaining as an associate is a good way of maintaining income levels until eventual retirement and provides continuity for the patients and staff alike, while continuing to enjoy clinical work without the worries of practice ownership.
Achieving a valuation
While this increase in activity has helped to drive up the values of larger practices, smaller practices typically being taken over by individual dentists are also increasing in value.
Goodwill and practice valuations by MediEstates for Scottish dental practices have risen by an incredible 200% since 2011
When I started in the business of practice valuation back in 2011 dental practices were valued using the traditional method of percentage of turnover. Today all practice valuations are done using the EBITDA method – earnings before interest tax depreciation and amortisation – a metric used to evaluate a company’s operating performance. Once the analysis and cost evaluations are finished we end up with an adjusted net profit figure and that is the figure used for the valuation. Every valuation that Mediestates does is tailored to the individual practice and we work proactively with the vendor to find the right buyer.
Because of the current buoyant state of the market it is essential that both potential purchasers and sellers arrange for a formal valuation as failure to do so could result in a huge discrepancy between the price paid and the true market value of the practice. To avoid this, choose a broker with experience in the dental market and knowledge of the latest market trends and current bank valuations.
At Mediestates we have vast experience of valuing and bringing to the market practices across Scotland from the Scottish borders to the Shetland Islands (and everywhere in between) including popular hot-spots such as Glasgow, Edinburgh and Dundee. There’s a lot involved in selling a practice and we are here to help you every step of the way.