Financial Tips

Helping Dentists & Doctors Achieve Their Most Important Goals

Selling Your Dental Practice? - 8 Tips for Avoiding Common Pitfalls 

Are you within 5 years of selling your dental practice?

Dentists face many challenges when it comes to planning to sell their practice(s). 

Alison Oliver from law firm Ward Hadaway shares with us her 8 Tips for Avoiding Common Pitfalls.

Selling your dental practice is a big deal. At Ward Hadaway we have helped numerous practice owners sell their practices. 

This article summarises some of the key pitfalls that can be encountered when selling your practice and what you can do to avoid or reduce them.

Tip 1: Plan ahead

Many sellers have unrealistic expectations about how quickly a sale can be completed. Even when you have found a buyer, a dental practice sale can take a long time to complete – sometimes many months. 

This is because the process has to be dovetailed with CQC requirements and, where there is an NHS contract, with NHS regulatory requirements. 

There is also a lot more work involved on the part of the seller and the buyer than they may appreciate in advance of the process. 

You cannot expect to market and complete the sale of your practice at short notice. You should set a target date for selling the practice at least a year or two in advance and work gradually but systematically towards that target date. 

Tip 2: Appoint specialist advisors early in the process

Dental practices operate within a very particular legal and regulatory framework and it is important that your advisors are specialists who understand this framework.

If they don't, it can cause delays and be more costly in the long run. 

You should obtain specialist financial planning advice to help you decide when is the best time for you to sell your practice and whether you need or want to continue working as a dentist after the sale. 

You should also obtain specialist tax and accounting advice. 

You will also need to appoint a specialist solicitor to assist with the sale. 

Appoint your advisors early on and make them aware of your target timescales. 

Tip 3: Prepare for the buyer's due diligence exercise

Once you have found a buyer and accepted their offer, the buyer will carry out due diligence – a process of obtaining detailed information about the practice and how it is run. 

Sellers are often surprised and even overwhelmed by the amount of information that is requested and can struggle to compile everything that is needed, particularly if the staff are unaware of the proposed sale and the owner is having to come into the office under cover of darkness to collate documents after a full day in the surgery. 

This can cause delays in the transaction. 

You can prepare for this by starting to compile important documents in advance: make copies and prepare an indexed file of key documents. 

Your solicitor and accountant will be able to advise you on the documentation that the buyer is likely to require. 

Tip 4: Make sure your house is in order

In the run-up to the sale, you should check that all your processes and documentation are in order. 

For example, do all your employees and associates have written contracts? 

Are these signed and up to date? 

Are your practice policies up to date? 

Do you have all the registrations and licences that you should have? 

Is all the practice equipment in good working order, and has it been inspected and certified as safe where this is required?  

Do you carry out regular health and safety audits and act on the results of these? 

The transaction will progress much more smoothly if the practice is well run and the documentation that you provide to the buyer reflects this.

Tip 5: Consider premises requirements

You should consider how the practice premises fit into the overall transaction as the deal may be de-railed if you are unable to transfer your property interest to the buyer. 

For example, if the surgery is leased, do you have a copy of the lease and the landlord's contact details? 

You should ask your solicitor to check the requirements for assigning the lease to the buyer. 

Your solicitor will need to demonstrate that you have good title to the premises and you should discuss with them whether you have all the necessary documents or whether documents need to be requested from other parties. 

If the premises are subject to a mortgage, you should check your lender's requirements for discharging the mortgage at completion.  

Tip 6: Confidentiality

Until contracts for the sale are exchanged with your buyer, either side could walk away from the deal. 

You will be providing the buyer with confidential and commercially sensitive information about your practice, and you may not want your staff and patients to know that you are thinking of selling until you are certain the deal will go ahead. 

You should consider asking the buyer to sign a confidentiality agreement preventing them from disclosing confidential information about the practice or details of the deal. 

Tip 7: Business structure

You may be running your practice as an individual sole trader, in a partnership or expenses sharing arrangement with another dentist or dentists, or through a limited company. 

It's important that your registrations, licences and other practice documentation reflect your practice structure. 

For example, if you run the practice through a limited company, is your NHS contract and CQC registration in the name of the company? 

If not, this could cause difficulties and delays when you come to sell. 

Speak to your solicitor to ensure that any problems are rectified in advance of the sale. 

Tip 8: Don't take your foot of the pedal

The value of your practice is dependent on a number of factors, such as the quality of the service that you provide to your patients, as well as the condition of your premises and equipment and the strength of your workforce. 

Some sellers can be tempted to start to wind down their efforts once they have accepted an offer from a prospective buyer. 

However, your buyer wants to take over a practice that is functioning at the same level as when they made their offer, and you need to be alert to the risk that the deal could fall through. 

You therefore need to continue to devote sufficient time, attention and resources to managing your practice right up until completion. 

This means continuing to address any staffing issues, repairing and replacing equipment if required and continuing to book in patient appointments for after the sale. 

In the latter stages of the transaction, and particularly after contracts have been exchanged but before completion takes place, this may well involve consulting with the buyer to ensure that any important decisions that you make are consistent with his/her plans for the practice. 

Ward Hadaway is a top 100 full service law firm with a national reputation for its healthcare work. Alison Oliver is an Associate Solicitor with more than 10 years' experience advising GPs, dentists and other healthcare professionals on legal issues affecting their practices. 

She handles numerous dental practice sales and acquisitions each year and is praised by clients for her efficiency, excellent service and proactive approach to anticipating and preventing pitfalls in dental transactions. 

You can contact Alison here.

This article is intended to provide general information only and should not be relied upon as legal advice. 

Copyright Ward Hadaway Law Firm 2018  

Hot Topics Q&A: Consumer Prices Index, What Exactly Is It?

Every week we receive questions from clients regarding all aspects of their financial planning. So, rather than keep the answers to ourselves (and clients) we publish one key topic each issue. 
 

Q. I know that inflation is measured by the Consumer Prices Index (CPI), but how exactly is the CPI calculated?

A. That's a great question as the term 'CPI' is mentioned in the media more or less every day, but not everyone knows exactly what it is. 

Every year the Office for National Statistics (ONS) reviews and updates the basket of goods and services which it uses to calculate the various Consumer Prices indices. 

It recently published its 2018 revisions, which took effect from the February inflation numbers, which were published on 20 March.

The 2018 basket consists of 714 items and on this occasion 14 have been removed and 15 new ones added, with a further 7 “modified”. 

The adjustments are a reminder that measuring inflation is no simple matter, a fact also evidenced by the controversy surrounding the Retail Prices Index (RPI). 

What we spend our money on and how we allocate our expenditure are far from static.

The headlines changes include:

• Women’s exercise leggings and action cameras such as GoPros have been added to the basket of goods and services
   
• New food items added to the list include raspberries, quiche and prepared mashed potato. The addition of mash comes some 30 years after dried mashed potato (remember “Smash”?!) left the indices
   
• Pork pies and edam cheese have been removed. However, pork pie lovers will be relieved to know that their favourite will still be catered for within the wider product category of a “meat-based snack”. This is an example of how the ONS ensures it can collect prices from a broad range of retailers, including shops where pork pies themselves are unavailable but other meat-based snacks are sold.
   
• The rise of the smartphone means digital camcorders have disappeared from the basket. Similarly, digital media players such as Chromecast and Apple TV have replaced digital TV recorders and receivers such as Freeview boxes.
   
• The shrinking band of late night revellers, who saw nightclub admissions removed from the index in 2016, will also witness the ejection of the “bottle of lager in a nightclub” from the 2018 index
   
• ATM charges disappear, thanks to the increased use of contactless payment

The changes grabbed a few headlines, with much focus on the pork pie v quiche front! 

The news came on the same day as the Spring Statement, which showed the Office for Budget Responsibility (OBR) expecting CPI inflation to drop to 1.8% by the end of 2019.

Please send us your questions! It's easy to do. Just send an email to us here (and if we publish it we'll make it anonymous).

Wrap-Up - 'Tin' Anniversary, Pension Challenges & Planning Your Future

Now that the clocks have changed and (hopefully) the warmer weather is on the way, I hope you're looking ahead to the rest of 2018 with a smile on your face 

On the personal front, I went skiing with the family in February (French Alps). A good time was had by all and I was relieved to escape injury this time (2 years ago I came home in a sling!).

I've also just done the North Tyneside 10k Run and managed my best 10k time for many years (45:55), proving perhaps that there's still life in the old legs!

And in a few weeks I am off to Cyprus for a few days with Mrs P to celebrate our 10th wedding anniversary (woo hoo!).  

On the work front, the first quarter of the year has been great! We've started work with a number of new doctor and dentist clients, helping them plan towards their ideal retirements. 

One area where we've seen a 'spike' in demand, is requests for advice on the pensions annual and lifetime allowances. 

In many cases, this is causing huge problems for a number of our clients. So much so that some have decided to opt out of the NHS Pension Scheme.

Not a decision to take lightly!

What I will say is that the calculations / permutations are extremely complex (does anyone remember the lauded 'pensions simplification' in 2006?), so I would advise all dentists and doctors to tread very carefully and make sure you do the sums for your own situation before you make any major decisions. 

I have some useful resources to share with you:

1. A brief guide to financial planning, by Jane Wheeler

This is an excellent 8 page pdf guide, which covers many of the areas that we should all be thinking about. 

Naturally, at 8 pages it can't cover everything, however Jane explains things in an easy to understand manner so I highly recommend you have a cup of tea and browse through it!

By the way, Jane Wheeler is now retired but previously worked in the field of financial advice and financial planning for almost 25 years and is a former President of the Institute of Financial Planning and director of the international Financial Planning Standards Board.

2. A webinar replay (vimeo)

Following my presentation at last years North East Dental Conference in Newcastle, myself and the speakers recorded our presentations via a webinar. 

You can hear from Alan Suggett of accountants UNW, Fiona Campbell of solicitors Sintons and yours truly (mine starts at 41:05), where I cover: pensions update, early retirement (the key steps) and retirement mistakes to avoid.

That's it for now, best wishes until next time!