Don’t put the cart before the horse
Don’t put the cart before the horse
When you’re buying a practice, it pays to get your process in order.

Buying a practice – whether it’s your first, second or third – is an exciting and important milestone moment. However, it’s not really a ‘moment’ at all.

The buying journey is really a series of mini-milestones, with each step along the way carrying its own importance. Rather than thinking only of the ‘big finish’ completion goal (tempting, we know), it’s vital to pay attention to every part of the process in turn. More than this, it’s vital to meet those smaller goal points in the correct order. Too often, we see buyers who have tried to race ahead, only to have to double back and return to an earlier checkpoint (usually at a great loss of time and money).

At Hive, we have a dedicated team on hand to help with the buying and selling of practices, which means that we’ve had the opportunity to set out the smoothest acquisition process. Here, we’ll consider how – and why – the order of these steps can make such a difference to your buying experience.

1. Discovery

This is the time for all those initial and essential questions. Do you want to buy a practice? What type of practice do you want to buy? Have you found the right one? It sounds obvious, but if you haven’t drilled down into these topics, you might be wasting time on points 2 and 3, considering a purchase or a practice that doesn’t work for you. If you’re unsure, our consultancy programme, purpose-built for acquirers, can really help.

2. Negotiation

Once you’ve found something that seems suitable, it’s time to agree on a price and discuss the technicalities, such as how and when you’ll pay, and whether the seller will stay on in the practice. We’ll support you during this time to ensure that you get a deal you’re happy with.

3. Financial modelling

With negotiations in hand, it’s the right time for us to check that you’re paying the right price. Our team will consider the viability of the business, including forecasts, to be sure that you’re settling on something fair. Often, there’ll be some back and forth between this stage and the previous one until a deal is agreed.

4. Heads of Terms (HOTs)

Only when you’re sure that the price is right, the formal documentation will be produced by solicitors, but we’ll review it to check that you’re getting the best deal.

5. Bank finance

Chances are, you’ll need some finance, but the process of obtaining it is understandably detailed. To give banks time to understand risk and put in place various protections, we recommend kicking off the process at this stage to avoid delays later on. If needed, we can introduce you to lenders and brokers to assist with finance.

6. Due diligence, 7. Tax structure, and 8. Legal

These three stages typically happen at the same time. As part of due diligence, we’ll double-check that the figures provided by the seller are correct, while also involving solicitors who’ll take care of the legal side. Doing this now means that if there’s anything the seller hasn’t told you about – such as unpaid tax – you’ll find it out before you buy, rather than afterwards. We’re happy to recommend solicitors who are dental industry specialists, and therefore know exactly what to look for.

We’ll also help you to consider the tax structure for your potential practice, deciding on questions such as whether you should buy it through a limited company, or form a group if this is your second site.

And finally, solicitors will again be needed to draw up the various legal agreements, which is often a more complex process than expected, and therefore one to get the ball rolling on now.

9. Marketing plan

With your deal now nicely progressed and more likely to go through than not, it’s sensible to begin considering how you will generate income. There’s always a temptation to begin this stage sooner, but while dreaming is natural, try to avoid committing any resources until this time. By waiting, you’ll save yourself from spending money you might not get back, and you’ll have a far better idea of what’s really needed. If you’re working with our dental marketing consultants, they’ll be able to get started on creating a plan to drive growth.

10. Completion

With all of the above taken care of, you’ve finally reached completion: the point at which the practice is yours. Documents are signed and keys are handed over, but wait; it’s not the end of the process yet.

11. Financial systems

As you move forward with your new practice, we’ll help you prepare for success by designing and implementing a financial infrastructure, and providing training in bookkeeping and systems such as Xero.

12. Completion accounts

You’re almost there now, with just the final set of accounts left for us to take care of. We’ll check them to retroactively confirm the financial position on completion, and to ascertain if any money is still owed, by either yourself or the seller.

Get us involved

As experts in buying and selling dental practices, we can help at every stage of the journey, whether directly or through our established network of partners. As we’ve shown, it’s hugely beneficial to get your buying process in the right order, but it’s also helpful to get us involved on your behalf as early in the purchase as possible.

If you’re thinking of buying a practice, or you’re concerned about a sale that’s already underway, get in touch with our team as soon as you can.

The information contained in this article is based on the opinion of Hive Business and does not constitute formal tax advice. Any tax outcomes will be based on individual circumstances, tax legislation and regulation, which are subject to change in the future. You should seek specific advice before embarking on any course of action. Hive Business does not provide regulated Financial Advice, including advice on investment, insurance or lending products or their suitability for you. This article is provided for information only and does not constitute, and should not be interpreted as, investment advice or a recommendation to buy, sell or otherwise transact, or not transact, in any investment including Bitcoin and other crypto. Any use you wish to make of any information contained within this article is, therefore, entirely at your own risk.

By Simon Vincent Senior Tax Accountant
If you have any questions or comments about this article, please get in touch.
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