The rise of the "Squat Practice" (there must be a better name for it?!)…

By Thomas Coates

Why are more dentists choosing to build their own practice rather than buy an established one? Thomas Coates explores the rise of the squat dental practice, what is driving the shift and the financial, property and CQC considerations involved.

Can we start by agreeing that "squat practice" is a dreadful name?

It sounds less like an exciting new business venture and more like somebody has occupied an empty dental surgery whilst the rightful owner is away on holiday. Surely, as a profession, we can come up with something better. "Start-up practice" perhaps. "Greenfield practice" if we're feeling particularly corporate. Whatever we eventually decide to call them, however, there is no escaping one simple fact. I seem to be spending more and more of my time talking to dentists who want to build their own practice from the ground up rather than buying one already on the market.

What has changed is that building your own practice from scratch is no longer viewed as the risky alternative.

Five or ten years ago those conversations were relatively unusual. Most aspiring owners naturally looked towards acquiring an established practice with an existing patient base, experienced staff and an immediate income stream. That route remains an excellent option and, for many buyers, it will continue to be the right one. What has changed is that building your own practice from scratch is no longer viewed as the risky alternative. Increasingly, it is becoming the preferred route into ownership for a new generation of dentists.

Interestingly, this is not simply my own anecdotal observation. Recent market review’s from a number of the specialist sales brokers have highlighted the continued rise in startup practices, pointing to sustained demand for private dentistry together with planning reforms that have made opening new practices more achievable than in years gone by. That certainly reflects what we are seeing at Buxton Coates. Conversations about startup practices have gone from being an occasional curiosity to a regular feature of my working week.

I still find myself speaking to practitioners who want advice as to the options on handing back an NHS Contract

The dental profession has changed significantly over the last decade. Continued pressures within NHS dentistry have inevitably encouraged more practitioners to consider private practice as their long term destination. I still find myself speaking to practitioners who want advice as to the options on handing back an NHS Contract (try selling it first!) and that’s a trend that shows no sign of slowing. At the same time, patients themselves appear increasingly willing to invest in private treatment where they value access, continuity of care, technology and the overall patient experience. Against that backdrop, it is perhaps no surprise that more dentists are asking themselves a very different question. Rather than buying somebody else's vision for a practice, why not create one that reflects their own from day one?

Buying an existing practice means inheriting patients, systems, goodwill and a business that already functions. It also means inheriting somebody else's decisions. The layout of the surgeries, the branding, the equipment, the staffing structure, the patient journey and, sometimes, a collection of historic problems that only become apparent once the keys have changed hands.

Instead of adapting to somebody else's business, you have the opportunity to create your own

Building a practice from scratch offers something entirely different. Every decision is yours. You choose the location, negotiate the premises, design the surgeries, specify the equipment, build the brand, recruit the team and create the culture. Instead of adapting to somebody else's business, you have the opportunity to create your own. That level of control is proving increasingly attractive, particularly to younger dentists who have a clear vision of the type of practice they want to build and the patients they want to serve.

There is another factor that, in my view, does not receive nearly enough attention.

It is also about the numbers

The financial commitment involved in buying an established practice can be substantial. Whilst banks remain extremely supportive of dental acquisitions, purchasing an existing business usually means paying for goodwill as well as the tangible assets. Depending upon the size of the transaction, that can require a significant cash contribution from the buyer together with personal guarantees and other forms of security.  A startup project looks very different. Instead of borrowing to purchase somebody else's goodwill, much of the investment is directed towards creating tangible assets. Dental chairs, scanners, compressors, decontamination equipment, cabinetry, IT infrastructure and all of the other items required to turn an empty shell into a functioning practice are assets in their own right. In many cases, that equipment can be funded through specialist unsecured asset finance, allowing owners to preserve precious working capital during those critical early months of trading.

Startup finance is often considerably more accessible than many people initially assume

For many dentists, that changes the equation entirely. Rather than finding a substantial deposit to acquire an existing practice, they are investing in equipment that will form the foundations of a business they have created themselves. Whilst every project is different and funding should always be tailored to the individual circumstances, startup finance is often considerably more accessible than many people initially assume.

We are fortunate to work alongside an outstanding specialist dental funder who understands exactly how these projects are structured and who becomes involved at a very early stage. In my experience, having lawyers, accountants and funders all talking to one another from the outset makes an enormous difference. It avoids the all too familiar situation where everybody is working exceptionally hard but not necessarily in the same direction.

Of course, there is one rather obvious difference between buying a practice and creating one from scratch. When you complete the purchase of an existing practice, patients walk through the door on the Monday morning.  When you collect the keys to an empty building, there are no patients, no staff, no systems and no income. There is simply an idea, a building and a great deal of ambition.

Turning one into the other is undoubtedly one of the most rewarding projects a dentist can undertake. It is also one of the most complex.

Finding the right premises is only the beginning. Is a new lease required or is there an existing lease to assign? Would purchasing the freehold make more commercial sense? Does the building have the correct planning position? Will alterations require landlord's consent? Are there restrictions within the lease that could affect the way the practice operates in future?

Only once those questions have been answered does the next stage of the journey begin. And that is where, in my view, having the right team around you becomes every bit as important as having the right building.

Thinking about setting up your own dental practice?

Our in-house Commercial Property and Compliance teams offer a joined-up start-up package, covering the legal work involved in acquiring your premises alongside your CQC registration and compliance set-up. Having the expertise you need under one roof means fewer businesses to coordinate, while we work closely with your funders, accountants and other advisers to keep everything aligned and take some of the stress out of the process.

Get in touch to find out how we can help you move from initial idea to opening with confidence.

Call 0330 088 2275 or email info@buxtoncoates.com.