Sarah Bradbury considers the impact that covid has had on the dental industry.
We are already starting to hear about the health impacts of long covid, but what about the financial implications? Not only is the world being thrown into a recession and our taxes are being stretched to their limits, but to get though the financial hurdles you have to decipher different types of business loan schemes and hope the government can still find money for continued furloughing, just to run your practice through this uniquely testing time.
The British Dental Association (BDA) has, since last April, been in discussion with the government to try to ensure there is central money for dentists and their businesses but, as is often the case, dentists can get lost in the support given for the NHS and medical fields.
Feeling the pressure
In October 2020 The Dentist reported that Begbies Traynor Red Flag Alert research, which tracks UK businesses in ‘significant’ financial distress, categorised over 1,500 UK dental businesses in this category. This would suggest that around 16 per cent of UK dental practices were experiencing financial difficulty last year. This highlights the increased costs of PPE, social-distancing and cleaning regimes associated with Covid-19 combined with a lower number of patients in attendance. On top of this can be added the restrictions and changes with permitted treatments and patients being nervous about leaving the house due to infection risk. Cumulatively this can cause significant planning and cash flow issues.
Financial help
Whilst there is a range of financial support available, it hasn’t always been easy to understand or access. The BDA reported that a quarter of practices had applied for a government support loan, but around 86 per cent of those had been turned down.
The National Association of Specialist Dental Accountants & Lawyers carried out a survey in August 2020 and found that 52 per cent of UK dental practices had taken advantage of the CIBLS (coronavirus business interruption loan scheme) or the BBLS (bounce back loan scheme) from the government. This equates to 11 per cent of practices taking out the CBILS loan, mainly private practices, with the average loan being 105k (12 per cent of fee income) and 41 per cent of practices taking out the BBLS loans, with the average loan being £49k (seven per cent of fee income).
Early retirement
Dentists having to make the painful decision to retire early and sell their practices due to long-term health issues is sadly not something new. However, having to sell your practice because you just can’t fund a business and pay staff in an environment with an international health pandemic is new. Some principals – as far back as March 2020 when the first evidence of the costs, trouble, stress and worry of operating their practice with a background of symptoms and cases, and a foreground of restrictions and PPE – decided it was time to step away from practice ownership. And because of this, after the first lockdown, many dentists sold their practices, with many retiring earlier than they had planned.
The opportunities
A notable change over the last 20 years has been fewer associates buying from their principals, due to a number of financial, practical and regulatory concerns. However, the silver lining on this very dark cloud could be that more opportunities are being created for associates to buy.
Whilst some larger dental groups haven’t been buying as prolifically as they once were, individuals have. Around 80 per cent of Christie & Co practice sales since January 2020 have been to independent purchasers. In its first ‘buyer registration index’, Christie’s figures show a 59 per cent increase in buyer registrations since the UK eased lockdown measures.
Lis Hughes, the managing director from Frank Taylor & Associates, underlined this trend by saying, “The biggest activity we have seen in 2020 is from associates looking to buy a practice. They are now seeing opportunities to be able to take control of their destiny, as it has been a hard year for them for two reasons. One is when practices returned to work after the first lockdown, many associates saw their pay rates, and therefore annual income, significantly reduced, and also the lack of government support for anyone earning over £50k a year.”
Lis continued, “Not only has the number of potential buyers increased, but the geographical spread of practices for sale is changing. Not surprisingly the popular areas remain just that, however, practices are now being sold in areas where historically there has been less interest. This may reflect the change in the working patterns of the population at large; as more people work from home, rural settings are becoming more appealing. For those thinking of selling, the market is still very active, there are plenty of keen buyers, and lending to the dental sector also remains strong.”
One benefit of the current uncertain situation is that in any downtime, buyers and sellers can also take the time to be more prepared for the completion of the transaction, thereby aiming to make it less stressful. This includes collecting together information for the due diligence documentation, checking that accounts and processes are up to date and regulations are being complied with; and for buyers ensuring their funding is secure and that they are thinking about their business plans, approach, and team management for when they become owners.
Whatever impact covid has had on your finances, career and business over the last year, try to make sure that any decisions you make, are taken with time and thought. Then through all of the unpleasantness we have experienced, there could still be some light at the end of the tunnel and the prospect of a new start.
References available on request.