The warning signs

Michael Blenkharn considers what might make you want to shy away from a potential purchase.

The process of purchasing a dental practice is a long way from the stereotypical unscrupulous world of the second-hand car trade industry, but the lessons learnt from buying a car can be applied when buying a dental practice.

Performance

In the same way car buyers compare each car’s acceleration, economy and boot space against one another, prospective dental practice buyers can do the same thing. A practice’s performance can be benchmarked against national averages and compared to other NHS, private or mixed practices. This benchmarking process can highlight any significantly high expenditure as a proportion of income.  One example of how this can be particularly useful is when reviewing staff costs. If you acquire a practice with high staff costs you will find it extremely difficult to reduce these as, under the TUPE (Transfer of Undertakings (Protection of Employment)) legislation, you cannot reduce an employee’s pay rate after buying the practice. The benchmarking procedure enables the prospective buyer to interrogate and evaluate the financial performance of the target practice.