Dr James: 0:41
Fans of the Dentists who Invest podcast. If you feel like there was one particular episode in the back catalog in the anthology of Dentists who Invest podcast episodes that really, really, really was massively valuable to you, feel free to share that with a fellow dental colleague who’s in a similar position, so their understanding of finance can be elevated and they can hit the next level of financial success in their life. Also, as well as that, if you could take two seconds to rate and review this podcast, it would mean the world. To me, what that would mean is that it drives this podcast further in terms of reach so that more dentists across the world can be able to benefit from the knowledge contained therein. Welcome, welcome to the Dentists who Invest podcast. What is up everybody? Welcome to this live and in the flesh podcast. Well, for the moment it’s a live, but it will be a podcast Eventually. I’ve just let the cat out of the bag a little bit on that one with my good friend, Andrew Acton, and we are here to talk about all things practice ownership in 2022, which is building on the back of our podcast, which we released way back when Andrew, I don’t know if you recall that was episode number five. How crazy was that. Do you remember?
I don’t know that would have been what April May 2020, something like that.
Dr James: 1:55
I think it was oh, no, no, no, because Dentists, who Invest, came into existence in September. So September 2020.
So yeah, yeah, would have been 20, 20 then.
Dr James: 2:09
I tell you what these last two years.
Just play with your mind in terms of trying to get time frame sorted, don’t they?
Dr James: 2:17
Yeah, I know Well, none of this existed. Dentists who Invest didn’t exist 18 months ago, and that is the sobering, that is the really, really crazy thing to think about, because it just feels like it’s been a part of my life for so long, but maybe it’s because I’m immersed in it every day. Every day seems like a year. I don’t know who’s to say. Anyway, andrew, how are you today? Looking forward to this one tonight, looking forward to you sharing your wisdom on the topic of practice management, because, as we all know, this is something that resonates with every single dentist and also, as well as that, it’s something that is shifting with time and it’s always evolving, and we want to get the fresh tick on whether or not it’s still a good idea in 2022, of course, don’t we.
Yeah, I mean it’s still a great idea. I suppose I own a number of businesses, so I’d be a strong advocate of owning a business. Being a leader in a business, I think it’s great fun, I think it is enormous fun, but equally I think it’s okay to not own a business as well. I think there’s a real danger at the moment that lots of people are kind of just almost like joining a bandwagon of wanting to own a practice because the people around them own a practice, or their family think they should own a practice, and for me that’s not a good enough reason. We all know that the fear of missing out is a dreadful decision maker. You don’t want to be making a decision because of the fear of missing out. But equally, if it’s something you want to do and there is a fire in your belly and there’s that spark, that spark can turn into a flame that can be nurtured and it can become something quite special. But it’s got to be the thing you want to do, because you’re going to have to give this all of your attention. You know what it’s like yourself, james. 18 months ago you didn’t have dentistry vets. Now it’s consuming your world because it’s your thing, it’s within you and if you’re going to buy a dental practice, you need to be the James Martin. You need to be the James Martin who buys a dental practice with that same level of passion, because it needs it.
Dr James: 4:10
Can I say one thing on that? My biggest misconception before I got into this whole world or dimension, I didn’t realize that it’s actually a lifestyle as well as a career, If that makes sense. So when I say lifestyle, what I mean is you have to virtually you have to. There’s really no such thing as some time off, because it’s always in the back of your mind and there’s always going to be people reaching out to you about the business, or you have to be conscious of what you’re doing the next day. It’s not just like you clock off at five, but you know what that works for some people, for others not somewhat. But I tell you what. At the very least it’s always good to make everybody aware of what it is before we start. Andrew, just getting a little bit of feedback on your microphone there. I don’t know if that’s like some static, Maybe it’s at my end is it yeah, I’m very, very quiet at this end. Oh, okay, okay, it seems to be better now. I don’t know what’s that. Fixed it. Yeah, yeah, okay, we’ll see how it goes. We’ll see how the recording turns out. Yeah, we’re good, but anyway, my friends, sorry to disrupt proceedings, but yeah, anything you wanted to say on top of that as well?
No, not really. I just think it’s that where, at the moment, the demand for dental practice answers the sort and I think it’s kind of still falling out the back of how people felt through the pandemic. You know, the pandemic really did shape people’s lives. Business owners had a really hard time, but people who didn’t own businesses felt really vulnerable because they weren’t getting support from the government. They were using their savings to survive. They’ve now come back into into working, which is good news. But because people have been in shaker, there’s lots of people that are using that as their motivator to buy a business and you need to have a reason to do it. But it’s unlikely a pandemic is going to come around again. And, going back to my earlier point, I think you need to really dig deep and understand what owning a business means to you. You know, is it about more money? In time, a practice only practice could deliver more money for you, which is great. Is it about leading a team? Is it about delivering your vision, you know? Is it about another reason, something to do with your family or your heritage? What is it within you that makes it really important to own a dental practice? Because it will consume all of your time without a shadow of a doubt. You know, I know people who spend 14, 16 hours a day working on their business. So it’s not for the faint hearted and the nature of the world these days and I’m pretty aware that we’re kind of broadcasting this through social media, but on social media people tend to make things look very easy. So what really happens is you’re getting to see their highlight reel. That’s all you’re getting. You’re getting the highlight reel of their life. You don’t really get to see the behind the scenes of what it’s like to own a business. And I’m not sitting here trying to put people off, don’t get me wrong. I’m just trying to draw up the reality of it’s a serious undertaking. You know you have to give it your all. If you’re prepared to give it your all, it’s an amazing thing to do, you know. Only a dental practice is a wonderful thing to do. Having said that, there’s no doubt at the moment it’s not easy to buy dental practice, because the values are high and a lot of people are wanting to buy dental practices at the moment 10 out of 10.
Dr James: 7:36
And you know what, Like I say, I would 110% agree with what you just said. It’s more of a lifestyle than anything else. And no, I suppose you’re not trying to put people off. But at the same time it’s a bit like in dentistry when we have informed consent, you have to let everybody know that ins and outs before you undertake a procedure. And this is maybe informed consent on our dental practice. There’s a nice way of putting it right there. You mentioned valuations just a second ago. That leads us into very nicely what we were going to discuss first, which was how our dental practice is valued.
So I’ll give you the kind of the short version, because it gets quite complicated. There’s about 30 factors at the end of any dental practice, but the big ones, the ones going to kind of set the cap. The cap and the collar gets set by location. So where your dental practice is in the country is going to determine the maximum price and also the minimum price we then go into how is that income generated? Is it NHS practice? Is it a private practice? Is it a plan based practice? Then you look at the figures within that particular dental practice and now we’re looking at the profit and loss statement. I mean saying what’s the fee income, what are the core costs in that business, what are the team paid, what are the labs and materials? That will give you an idea, because that will produce the net profit from the financial accounts. But then what we need to do is look at those financial accounts and the quick way is to get to an EBITDA. So an EBITDA number is the net profit from the financial accounts and then you add back to that. So the net profit is the earnings and then the B is before and then you add back to the earnings the net profit, interest, tax, depreciation and amortization. Depreciation is the allowable deduction for equipment fits and fittings and amortization is the same thing for goodwill, what that is intended to do is to get it to a baseline profitability or EBITDA figure so that you’ve got consistency across the board. And that does work In industry. It doesn’t work perfectly because lots of dental practices are run as board-line lifestyle businesses. So what I mean by that is the owner may run their car, their motor, through their business, they may go on courses, which takes them to Dubai, new York and South Africa, and that will be an allowable business cost. So you can see there’s costs in the business that aren’t directly related to the efficient running of a dental practice and they need to be factored back in, and that’s where you get to a reconstituted net profit. Once you put all that into the melting pot, you then look at the comparables of other practices that have achieved a sale in the similar area and of a similar profile and then you apply your value based on that and goodwill values get represented typically as a multiple of the adjusted profit or a multiple of EBITDA. The only slight further complication to this is because people quite often say well, what’s my multiple? Yeah, what multiple am I gonna get? And there’s two different styles of owning and running a dental practice. You can have a dental practice where you work in that practice yourself as the lead clinician. So that’s an owner run dental practice. And what you can also have is you can have an associate lead dental practice where the principal doesn’t work in the practice. Those two practices will have a very different level of profit Because if you think, if you’re working as a principal in a practice, james, and you gross 300,000 pounds, that’s 300,000 pound of income that you’re not reliant on associates for. So that boosts your profit quite significantly. So the multiple that you get on your practice will be slightly lower than if it was associate lead. But actually the value of your practice is probably gonna be the same because whether it’s associate lead or a practice that’s owner and occupied, the value of that practice is gonna be the same. They don’t differ based on the style of how it’s run.
Dr James: 11:37
Yeah, totally, and this is why, as well, someone said something smart to me once and they said you wanna sell your dental practice on, make yourself the least valuable person in the practice. Would that be that would be conducive to what you’re saying, because obviously that huge part of the turnover comes from the principal. Then that’ll be a massive issue and that’s what we’re going to. I’m even gonna touch on that later, actually, but it ties in with what you’re saying around. Actually, andrew, you must excuse me, I’m looking down at my phone a few times. I am listening intently, just in case you thought I was getting distracted. There’s a few people messaging from the group as well. So, guys, I just wanted to say something, a little bit of housekeeping before we go any further. There’s normally on the right hand side of the screen an area where people can type there are questions. We are unable to see those tonight. For some reason it has not appeared on Facebook. So if you have any questions, please drop me a private message and Andrew and I will do our best to get to every single one of you. Thank you so much on that one. Okay, andrew, thank you for that listening intently on that, and you mentioned goodwill there a second ago, and maybe goodwill and a few other of those technical terms. It might be nice just to break it down and make it dead simple and understandable, because a lot of us dentists, myself included, are slightly. I’ve heard of them, but maybe we’re not as familiar with them as we could be. And who better to come to than the guru who does it every day? You know what I mean.
So goodwill is effectively the intangible asset. Yeah, that’s what you’re buying, and goodwill is a mishmash of lots of things. The important thing to remember is you can’t put goodwill in the cupboard. You can’t see it, you can’t touch it, you can’t do anything with it. But it’s all the patience in the practice. It’s a team who work in the practice. It’s a sign on the door. It’s the fact that if you speak to people locally, they know where to go. It’s the fact that you’re delivering a set of dental services. You’ve noticed that in all of these things that I’m talking about, none of them relate to money, because the money is the byproduct of all of those things. You know the kind of money follows the event and the location is gonna feed into the goodwill, and so what you’re buying is your pain for what someone’s done in the past in terms of creating that dental practice, but you’re buying for the future. So you’re paying for the past, but you’re buying for the future, and you do have the alternative to set up a squat dental practice. You don’t have to buy dental practice. You can create a squat. In that scenario, there is zero goodwill to start with, and you’re gonna build that goodwill yourself, so you’re gonna fit out the premises, you’re gonna put the sign up, you’re gonna create the website, you’re gonna have that first patient that comes in to receive treatment and from that moment you start building the goodwill yourself. That is a more risky approach to getting into dentistry because typically a squat the very quickest end. You could get to break even in nine to 12 months, typically people looking at sort of 18 to 24 months to get it really working, whereas if you buy an established dental practice where you pay for the goodwill, all things being equal, you’ll take it over and it will continue to do what it’s done before so long as you treat it in a similar way, and then the hope is you then grow it on from there [“Dentist”].
Dr James: 15:01
Real quick guys. I’ve put together a special report for dentists entitled the seven costly and potentially disastrous mistakes that dentists make whenever it comes to their finances. Most of the time, dentists are going through these issues and they don’t even necessarily realize that they’re happening until they have their eyes opened, and that is the purpose of this report. You can go ahead and receive your free report by heading on over to wwwdentistuneinvestcom forward slash podcast report or, alternatively, you can download it using the link in the description. This report details these seven most common issues. However, most importantly, it also shows you how to fix them Really. Looking forwards to hearing your thoughts. [“dentist”]. Interesting. I’d be very curious to know roughly how that’s calculated. Is it something to do with the Google reviews? Is there a survey? I’m an interesting one, hard to quantify.
Yeah, they get fed into it Absolutely. I mean, for me, something that doesn’t get talked about an awful lot but I think is important is the consistency of the team. I think where you’ve got a consistent team, there’s very often a direct correlation between a team that’s been in situ for five, six years or more and improving financial performance. Where you see practices that have a high churn of people, that tends not to be good news. But the Google reviews will feed into it. A good website will feed into it. If you’ve got a good Facebook advertising campaign, it feeds into it. But remember that all these things feed into the goodwill. They’re not valuable in their own right. So occasionally people come to us and say, well, I want to sell my dental practice, but I’m going to keep the website. And I say, look, you can’t really keep the website because the website is part of the marketing mix. That’s part of what’s making this practice successful. They say but it’s a really good web address, it’s a really good URL. I want to keep it. I might do other things with it, but that’s what someone’s going to be buying. They’re buying it lots of barrel and if you take one element out of that, that kind of destabilizes everything, because it’s almost like a universe. It’s an environment in its own right, and the reason it’s been successful is because of all of those elements coming together. You take an element out, you don’t know what impact that’s going to have on the business.
Dr James: 17:26
I hear you, ok, cool, fair enough, and you mentioned eBay DA and this is something. You went into detail. You explained what the acronym meant, but this is something I always see chopped around and I can’t be the only one who is uncertain, beyond the actual acronym itself, as to what it means. Maybe you could talk a little bit more about eBay DA and some of the things we have to consider on that one.
Yeah, let me slow that one down. So when you own a business, at the end of the financial year and you could have a financial year end your account is going to produce a set of accounts for you. At the top end it has income and then, quite depressingly, every number there after is a cost. So you have a big online cost and then you have a net profit. The net profit, if your accountant is doing their job well, should be reduced to the lowest acceptable level, because that’s what you’re going to pay tax on, and there’s a big difference between tax avoidance and tax evasion. Tax evasion is illegal. Tax avoidance is perfectly fine and there are things that you can do to reduce your tax. So, for example, if you had a limited company a number of dental practice operators in that style now and you had cash and profit within your business, what you could do is you could make a company pension contribution on your behalf, a perfectly allowable thing to do. That would reduce your profitability, thereby reducing your tax, and that is a fine thing to do. However, somebody else may choose not to do that. So, dealing with EBITDA, to start with, what an EBITDA calculation does is it tries to neutralize financial accounts by taking out certain elements. And I think it’s important to remember that the EBITDA calculation doesn’t perfectly work for dentistry. It’s really designed for larger corporate entities as a way of measuring like for like. So you’ve got your net profit, you add back to interest. So this is any interest that will be incurred for any bank loans or finance agreements in the business. They will get added back to it. There will be tax added back. But then again, remember, depending on the trading environment, lots of dental practices now operate as still as sole traders and partners. Therefore there’s no tax within the sole trade of parts of accounts. It would be personal tax payable, so that wouldn’t feature, but it would in limited companies. You then have depreciation, which is allowable deduction for equipment, and then amortization, again the allowable deduction for goodwill. So when you take those back, that’s where you get your EBITDA number and it’s important to understand what the numbers that go into that and what that means. However, as I was saying before, an EBITDA calculation in dentistry doesn’t actually go far enough. You need to also then look at a reconstituted net profit as well.
Dr James: 20:23
What would an example of a high EBITDA be? Because I’ve seen people say like 9, 10, 12, stuff like that, or is that a hard question? Have I given you a real ball there when I ask that, or is that fine?
No, not at all. I think your 9, 10 probably is the multiple. That’s probably the sale multiple, the goodwill multiple as opposed to the. EBITDA. So on the financial accounts you’d have net profit On a general dental practice. The net profit would typically come in at somewhere between about 22 and 25% on the financial accounts, something in that order. Then an EBITDA would then probably increase that to somewhere between 27, 28, 30%. But then, importantly, the next stage on from there is the reconstituted net profit. That’s the one that probably gets it to something like 35% 38%. The exceptions to the rule are practices that do specialist work. So specialist work tends to be more profitable than general dentistry. So, for example, if it was primarily orthodontics, very often the profitability of those can be in the 40s, sometimes even riding into the 50% of turnover. They’re phenomenally profitable.
Dr James: 21:41
Wow, okay, I’ve heard of net profit, but not reconstituted net profit. How does that change things?
So the reconstituted net profit. So if we think about that set of financial accounts again, that net profit, at the bottom we’ve done the EBITDA, so we’ve added the interest, tax, depreciation and amortization and then the reconstituted net profit is taking out those elements that are personal to the person who runs the business. So motor, if you run motor vehicles, that would come. So if there’s traveling costs, if there’s an exceptional amount of repairs and renewals, that would get added back. But a really important one to factor and think about as well is I make an assumption when running a dental practice that the principal, the person who owns that dental practice, is going to deliver in the region of about 300,000 pounds worth of dentistry themselves. So when I do a reconstituted net profit I want to reflect that in my calculation. So that might mean either add or take away associate fees depending. So, for example, if it’s a practice where the principal doesn’t work in the practice at all, it’s completely reliant on associates. But if I now turn up and I deliver 300,000 pounds of that dentistry myself, I’m not going to be as reliant on associates. So I can reduce the associate fees to reflect that. However, the converse of that and that point that you said was spot on about make yourself indispensable. If you are the principal who is delivering, say, for 450,000 pounds, I’m going to have to increase the associate fees because the person who buys your practice is unlikely they’re going to come in and be able to gross at that level to start with. So I’m going to increase the associate fees and obviously, by increasing the associate fees that reduces the profitability 10 out of 10.
Dr James: 23:36
Awesome, Thank you for breaking that down. And one we’ve got some technical questions here which I think are good to cover, and then we’ve got some more philosophical, maybe like the fluffy side of just exploring the emotional aspect of finer practice. So let’s do one more technical and then let’s go philosophical, shall we? Because we want everybody to see that side of the game and that’s a huge you know what. That’s a huge thing because you know what sometimes, when we look at it, that practice and we think is the risk actually is what I’m staking, you know, purely in terms of a financial decision, is that the best thing? And maybe some might argue, actually investing is the best way to go about making gains, new money, from the point of view of time trading, time for some money and also the power of compound interest in the long run. But it’s not as simple as that. You know. For some people it’s an emotional thing and we’re going to delve into that in just a minute. So our one final technical question was leasehold versus freehold which is better? Maybe it might be nice just to even go one step below that for the moment and just simply state what a leasehold and a freehold are. There’ll be lots of people who know what it is, but there’ll be some people who won’t. Maybe it might be nice to explain.
Yeah, sure. So a dental practice obviously needs premises to operate from, and a freehold would mean that you own the dental practice premises. So you would own the building and then you would own the business that operates within that building. If you had a leasehold, you wouldn’t own the building. You’d have a lease in place which gives you the right to be there for a determined period of time and you pay rent to the person who owns the property. There is no right or wrong here. You know you can own a practice on a leasehold basis or on a freehold basis. The kind of my comments would be if you’re going to buy a practice that’s got a freehold, think of it as two separate investments. So you have a dental practice as an investment and you’re buying a property, and that’s another investment. Your business happens to operate from the property that you own. But I think it’s a good idea to think of them as two distinct investments. The property over time typically would increase in value. You’ve got an appreciating asset typically, which is good news, and then the dental practice should produce a yearly profit for you, which is nice and, all things being well, that could well increase in value as well. But I would think of them as two separate things. You can own the freehold in your own personal name. You can own it in a company with a dental practice, which accountants don’t necessarily always advise. But what you could also do is you could own that freehold property in your pension, which would then enable you either a sip or a sass and that would then enable you to then pay rent effectively from yourself, out of your business a very tax deductible way of incurring a cost and you then pay that rent into your pension fund. So you’ll grow yourself a private pension pot by having the property rent paid, not into you. Itch yourself what you’re going to get paid income tax on. You’re going to pay income tax on. You can make it as a direct pension contribution. So property can be a good thing. However, what it does mean is if you’re buying a dental practice, the average practice in the country is about £800,000. And the average freehold is about £300,000. So it’s quite an increase on what you’re going to be spending if you include the freehold as well, which is why some people opt for a leasehold, or some people may not get the option to buy the freehold as they’d up on a leasehold basis. If you’re looking to buy dental practice that operates on a lease, there’s a few things to look out for. Look for the remaining term of the lease. So if it’s, say, a 15 year lease and there’s 13 years remaining, a bank who’s going to lend you money will lend you money over 13 years because you’ve got 13 more years for the right to be there. If it was a 15 year lease but there was only four years remaining, a bank may well only lend you the money over four years. That’s going to make that practice potentially unaffordable. So the seller may need to speak to their landlord and get that lease extended. Something else you want to look for as well is, if it’s a leasehold practice is check to see if it’s held under the landlord and tenant act 1954, which is very specific. But what that means is that you get the automatic right of renewal of the lease, subject to certain conditions. So if the freeholder wanted to take the property back for their own purpose or redevelop it, those are the two main reasons why you wouldn’t get your lease renewed. But outside of that, if you’ve got a lease in place, the likelihood is you will get your lease extended. And when you’re buying a business, given that you might own this business for 12, 15, 20 years. It’s important to know that lease will be renewed as it comes towards the end. But that’s a very quick snapshot of the difference between a leasehold and a freehold Nice one Love it.
Dr James: 28:39
Thank you for breaking it right, darlene, as well, because I know that that’s something that I’ve always I vaguely knew what they were and now I know exactly what they are, and there’ll be a lot of people listening who feel the same. Okay, let’s talk about the fluffy stuff, the emotional stuff, andrew, a little bit less of the technical, just to mix it up, make it, spice it up a little bit. How could we? What was it? I’m just looking to my little list of questions here. Let’s talk about how. Let’s talk about how much it means to someone. Let’s say you’ve got a dental practice, okay. Or let’s say you’re thinking about buying a dental practice, you know. And let’s say we’re a lot of our friends are out there and they’re buying dental practices, okay, and does that always necessarily mean that we should follow suit? I mean, what should we? There’ll be a lot of people out there that feel this little bit of societal pressure to do that. You know what I mean. And what would you say to those people who feel pressured? Would you say that it’s good to jump in on the bandwagon? Do it the same as everyone else Hold up, take a stop, don’t follow us. Think this through. And if you were to say to them you think it through. What would you say to them?
I think you need within yourself. You need to understand what motivates you. You need to understand the core, really good reason why you want to own a dental practice. And, honestly, because your mates have got one, that’s not a good enough idea. You can’t buy dental practice just because that’s what other people are doing. The other people may well have their own reasons for doing it and you need to find yours. And if you can’t find it, then you really need to keep searching before you embark on owning a dental practice. It’s a big commitment Now. This will be your focus. This will be the thing that will keep you awake at night. It will take you away from your family. You’re gonna make sacrifices when you own and run a dental practice, so you need a good reason to know why you’re doing that. So when you’re there late at night and you’re questioning whether it’s the right decision, you’ve got a really good reason that you can go back to and go. But the reason I’m doing this is because I’m passionate about delivering a vision of patient care, but I didn’t see somewhere else. I’m passionate about building a team of people who deliver the vision that I’ve created and creating a culture that I’ve not seen anywhere before. There needs to be a real thing that you can lean back on because don’t get me wrong, owning and running a business is so much fun but it’s not easy and there are days when you scratch your head and it’s like this is really hard work and when those days come, you need to have that kind of core strength to understand why and for me, as a reaction to the pandemic, because your friends have got dental practice and the other one as well is to earn more money. I mean sure, over time I was gonna say that I was gonna say that as well.
Dr James: 31:42
I think that there’s this. Where a lot of that comes from is there’s an illusion. Maybe you’ll correct me whether I’m right or wrong on this, but from what I know and from what I’ve heard, it isn’t always the case, but there’s an illusion. Here’s your associate pay. You own a practice and this becomes your pay. Yeah, but that would be the most important thing, but that would be the received wisdom. But, just like lots of received wisdom, it’s not always necessarily correct. And yeah, you were just about to sorry, just before I jumped in there. You were just about to jump in and say why is this the case, or what your thoughts are on this. And I’m listening with all the areas, because this, for me, is gonna be shattering the most common misconception.
James, James, this is your show. Don’t depend as much as you want, honestly.
Dr James: 32:34
No, look, I’m gonna do this. I’m zipping my lips for everybody to find out.
So, as a general rule of thumb, if you own a dental practice, you will earn more than workers as an associate and well, come onto the other things it brings to you as well in a minute. But as a general rule of thumb you will. It still means that you’re going to be delivering a significant amount of clinical dentures to yourself, and typically principles were something like three to three and a half days a week clinically, and then they spend the rest of time working on their business as an associate. If you’re working clinically four, four and a half days a week, five days a week, in the short term you’re probably going to earn more money because you’re literally just doing more clinical dentistry. So you’re actually working more, more, more clinically. But by owning a business. What it gives you the ability to do is build a team around you. It gets you in a position where you earn the net amount received from associates and therapists and hygienists and it gives you the ability to wind back on some of your clinical work. But that doesn’t happen overnight. To start with, you may end up having to spend more time on your business, which means less time clinically, and as a result of doing that, your own earnings may drop slightly, but this is part of a bigger plan. This is something that you’re perhaps working to over a period of time and this is important that, when you’re thinking about buying a dental practice, is also doing a personal budget, because the amount you earn might not be the amount you need. So you need to understand, if you do your own personal income and expenditure statement, how much do you need against how much do you currently earn? Because if those are two different numbers, that will give you a much better idea that when you go into ownership, if, for a period of time, you’re having to invest quite heavily in the business, working with the team, understanding what motivates them, you might have to do some training, there might be some work in terms of putting in place some infrastructure that wasn’t there before. You know you’ve got that, that capacity and that redundancy what you were earning to be able to spend that time doing that. So I see I still see some associates who gross at a phenomenal level and do incredibly well. I also see principals who do the same. I also see associates that don’t gross at particularly high levels and I also see practice owners that aren’t necessarily getting the financial rewards they’re hoping for. But as a rule of thumb, I would say that if you own a dental practice and you work in that dental practice, you’re, over time, going to earn more from dentistry than working as an associate. What you also have is you have an asset as well which, all being well, at some point you’re going to be able to sell that asset on, and that’s where you’re going to get capital capital lump sum as well.
Dr James: 35:28
You know what. Thanks for clearing that up, because you know, maybe what I’ve just said is reflective of my little bubble, whereas you meet hundreds of these people, so you’re going to be so much more informed on that than anybody else. You said the word team Just a minute ago. This is another thing we have to think about, especially in 2022. It’s so hard to get dental nurses, and it’s also very hard in parts of the country to get associate dentists. Have you noticed any trends, andrew? Which areas of the country are more favorable to building a new dental practice because there’s more free labor versus other areas? What would you say on that one? Any input?
It’s, it’s affecting the country, you know, top to bottom, left to right, I think there’s a there’s a chronic shortage of nurses. I don’t think it’s quite as bad on the on the dentists, the associate side, I think the nursing side is a bit that’s hurting people hardest at the moment. I’ve seen lots of practices which pre pandemic something in order of nine to 10 pounds an hour. Those practices now up to 14, 15 pounds an hour for their nurses. That’s a significant increase. The brutal realities. You need nurses, you need good quality nurses, you need reliable, consistent nurses to deliver really good patient care. And it’s just one of the things that things tend to go in kind of cycles, like sort of financial cycles. And at the moment the demand for dental nurses is incredibly high, which means the cost for dental nurses has increased. That in the short term does immediately impact the profitability of a dental practice, because I would typically expect the cost of a team in a dental practice to be about 20% of turnover, something in that order. That’s what I’d broadly expected to be. If the nurses have gone from 10 pounds an hour to 15 pounds an hour, that’s going to push that percentage up. But for me that that’s a percentage of turnover. So we also need to remember what’s happening in the practice at the other end of the of the profit and loss statement, which is the income. You know what’s happened to the income in that practice and, whilst it’s very sensitive at the moment because you know people, some practices are struggling to get patients to visit the practice to hit their their UDA quota private dentures in is in really good shape. But you can. You can address the increased costs of your team by paying them more money, by adjusting your prices, and so if you put your price up by by one, one and a half, two percent, that will probably cover the increased cost of your team, and the smart thing to do is is to look to put up prices that aren’t so sensitive. So your patients may well know what your high, what they pay for their hygiene visit last time they came, but they probably wouldn’t necessarily know the cost for composite bonding or you know some more unusual treatments, and so you may be able to put the price up for some treatments which patients don’t have that regularly, by an amount that would more than cover the cost of those team members, and it’s trying to balance that, that income and the costs to maintain your profitability. But going back to your point about about recruitment, it is. I don’t think there’s any part of the country that’s really been been unaffected. There is an interesting point that that’s also coming down the line as well. That relates to the pandemic, which is when, when the pandemic hit, everybody left the big cities in the towns and they kind of went back home and there was a lot more activity in more rural locations. But since the end of the work from home mandate from the government just last week, we are seeing already a return to numbers of people to the larger cities and whether that’s going to change how people feel about whether they want to work locally or whether they do want to get back into the towns and cities is a bit early to tell. But I think that that kind of migration out of the cities over the next three or four months could change as people start heading back into the big towns.
Dr James: 39:31
You know you said just then about putting prices up with the slightly more unusual treatments. That is a gem right there, for principles, but also for associates who want to gross more to. You know you see your patients every week. You say you see lots of patients that know what a fill in is, they know how many fillings you’ve done from over the years, but then all of a sudden they want something slightly more elaborate. That’s where if you want to increase your turnover, those treatments, it’s certainly a lot more favorable to increase those, just like you said, not just for principles, but I would also make the point that that’s for associates as well, which is slightly moving away from practice ownership, but still a gem and that really stuck with me. So thanks for that, Andre. I was also going to say as well we one thing we should talk about, and it is important to talk about banks, loans, interest rates, what sort of deposit we put on our houses, we put down a deposit.
What sort of what sort of deposit?
Dr James: 40:24
should we be looking at for a dental practice? What’s the favorable one? Favorable one in terms of interest rates? Quite a lot to unpack there. What would you say on that topic?
So the typical deposit to buy a dental practice is is is quite broad, is somewhere between 10 and 20% of the purchase price, and a lot of that comes down to the quality of the practice you’re buying but also what your own personal profile looks like. So I always say to people you will probably get away with a 10% deposit, but plan for a 20% deposit and then if you don’t need the extra, then happy days, go on a cruise, go by yourself a nice watch, whatever you want to do, but if you do need it, at least you’ve got it there. At the moment, the banks are still incredibly generous to dentists and the interest rates have gone up a bit. The average rate at the moment for an acquisition loan is about 3.25% above base rate, base being at 0.25. So 3.25 is slightly higher than it would have been pre COVID. However, I’m not a dentist, so any venture that I go to my bank for to help me, the maximum they’ll lend me is 50% on any new venture as an absolute maximum, and mine, just right, it’s going to be somewhere between 6 and 7%. So, as a contrast, as a dentist you’re going to get probably 85, 90% funded and 3.25% as a non dentist, I’m going to get 50% at best and I’m going to pay 67% interest rate. So the worlds are very different. The banks still love dentists. They absolutely adore lending money to dentists because they’ve got a mandate from the government to keep lending, because that’s going to help us get out of the situation we’re in and get some money in the coffers so that the government can be repaid. But also, where you need to keep lending money you just look for markets are safe. Healthcare has always been safe. When you then look into healthcare, there’s certain elements of healthcare that are slightly more risky than others. So, for example, care homes. Care homes is a more risky element of healthcare than dentistry. So once you put a ticket in the box and say, well, let’s lend to healthcare. When you then get into healthcare dentistry the bad debt rate in dentistry is so phenomenally low because the core fundamentals of a dental practice work. Where a dental practice doesn’t work and a bank has the risk of losing money is where the principal, the person who owns the business, takes too much money out of the business for their own personal reasons. So they might have invested in a business outside of dentistry, or they might have a ponchant for cars or wine or whatever it might be, and the money gets spent outside of the dental practice and that’s where the dental practice comes under pressure. But the fundamental financial mechanics of a dental practice. It works really well and that’s why the banks like it.
Dr James: 43:16
That’s awesome, cool, thank you so much for that. Then, what we were going to do very shortly, guys, so I’m just looking over here. We’ve got one more thing to get through. Then we’re going to throw the mic out to the floor. I’ve had a few questions creeping in over messenger, just as we’ve been conversing Andrew, so we will answer those ones that came to us. We’ll go from there. So we’ve got one final question. Before we throw the mic out to the floor, feel free to send me some more questions over messenger. Everybody who’s listening. Feel free to ask Andrew anything you like about, or an identical practice, or even selling one, because that’s also Andrew’s forte as well, of course. So final question on the agenda tonight, final thing we wanted to talk about should I buy a dental practice with my friend, my closest friend? We go way back when I trust him with my life, all of those things. Is that a good idea? Is that a bad idea? Things that I should consider before I do that, because we don’t want to see any friendships ruined. Of course do we, andrew.
Absolutely not, absolutely not. And buying with a friend can help because, like I say, the average practice of a sorry, the value of a dental practice at the moment is about £800,000. So if we assume it’s prudent to have a 20% deposit, even though you might only need 10%, 20% of £800,000 is still £160,000. That’s a large sum of money for a relatively young person to have access to. Typically, people who buy practices around the 27, 28, 29 years old so that’s not long at a dental school so that’s a large amount of money. If there’s family money to support them, it’s doable, but if there isn’t, sometimes clubbing together with a friend means you don’t need to find £160,000, you might only need to find £80,000. So that makes it a much better situation. However, remember that you’re entering into a business agreement with this person that will look and feel a bit like a marriage. You’re kind of linked together and you’re linked together in a very deep and meaningful commercial and financial relationship, and that needs to be fully understood before you start on that and the reason that I laboured. The point is that that relationship is going to finish at some point somehow, so at some point that partnership is no longer going to continue, which is why it’s absolutely vital. At the front end, two things happen. One, you establish who’s going to do what in the business. So, ideally, what you want is you want the perfect Venn diagram, you want the bit where I do this, you do that, james, but we have a bit in the middle where we cross over so nothing gets missed. That’s the perfect way to work. But you need to understand who’s going to do what at the beginning, so you’re covering all the bases. The second thing you need to do is you absolutely must get a solicitor an ideally-idental specialist solicitor to produce a partnership agreement or a shareholder agreement. If you’re going to be buying a limited company. Because why? Things are on good terms, happy days, no concern, no problem at all. If and when you fall out or when something changes and you then have to go back and look at this agreement, it will be really important what’s captured in that agreement. Hopefully it’s not needed, but the nature of life is that when you pull that agreement out, something’s gone wrong. So it’s important you’ve got that agreement in place. And then the last point I’d say about is it a good idea to buy with a friend? If I asked you who, would you buy an dental practice with. If you couldn’t answer instinctively in under three seconds, then you’ve got to question whether that’s the right person you should be buying with. You know the thing that you if you have to go so who, but isn’t it. Do you know that thing? They have a thing, don’t they? Do you know if you’re struggling to make a decision? They say the best thing to do is should I go left or should I go right? They say if you toss a coin, when you toss a coin in the air, before it lands your brain will be hoping for heads or tails because instinctively you probably already know what you want to do. And it’s the same thing with a friend and a practice. The chances are you either know exactly who that person is and if you’re struggling to think of the right person, then I’d say that probably isn’t a good idea to buy a practice with somebody.
Dr James: 47:50
Now that is food for thought and also a nice way to make decisions just generally in life as well. Thank you for that Full of gems tonight. Thanks so much, andrew. Okay, guys, we’re going to throw the mic out to the floor now. So we’ve had a few questions coming in over Facebook Messenger, so I’m just turning to my phone now so I can read out the first one. Now, this is an anonymous question and I only got one opportunity to execute this live without giving up this person’s name, so I’m going to do that. Do you know what? That’s the beauty of the editing button Later? I guess he hasn’t. Actually, I hope that this is a not. I hope that the way this person has written this is anonymous and preserves their anonymity. But let’s find out. Okay, my question is the banks are lending at the moment, as previously. Hbos has given colleagues 100% business loan I’m just reading this out, as is Andrew, so hopefully you’ll know what these terms are Given colleagues 100% business loan with no deposit needed, which was around three years ago, and is now looking 30% deposit for similar loan to buy into shareholding. Planning to shop around, but just wondered if it is likely. If this is likely, just how it may be in the current climate. So I think the essence of this question is this person has been offered 30% deposit and they want to know if that’s representative or should they go and look at another lender.
I think what happens is banks, they kind of go in cycles, so they have policies and they also just have a desire to work within a business based on capacity, and their policies vary every time and their capacity to write business changes over time and those tend to influence the rate that they’re prepared to charge or the terms are for people. So Bank of Scotland a few years ago would have been keen to write business as we sit here today. They’re not somebody who jumps off the page as me as being as keen as some of the other banks, and what I’d recommend is what you can do is you can do it one or two ways. You can take yourself around a number of different banks and ask the question yourself, but when you then get to their banks, you need to then make sure that you find a bank manager understands dentistry, or what you can do is you can deal with a broker that understands dental finance and they do that for you, because ideally, you really want to approach probably three banks and see what those terms are. A 30% deposit for me is that’s unrealistic. There are banks that will lend you between well, we require a deposit of somewhere between typically 10% and 15% worst case scenario 20%, but that’s still significantly down on 30%. If you’re buying a freehold, they’ll lend 100% of the purchase price. So if that person does want to DM me, I can put them in touch with the guys and they can have a chat with them about it. But for anybody else that’s listening, as a rule of thumb you really should be going to three banks that specialize in dentistry but, importantly, bank managers in those banks that understand dentistry as well. That can be quite a time consuming thing to do, which is why I recommend people use a broker 110%.
Dr James: 51:09
That’s excellent, great answer. And we also managed to preserve the whoever that person was, that identity and keep it off camera, which is great, excellent. We’ve got another question coming in. I’m not sure if this is an anonymous one or not, but we’ll presume that, just in case. Best ways of retaining staff, andrew, what should we do?
Now I know you’re not a dentist.
Dr James: 51:32
Andrew, obviously, but maybe you’re coming at this more from the point of view of what you see in current trends in practice and how that might reflect upon their evaluation and what those well run practices have done so that they’ve been enabled to keep their staff. I guess that’s more your angle on this one, really isn’t it?
Yeah, exactly, and I don’t think we can shy away from pay. I think there’s a baseline pay that people need. Yeah, we’re not talking minimum wage, we’re talking living wage plus a bit. I think you need to pay people an amount of money so that they can they can live their life and they can enjoy themselves within the Bracket of the sort of job they’re doing in their practice. But I genuinely believe that, so long as the pay is good enough, it comes down to the conditions you create. So, you know, making sure that your your holiday terms are generous, making sure that you’re doing Regular reviews with your team, you know you’re giving them feedback, you’re giving them training opportunities. You’ve got a social calendar. You know, within within my business, where we have a formal social calendar, we agree at the beginning of the year we go, for you know we go to comedy clubs as a, as a team we do. We do a great British bake-off once a month. Some somebody in the team has to bake a cake and bring it in and everybody critiques it. Yeah, small things that kind of just build a culture to make it enjoyable. But I think something else that that matters as well is trying to create Space in the dental practice and I get this is space dependent, but try and create a lounge or a star room or somewhere which is their space, which makes them feel valued. It’s about trying to create an environment that people enjoy being in, because the money kind of comes and goes and the money pays the rent, but you all spend a long time working together. Something else that we did now I got it from some somebody that had done it before, but it goes down incredibly well when you’re looking for new team members is everybody in my business. They get their birthday off. It’s written into their contract that they get their birthday off in addition to their annual leave entitlement, and for me I think I want to think it’s really cool thing to not worry about the anyway, but also I would hope it says something about the sort of organization that we are in the. There is that value. We value you, you. We want you to enjoy that special day every single year, and if you can start to get those things into your, into your culture, what will happen is dental teams and teams generally operate like tribes, so tribes work well. In between it is all 12 to 14 numbers. A tribe works really well. So if you get people buying into that and enjoying that environment, other people want to be part of it and that can attract talent into your practice as well. So I would look, I would look beyond just pay and say what other things can you do? Yeah, I’m gonna give a Specific mention to to. So Angela, or luck and death Patero, run women and dental rooms in South London and I’ve seen her post on on Instagram places where their team sing and dance together in the morning. And don’t get me wrong, that won’t be for everybody, but what an amazing experience and culture and environment to be in, where people in the practice want to be part of something. So I say I would try and look at the non financial elements of the package and see how you can make it interesting and fun for people.
Dr James: 54:56
I Love it. Solid advice. So we are just coming up to the hour mark. We have two more questions, there’s a few more, there’s a few more creeping in, but we will keep this to around the hour mark. Oh, maybe, maybe we’ll have time. We’ll see how we go. Yeah, with these next to you, but we’ll see how things go. Feel free to send us questions in guys. Yeah, yeah, maybe we will do, we’ll see how things go. Sure, there’s no, there’s no particular rush regarding finances in the practice. Regarding finances in the practice, would you advise the practice manager to be in charge of all the financial aspects See the accounts, pay the bills, staff, etc. Or is it better for them to not have access to all of the accounts? Or even, is this something I suppose that it even maybe no opinion on, or there doesn’t have to be that? It can work for someone, it can work for others. What would your thoughts be?
I think it depends how, how closely you manage it and how much you want to be involved in that business. I think it also determines it comes down to the role the practice managers fulfilling. If that person really is a practice manager Perhaps retards of a business manager, then I don’t see how that person can Genuinely have a management responsibility in that business and not see and understand the numbers. I think that’s. That’s kind of like going to a boxing match you want to tie behind your back. It just doesn’t seem fair. So I think you need to work out to start with whether you want that person to manage Without any information on finances, which might just mean managing the team, managing patient interactions. But if you want that person to improve the financial performance of the practice, drive up turnover, managed costs, managed and material’s costs, look at pay rises, look at the cost of team members. Agree, sanerie increases bonuses. I think to ask somebody to do that and not give them access to define information just doesn’t seem. There’s a real disconnect there. So I think there’s there’s probably looking at the, the description of you, what you want that practice manager to do, and that will probably lead you down the path in terms of what information you need to give them, because if you don’t want them, if their job description doesn’t be quite to go anywhere, then you need a number Because you control that, then that’s okay. But then don’t ask them to do things related to the numbers if you’re not going to give them the information. But if you trust that person and they’re part of your management team, I wouldn’t see any problem with with exposing them to the financial information, because what that will do as a business owner that now frees me up to go and do other things, because I don’t need, on a day-to-day basis, be worried about the numbers because I’ve got somebody else doing that, so I can now. I can now go and do something that’s more valuable to the business as opposed to looking at the numbers, because my practice manager could do that for me Seems reasonable, absolutely awesome.
Dr James: 57:46
We have, where are we? Oh sorry, hang on, I’m just gonna get confused here. Yeah, we’ve got a question. Would you, andrew, recommends buying to establish past practice as a third partner, or look to go it alone with a squat? I suppose that was the question. Probably quite a lot of people there and variables, I’m gonna say, but is there anything that you can offer from that information that I’ve given you just then, andrew? So I think if you’re gonna buy in as a third partner One, you’re gonna be either in a minority share or you’re gonna be a third equal partner.
But remember that, from that point of view, you don’t have overall control of the money. So I think that’s a good question. I think that’s a good question that, from that point of view, you don’t have overall control. So you’re gonna be working in a democracy. You’re not gonna be able to make all those decisions and point it in the direction that you want. So make sure you’re comfortable, as a person who’s getting into practice ownership and business ownership, that you’re not gonna be in charge of your own destiny. You’re gonna be working in a collaborative measure with other people. So that that’s an important point to know. Something else that’s important as well is that if you’re ever looking to buy into an established partnership, there’s two Considerations here. There’s the do I like the business? Do those numbers look good? Do I think I could make that business perform? And then the second one is are these the sort of people that I like, can work with Trust and can see me developing a business relationship with? Because unless you get a firm yes to both of those and it’s probably not a good idea because again, a bit like when we were talking about going to partnership with a friend. You don’t want to be in a position where it unravels and it falls apart and then you’re in a contender situation. The the second point to that was or should I set up a squat? There’s there’s probably a point in the middle which is buying to a partnership by a practice on your own an established dental practice on your own where you have autonomy and control yourself, or Set up a squat. Setting up a squat requires you to be more than Than a dentist, and remember that the dentist are Incredible. You know it’s five years at dental school. Come out as a trained technician, clinician. You’re outstanding. However, dental school doesn’t spend much time talking about business. So if you’re going to set up a squat, you need to be quite confident in your abilities and have some understanding as to what the core principles of business are, because you’re going to have to start a business from nowhere. If you buy an established practice, somebody’s already done that for you. You can step into their shoes and continue to run that business.
Dr James: 1:00:29
Ten out of ten awesome. Do you know what we were going to wrap up after those two? But let’s, let’s have a few bonus ones, andrew, but thank you for all this value you give them tonight. I’m sure there’s lots of people out there that again. So much for this. I certainly am learning loads as well. Let’s go on to here’s one. I liked actually that I spotted Okay, and it kind of talks. It kind of leans back to the, the more ethereal sort of fluffy, emotional side of by an identical practice, rather than the technicals here. Here’s the question when do you start if you have actually no grasp of running business? I want to be your own boss. Is it best to learn once you’ve taken the reins, or is it better where to get grips with things and go and practice? Do you know what? I don’t really? I don’t know nearly as much about dental practice as you, but for me my philosophy is just go ahead and do Something. Yeah, but then we have to tie in people’s personalities. If that’s too far outside their comfort zone, maybe there’s a slower way to gain some experience. I don’t know. What are your thoughts?
So, james, unfortunately you’re. You’re an outlier because you’re an entrepreneur that happens to be a dentist. Most dentists are our dentists, with, with, with, not a Natural entrepreneurial flair. So my advice to most people is if you’re working as an associate in another practice, speak to the principal and see whether they’d allow you to work with them, deputized for them, when they’re on holiday. Could you get involved in some marketing campaigns? Could you get involved in perhaps training or developing some of the team members in the business, and then what you’re going to do is you’re going to get exposed to the business side of dentistry, but within somebody else’s practice, and that’s a safer environment to do it. What that also does as well is as a secondary benefit, and the secondary benefit is you can add those skills to your CV. So then when you go to a bank to borrow a million pounds of my dental practice and they say, well, great, your dental Experience is is not in doubt. You know you’ve done all your postgraduate qualifications, you up to date your cpd, that that’s all sound. If you can then produce a CV that says and I’ve deputized for my principal and I’ve run some marketing campaigns and I’ve supported the team when the principal was on holiday and I did this at any other. That shows that you’ve put yourself out and above and you really wanted to understand business, because if you’re going to be using the banks million pounds, they’d like to know that you’ve got, you know, some basic understanding of what what businesses is about. So your, your idea of just kind of jump straight into the pool is the entrepreneurial end of things. For most dentists, learning in the dental practice is a is a safer way to go. But, like I say, you’re, you’re not helpful because you’re, you’re the other end of the spectrum.
Dr James: 1:03:11
You know what? I ought to be slightly careful, andrew, because you know, when you start let’s say you’re starting a business and maybe it’s just something like you’re creating some content and seeing what sinks and seeing what swims Then there’s very little on the line, isn’t there? And you make a really good point, because if you’re going to go to the bank and you’re saying, listen, I’m not personally liable for all this money, just jumping in at the deep end with two feet in both hands, maybe isn’t the best idea. So you make an absolutely tremendous point and when I reacted to that, that was very much my knee jerk reaction. Yeah, just go ahead and do it, but you, I’m glad that you covered the conversation. So thank you, okay. Final question Thank you for all these tremendous questions tonight, guys. Uh, we have. Yes, should buying a share be cheaper than buying the equivalent amount if it was the? Oh, oh, that’s a good question. So should buying a share in dental practice be cheaper than buying the equivalent Amount if the? If there’s an open market, ie If it was valued at one million open market, should 25 buy in be 250 car lower, as you’re really? You’re only buying a share, hmm, hmm.
I guess, I guess, maybe.
Dr James: 1:04:26
Yeah, no, go on, I was going to guess something, but yeah, if you’d like to. Yeah, I’m interested here on what this is.
Okay, so what? What the person’s asking here is that there’s, there’s an overall value for a practice, but then if you’re only buying a proportion of that practice, is it simply you cut that cake up and then you buy that, that piece? Um, I can understand the logic as to why that would make sense, but it, but it, but it doesn’t.
Dr James: 1:04:55
Right. I think maybe the question is slightly more along the lines off. If they were to put the practice up for sale on the market and it was to be worth one million, right, then normally to buy a quarter of that it would be worth 250k. But what this? What the person is asking this question is saying that would you expect that if it was not on the market and it was a deal between you and your mitt that you might pay more or less, or what the should, what should should the dynamic be, if I’ve understood it correctly, andrew?
Okay. Well, what I’ll do is let me answer that bit first and then I’ll go back to the first point, because they are related. So if you’ve got a friend or someone you know and they’re going to buy into your practice, and let’s use the example in question it’s a million pounds and somebody comes in and says, well, I’d like to buy 25% of your business. You know it’s a million pounds, so surely 25% worth 250,000. It’s not, because when you end up with more than one person owning a business, the way that you’re going to get out is you are more than likely going to sell your share or you’re going to sell the whole business together. But if you sell a share going back to my point before about you have to assess the business and the other partner or partners in that business. Because of the increased assessment and there aren’t as many people who want to buy into a partnership as there are buying a complete practice the value of that share is reduced. So in the example, where it’s a million pounds, the share, the 25% share, wouldn’t be 250,000. It might be a hundred and eighty thousand pounds or 200,000 pounds. There will be a discount because what you’ve now ended up creating is a partnership, and partnerships are not as desirable as a whole practice. But going back to that thing about if it was off market and if it is your friend, what you want to agree with your friend is entirely up to you. What I would say is important is the start point should always be to get a valuation so you know what it’s worth. If you then choose, because they’re your mate, to give them a discount on it, that’s your choice, but you should always know what the true market value of it is. Because if you don’t know that one, you don’t really know if you’re discounting it or not. And two, I always think it’s nice if you are given a discount of some sort with anything that the person who’s receiving the discount knows they’re receiving a discount. So even in dentistry, if, say, you’re going to do a filling and the filling should be 120 pounds but you’re only going to charge somebody 80 pounds, I would say it’s really important for that patient to know that was a 120 pounds filling, but actually today I’m going to discount that for you to 80 pounds. They need to see the fact that there’s been a discount. And it’s the same with if someone’s going to be buying a practice. They need to know what the market value is, so there’s an appreciation of the discount that’s been afforded.
Dr James: 1:07:56
You know what? Thank you for that. There was maybe two interpretations there. I’m actually reading it again. I think it might have been more leaning towards what you were saying, but regardless, we’ve recovered both eventualities anyway. Andrew, we’re coming up to just over the hour mark. There’s been so much value there tonight. Whether you own a practice, you’re thinking of buying a practice or you’re going through the process. There’ll be something in that for everybody. Andrew, we’re going to conclude proceedings very, very shortly. Is there anything that you’d like to say in conclusion?
No, I think I’d say just take time. If you’re thinking about buying a practice, speak to your friends and family. They’ll know you well If you ask them whether you think you’re cut out for owning and running a business. Hopefully you get some really honest, good feedback from people. Speak to other people that are doing it at the moment or have done it, because they’ll give you their interpretation, their view on how it’s been for them. But remember that you also need to know what you want as well, because there’s a real danger in getting advice from everybody, putting that advice together and not coming up with a conclusion as to what you do, because you just end up with this amalgamation of everybody’s point of view, going back to the very beginning. Understand as a core why do you want to own and run a dental practice? If you can answer that question and it resonates with you and it really does go through to your core, then I think you start on that path. Just start looking at practices. Don’t put yourself under pressure. Register with some agents, get some details and ask questions. Get educated. Just keep asking questions. Understand what EBIT is reconstituting that profit, really get into the bones of it, because then when you find a practice that really works for you. You’ve been through this process a number of times before and you know how to assess it and you know how to take action. It’s not for everybody, but if it is for you, it’s an outstanding thing to do. It really is a wild ride.
Dr James: 1:09:50
What a nice way to wrap things up, andrew. Thank you so much for your time tonight. There’s a few more questions that have flooded in. Sorry, we couldn’t get to those guys who asked those questions. Anybody who’s question we didn’t get wrong to tonight, feel free to reach out to Andrew on the group and the act and you’ll be able to find him in the member section and he will be able to help you with anything and everything Practice, valuation, selling, practice, everything in that realm. That’s what Andrew’s forte is. Andrew, thank you once again for coming along tonight. It’s been a sincere pleasure. For anybody who wants to view this again, it will be viewable live on the group. I’m going to pin it to the top so everybody can see the video. As well as that, I’ll be releasing it as the podcast so you’ll be able to enjoy it in both those formats. Thank you so much for coming along tonight, andrew. It’s been an absolute pleasure. My friend, we’ll catch up super, super soon. See you later.
Yeah, you’re, welcome, cheers, james. Good night everybody.
Dr James: 1:10:48
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