Dr James, 0s:

David, welcome back to Dentist Who Invest Podcast. And you know what? It would be impright of me not to mention your your new title awarded to yourself of late Lawyer of the Year according to Dentist Times. It's quite the quite the accolade right there, David. Well done. And I know you're not going to let it go to your head. I absolutely need to better than that. And he's still humble, guys. He's still he's still one of us. He's still cool. It's Mr. David Nesdry. And David, we're here today to talk about due diligence on dental practice. But it's not just due diligence, we're also gonna make not we're gonna make due diligence not dry. So there's three D's in there, the triple D, and I think that we are gonna be able to pull it off. I'm feeling confident. How about you? Why not? Let's give it a go. Let's give it a bash, right? We've got we're blazing new territory right here on the Dentists Who Invest podcast. We're gonna make due diligence fun because we gotta know this stuff, especially people who are gonna sell their dental practices. And I feel like a lot of these things, because we don't know what they are and how they work, we kick the can down the road until we try to sell our dental practice, and then all of a sudden there is some legal quandary that we find ourselves in that means that we that precludes the entire sale. As ever, you can claim your CPD for this episode within the official Dentists who invest Smart Money Members Club. Smart Money Members Club also includes multiple mini courses and webinar series on finance for dentists, including how to become as tax efficient as possible, as well as understanding investing. All of this content counts as verifiable CPD, and you can download your certificates there and then upon completion of each lesson. In addition to this, we also include a whopping 10% discount on your dental indemnity and a 5% discount on lab bills for dental principals, amongst other perks and discounts for members. Please use the link in the description to claim your verifiable CPD for this episode. And David, I don't want to do too much talking because you've just enlightened me because I actually missed this somehow in the most recent budget. Uh the most recent budget that came out, of course, in October 2026, because that's when this podcast is being shorted. There's another reason why there's a little bit of an impetus for dentists to get their dental practice sold before April the 6th. I'll let you take the reins on that one. I'll let you explain why.

David, 2m 9s:

So thank you. Thanks for having me back. Um so yeah, so the latest budget, um, they've changed the business asset disposal relief and they've dropped it from a million pounds down to 500 grand. Um so whilst I'm not an accountant, effectively, all it means is that if you now sell after the 6th of uh April, maybe the 5th of April. I think is it the fifth or the 6th?

Dr James, 2m 32s:

Uh well it would be uh you'd have to get the sale done by the 5th, but no later, wouldn't you? Fine. So maybe we'll cut that bit out and we'll say uh No, it's fine, it's all right. It's all right. We we were establishing it on the camera, and yeah, like I say, uh get the deal done before April the 6th, correct?

David, 2m 47s:

Get the deal done before April the 6th, otherwise um there's a very real chance that you'll end up paying more tax. So I think time is of the essence now. I mean, I've I've already had um phone calls from people looking to sell saying um I've got an offer, um, I need to get it sold by um by the deadline, otherwise I'm gonna pay more tax, and it's very much a real issue and it's what it's well underway. So it's a kind of thing where even if I suppose you're um you may not have an offer at the moment, things can move very quickly, especially when people are motivated. So I think it's important to get this stuff, get this stuff going now. So when the time comes that you you know you have the offer accepted, you're you're ready to go, and you're not you know digging around for employment contracts or up-to-date reports or maintenance stuff um two months down the line and giving yourself even less time to get it get done before that deadline, really.

Dr James, 3m 43s:

Absolutely. And we're gonna jump into due diligence in two seconds. But just a quick thing before we do that, two things I just wanted to mention with regards to what you've just said. So the first thing is no, I'm not an accountant either, but my understanding is when we're referring to the threshold that David was talking about just a second ago, that 1 million to 500k, that's the threshold at which you pay, I believe it's 18% tax uh on the first 500k of the sale of your business. And then after that, I think it becomes 24% or 28%. I'm gonna have to look that one up. It's the higher capital gains threshold, it's the higher capital gains rate, whatever that is. Uh, and I believe BADR is now aligned with the lower capital gains rate on that first 500k, which is 18%, which is a lot worse than what it was before, because previously, not that long ago, it was 10% on the first million, and once upon a time it was 10% on the first 10 million in the good old days. So they're tightening up on this a lot. So, just to be clear, that threshold as of April 6th, 2027, is dropping from 1 million to 500k. So, I believe on a 1 million practice sale, that would just to bring that into real terms, if you sell sell your practice for 1 million, you're now paying an extra 30,000-ish in tax. Just to make that real for the audience, there's a little bit of an incentive there to get the deal done. David, question on that, the second thing I was going to come to is it feasible, us being sat here uh 31st of October 2026, that if someone out there decides to sell their practice today, that they can get it done before April the 6th?

David, 5m 16s:

It is possible. It is possible because this has actually been a situation that's happened the last couple of years as well, when people need to get things done by the deadline. And I think, listen, ordinarily we say practice sales can take six months, maybe, but when people are motivated and get in place what they need to do, it can happen, it can happen a lot quicker. I think off the back of um well, this I suppose this time last year, um the I've I had deals go through in in under 12 weeks, which was actually unbelievable because people are motivated because and it's gonna happen. Yeah, it's I know, and and what's gonna happen and what the and the risk, the real risk is this is that if um and it's happened before and I'm sure it'll happen again, that sellers will turn around and say, well, if it doesn't get done by that date, I either want to increase the price for you to cover my extra tax, or well, it just doesn't make sense for me to sell now, um getting less, so I'll just walk away from the transaction. And I had there was a couple last year where the there was renegotiation on the price and someone's losing out um because of it. So when everyone's motivated, it absolutely can get done in in a quicker time. Um even if you haven't got an offer now, um, or you know, if it's not on the market, even perhaps. I suppose if you've got you know, if you're motivated and you can get all that done and you can get something done by the end of the year, um then it's not it'd be difficult, but it's not beyond the realms of possibility that you can still get get everything through before that deadline, which is important.

Dr James, 6m 47s:

Jeez Louise. Well, what a pre-frame to this podcast, David, because what we're basically going to talk about today is what dentists can do to enable themselves to get the deal done sooner rather than later. And that's not to say we're definitely not, we're not making this podcast from the point of view where we're scaremonger and we're saying, Oh, you better sell your practice for April the 6th. You know, this in we had this podcast booked for quite a while, incidentally. Uh, and then this news was well fresh, fresh, you know, hot news, shall we say, you know, we're kind of fresh within the last few days of the the Chancellor's budget. Um, of course. So yeah, it just it came into play literally as we were about to shoot this podcast. So, regardless of whether that happened or not, this podcast was always going to be about how we can make a smooth sale, how we can make the sale of our dental practice as smooth as possible, and how can we do that from the point of view of a due diligence perspective, which is of course David's remit. So, David, over to you. We're all ears. I guess a good place to start would be I think there's a lot of people out there who maybe don't have entirely a you know a complete c clarity on what due diligence is for practice sales. So maybe we could delve into that first.

David, 7m 54s:

So effectively, it's just the exercise in which the buyer, buyer's lawyer, um does a deep dive into the into the business. I suppose I'd compare it to looking under the bonnet of a car before buying it. Um and I think what happens quite often is that you know, dentists are so busy running their practice and there's life, and a lot of things which may not appear that important because they're not really impacting the running of the practice kind of get kicked into the long grass, and quite often people don't even realise there's an issue or something needs to get sorted out until the point of sale. So, prime example, believe it or not, sometimes it comes up where employment contracts just aren't signed or associate contracts aren't signed, and no one ever considers it an issue because you know they're turning up for work every day, they're getting paid, they're doing their job. Um, so why would you why would you think there's an issue? It's only when it gets to the point where you actually start looking into this stuff, you think, oh, it's not actually in place, or you know, I've had this person on a handshake deal for 15 years. I never thought to put to to give them a contract. And and it and it does happen. Um, and it's there's no and there's no nothing wrong with that from the seller's side, but from a buyer's side, they're coming in. They need to make they're gonna want to know that all this stuff is is in place. They're gonna want to know that, well, when they when they take over, when they buy the practice, that you know, they know what the employees' terms are, for example, because that will transfer them automatically, or that one way or another they are gonna be obligated to, you know, carry on employing them on the same basis. So things like this, where it may not necessarily be a consideration in the running of the practice, when it comes down to it, it does all come out of the woodwork that it needs to be that it needs to be sorted out. So effectively it's just the an exercise in which a deep dive is made into you know the practice employment contracts, service reports, commercial contracts, patient records, all things like that, basically.

Dr James, 9m 52s:

Fantastic. Thanks for giving us that clarity. And you know what? Now it seems like a good time to mention you and I did talk about this off-camera. I believe you've got a checklist, uh, don't you? Or we we committed to make a checklist. Was that it?

David, 10m 3s:

Yeah, so we've got a a um uh a relatively standard form questionnaire, um, which we send. I mean, I sometimes send this out to people before they've even um had an offer accepted. And it's just all it's just a full-on questionnaire, very comprehensive, um, but it will basically give you a head start on the kind of things you need to get together. So it just means you can start running through and think, oh, employment contracts or my fire risk assessment, or I haven't looked at that for for two years, that that's going to need to be updated. I can get that booked in now. Asbestos reports, oh, my x-ray has been working fine, but I haven't, I've I've forgotten to get the service report done lately. So all these things, and it just gives you a head start because it can take a while to get these things booked in. And then a prime example, fire risk assessment might get done, come back, the fire doors need replacing, this alarm system needs replacing. And if that comes up three months into a transaction, you've then got to scramble to get it sorted quickly. Again, with this deadline we've got coming up, it just takes a bit of the pressure off. If you can get it sorted before the wheels are even in motion, really.

Dr James, 11m 9s:

Sure. And the reason I wanted to bring that up right now at the specific point, about midpoint of the podcast, is we are actually going to drop a link to download that in the podcast description. So feel free to check that one out, guys. Uh, when you get a moment in the podcast description, go right ahead, download that if you want to get this all laid out comprehensively. And what we will do in today's podcast is maybe touch upon some of the most salient things, David, that perhaps you come across in your day-to-day operation as a lawyer, uh, insofar as the common roadblocks that dentists seem to come up against. Because I like to ask this question to people who've got in the field knowledge, and I get that the answers will always be anecdotal. However, in a way, that's their greatest advantage because you're literally witnessing this day-to-day. Yeah. Yeah. And you're able to say, right, Dennis, here's what's here's where people are messing up, so to speak, uh, in October 2026, and what can we do about it, essentially? So, anyway, we'll get into that in just two seconds. Maybe what it could be good to do now, and I don't know, maybe you know this this off by heart because you look at it so many times. Uh, I'm not sure. But maybe what it would be good to do is to list some of the common due diligence areas in which we need to give attention in order to make this practice sail smooth. UK dentists. Dentists who invest now has an official platform where you can learn about finance and obtain UK compliant, verifiable CBD at the same time. The only platform that exists on which you can do both. The Smart Money Members Club has hundreds of hours of mini courses, webinar series, and live day recordings on all things finance slash tax efficiency for UK dentists. This includes complete courses on how tax works for UK dentists, finance so that you can invest and grow your own money, business so you can improve your profitability as an associate or principal, and for those out there that want it, there's also a mini course and how you can responsibly enter the crypto space using measured amounts of capital. I've gathered this content from the best of the best I could find in each respective area so that you know that this is how people at the forefront of each field advise their clients. The Smart Money Members Club also contains discounts on common things that UK dentists need to pay for on a regular basis. This includes a whopping 10% discount on dental indemnity, the offer to beat your income protection deal no matter what you're paying, and for the principals out there, 5% discount on lab bills and 10% discount on practice insurance. These are designed to offer hundreds, if not thousands, in annual savings. The purpose of this members club is to not only boost your monthly income but also manage your outgoings as much as possible and therefore create more profit. To celebrate the launch of the Smart Money Members Club, and given that the CPD deadline is coming up soon, I've decided to offer the first month for this platform entirely for free. This offer will end in the coming weeks as soon as the current CPD cycle is up. To collect your CPD for this podcast episode using the Smart Money Members Club, feel free to use the link in the description of this podcast.

unknown, 14m 13s:

Okay.

David, 14m 14s:

Well, I think I think one of them I've touched upon it before and I think it comes up quite a lot is is staff engagement, staff contracts. Um I mentioned it before that they're not always they're not always signed. Um but another thing is even when they are signed, sometimes they can be with with the wrong entity. If you're running a practice through a limited company and you have that contract with the employee in your sole name, that may need to be redone and that will need to be re-signed. If I'm look if I'm looking at documents and this has come up and we're buying a a limited company, but employee number one, their contract is not in the limited company, well then they're not engaged by that entity that's being bought. So really a new contract needs to be put in place with the correct entity. So that that can come up quite a lot for employees and for and for associates, I suppose. So number one, make sure it's with the right and make sure you're in with the right entity. Um, number two, make sure they're signed. I mean, it sounds obvious, but quite often we see them and they're just and they're not signed.

Dr James, 15m 19s:

These things slip through the rule works.

David, 15m 20s:

They do, they do. And again, just to finish off the employees one nicely, is quite often these contracts might be 10-15 years out of date, which is fine. And they don't necessarily need new contracts, but you need to make sure you are disclosing what all the what the update, all the updated terms. So uh salary in the contract might say 25 grand a year. If actually now time's moved on and it's 30 grand a year, well, you need to make sure you are properly disclosing that that is the new amount, that's the new salary, basically. Um, and that it's all all the updated info is is being sent over because people don't get new contracts every time they get a salary increase or you know they get an extra day of holiday, it just it just it's impractical and it just doesn't happen. But what's important is making sure that that is all communicated across basically at the time.

Dr James, 16m 11s:

Quick question on that before we move on. Out of every hundred practice sales that you sit you see, how often is it the case that the practice just has all its ducks in a row whenever it comes to employment contracts? Out of a hundred practices, maybe ninety. Oh, really? Dennists are quite good at this then, really.

David, 16m 31s:

Ducks in a row. No, Ralph said it the wrong way around.

Dr James, 16m 33s:

Oh, okay. Gotcha, gotcha.

David, 16m 35s:

I've said it the wrong way around. No, I would say all ducks in a row with employment and staff and everything, um, maybe one in one in ten. One in ten. Ten out ten out of a hundred.

Dr James, 16m 45s:

This is actually it's actually more often than not the case that dentists aren't pulling this off correctly.

David, 16m 50s:

Yeah, and again, things slip things slip through the cracks. So it's just, you know, in having um, you know, all the up-to-date GDC certificates, making sure people have got DBS checks, like all stuff which is just part of the parcel and it's probably done, but you may not necessarily have a record of it, um, immunisations jabs, like things like that. It's just uh having all this stuff ready and into hand. And it's like, you know, it said we said before that quite often as well, when people don't want it broadcast that they're selling the practice, if it then gets to the point of sale and you're chasing staff for you know DBS checks and immunisations reports and all of this, you could you could raise alarm bells, doing it all at one go, basically, as well. So that's also another reason why to kind of get ahead of it and make sure you've got everything needed.

Dr James, 17m 36s:

Fantastic. And you know, the reason I like to ask questions like that sometimes is I feel a lot of the time out there when you hear information like that, you might think, oh my god, I haven't thought about that for like five years, you know what I mean? And you might feel like you're alone, but actually it's kind of common. And yeah, that then shifts the perspective of us thinking to ourselves, right, we're not up to scratch, or we're how can I say this, blaming ourselves in that sense. And it just it allows us to feel like we're not alone, essentially. And it allows us to feel also and allows us to understand also that despite the fact that this is the case, obviously a lot of people are able to fix this because they go on to sell their practices. So there we go, boom. Anything more to say on that subject, or should we move on to the next item of view?

David, 18m 17s:

I just what you've just said as well is that it's a lot of this stuff is just not a big deal and it can all be sorted out. Um, and it's just a case of getting ahead of it and knowing to sort it out and then making sure it's done. But it's rarely an issue, and pretty much all the time it does get sorted out and it's fine. So again, no scaremongering, it's just to get a make sure it's all done and dusted.

Dr James, 18m 38s:

Boom. All right, great. So that was a very good thing to highlight from the point of view of things you need to get in place for due diligence. What would you say the next thing on the list is, I guess?

David, 18m 49s:

Next thing, probably general property requirements. So things like fire risk assessments, electrical reports, PAT tests, emergency lighting, all this stuff which needs to be done and up to scratch. So a fire risk assessment normally would be done every would be done every year. Um someone would come in, they do it, they might highlight different actions that need to be done. Like I said before, the fire fire doors might need replacing. Um, saw it not that long ago where a new alarm system needs to be fitted. And this is stuff that can take a bit of time to sort out, can and can be expensive. And more often than not, it's going to be raised, not just by the buyer, but a bank and any funder as well, because they do ask to see copies of fire risk assessments and they want to know that it's it's all sorted and compliant. So that's important. Um, same with electrical report, emergency lighting, all this stuff which you know seems fine, no problem. Um, it's just you need the reports and you need the evidence that it's that it's all fine. Um, and again, the sooner you know about it and the sooner you get it sorted and wrapped up, um, it's just one less thing to worry about um down the line when you will inevitably be asked for it, to be honest.

Dr James, 20m 5s:

Fantastic. And would the leaseholds and the specifics and the ins and outs of that fall into that category as well?

David, 20m 13s:

Um, so main thing with the lease is gonna if if there's a leasehold, the main thing is gonna be the length, the length of the lease. So nine out of ten banks when they're lending will require a lease term of 15 years, basically. So if you've only got four years left on your lease, you can pretty much guarantee that that is not going to be long enough and that's gonna need to be extended. So again, if you're even thinking about selling, it's having that conversation with a landlord now, basically, because they will that will need to be sorted out, and third-party landlords typically are the biggest delay factors in in a transaction.

Dr James, 20m 49s:

I see. All right, not to throw shade at those third-party landlords, but uh they're guilty. They're guilty. Watch out for those. Interesting. And any pointers on navigating that, actually, David?

David, 20m 59s:

Um, I think just it's start early. I think that's the kind of the that's kind of the key thing because in terms of extending a lease um or granting a new lease dudit to the buyer, there's there's no real obligation on the landlord to do it. So, I mean, quite often they're happy to do it, they've got guaranteed rent for another 15 years, there's no problem. But sometimes they are aware that they kind of hold all the cards and you need them in order to get your million quid for your practice, basically. So sometimes they know that. I've had it in the past where landlords have said, Oh, we'll do it for you, but we want 10 grand. And I've got one of those going on at the moment, and it's been going on for a while because the landlords know they hold the cards a lot of the time. So it's just it's navigating that, it's getting getting the ball rolling with it early again.

Dr James, 21m 48s:

What legal recourse do we have against a landlord who attempts to hold us a ransom in that situation, if any?

David, 21m 55s:

In terms of I suppose granting a new lease or extending one because Before the end of the term, you haven't you haven't really got any. And that's and I think sometimes and sometimes they know that. And sometimes they know that. And that does it does cause issues. Not often, but it can be a bit of a roadblock. I mean, as I said, there's been a couple where they've said, we'll do it, but we want 10 grand. And then your option is, well, I need it to sell. So I either sell and pay the 10 grand or I'm not going to be able to sell, basically. But it, I mean, listen, it depends on what the bank requirements are as well. But more often than not, it's going to be need to be long a longer period.

Dr James, 22m 32s:

Interesting. Interesting. All right, let's move on. What what what what about that list of uh things we need to get in place with regards to due diligence? What would you say is next on there? Next on there.

David, 22m 43s:

Um if you've got if you've got an NHS contract, things like end-of-year statements, um, copy of the contract, and in fact, quite often you may not have a copy of the contract, and the NHS don't have a copy of it either. So what can be a time saver on that is contact the NHS, and what they will do now is they will send you a letter to confirm what the key terms of the contract are. And if there is no contract, that will normally be asked for. So if I am told we don't have a copy of the contract, the NHS don't have a copy of the contract, I will ask a I will ask a seller to contact the NHS and get that letter. So that can take a while to get hold of as well. So again, that is something. If you don't have a copy of the contract, you might want to do that sooner rather than later. Um pay statements, if there are any breach notices, um general documentation relating to the contract again is is going to want to be seen. Whilst this kind of ties into it as well, if you're setting a limited company, CQC registration for the limited company. Um, and we talk about being on time pressures and everything with what's going on, but CQC is also uh a factor that can that can delay that can delay things. So I suppose it's important if you're running as a limited company, make sure you've got that that registration in place. Because if you don't, well then that is gonna make the target timeline slightly more unrealistic, basically.

Dr James, 24m 12s:

I see. Would you say that the topics we've covered so far would be the salient ones or anything else in there? Because I am conscious that we've obviously got this all listed in this wonderful report that we're gonna share with with uh in the description of the podcast.

David, 24m 27s:

Yeah, I think these are these are probably the main the main the main things. I think these are probably the main things and more importantly, the ones that can take the most time to to kind of rectify, basically. So if you know you don't have the NHS contract right, you can ask for it. Um if you haven't got your fire risk assessment properly sorted out or action plans need to be sorted, um, you can do that, you can get it in early. A lot of the other bits can be dealt with probably you know more quickly, depending on what they are. But I think these are probably the main things to kind of be aware of early doors because they can take the most time to sort out, really, especially the lease as well.

Dr James, 25m 7s:

I see. And if you were to identify the one single biggest roadblock that you see out there, the most frequently or commonly occurring one that hauls Dennis back from executing the practice sale in a timely fashion, what would you say it is? Let's name and shame it.

David, 25m 22s:

Uh it's gonna be le it's gonna be leases. It's gonna be I know we touched upon it before, but it's gonna be getting that lease term and the lease sorted. Um, and not only because not only due to third-party landlords being difficult, because they not always are difficult, but it's just the it's just the time, it's just a timing point of view, especially when you've got when you can have three parties involved. You can have the landlord and their solicitor, the buyer and their solicitor, the seller and their solicitor, sometimes even the bank and their solicitor. So you can effectively sometimes have four sub four lawyers all involved dealing with the same thing, and it can it can take time. So I think that is probably the number one thing. Um, and the number two is just generally getting a head start on the D D because it is gonna it is needed.