Buying a dental practice is not an easy decision to make. While many would say it is a great investment, you still need to be careful before proceeding with your purchase. There are a lot of considerations to make and legal pitfalls to avoid. If you’re planning to buy a private dental practice, here are some mistakes you should avoid.
Jumping in Blind
If you were buying a new car, you would test drive it. If you were buying an expensive coat, you would try it on. If you are spending hundreds of thousands or more on a dental practice, you must spend time understanding the business. This can only be done if your legal team raise the correct enquiries for you. A seller is not compelled to tell you anything about the practice unless you ask.
Ask the right questions and get the right information so you can make an informed decision as to whether or not to buy a practice. Don’t jump in blind and make a bad business decision.
Not Determining a Completion Date
In any transaction, it’s important to set deadlines to ensure all parties follow a completion timeline. This is especially important when setting a completion date – the point at which you pay the purchase price, collect the keys and become the practice owner. If you’re somehow unable to agree one, then there’s a risk that the deal won’t push through. It’s more likely to fail due to continuous delays. If you want your transaction to make progress, it’s essential for both a buyer and a seller to agree a completion date date so both parties know exactly what timescales to work towards.
Consider the following:
- The NHS will usually insist on a completion date being the 1st day of any month.
- The CQC will close an application if there is a considerable delay to the completion date.
- If you getting a bank loan to buy the practice, the mortgage offer will usually expire six months from the date of being issued.
Making Big Changes as the New Owner
Being the new owner of an established practice is an excellent opportunity for you to bring new energy and ideas to the table. This is essentially a good thing, as new ideas have the potential to bring your practice to new heights. However, you need to tread carefully as rapidly enacting new changes could prove to be detrimental to your practice, most commonly when it comes to staff.
As a buyer, you need to pay close attention to staff dynamics, pay and benefits. If the staff is vastly overpaid or has a large benefits package, you need to determine if you can keep that up after closing the sale. If not, then it may be better to look for a different practice. You will be paying a considerable amount for a well-established practice with a team that works well together. Bringing in changes immediately once you are the owner can have a devastating effect. Employees are incredibly well-protected and you do not want to face a n employment claim as soon as you become the new owner.
Not Being Commercially Minded
There are times in a transaction where you need to make a decision such as deciding on the anti-competition clauses in the contract. As a buyer, ideally you want the anti-competition clauses to be as tight as possible, restricting the buyer from being able to compete at all against you.
However, if the seller is intending to retire following completion, does it matter if your restriction is for three years or five years? Probably not and by being stubborn on points that are unlikely to have a big impact on your practice shows goodwill to a seller. Keep them on your side and choose your battles.
If you’re planning to buy a dental practice, these mistakes could decide whether your purchase will be worth it or not. So make sure you consider these factors and seek the help of a legal professional to make sure your purchase will go smoothly.
Goodman Grant Solicitors offer support and advice to dental professionals and people who want to enter the dental industry. If you’re buying a dental practice, then our legal team can help you with the entire process. Talk to our in-house valuation experts today!