Key Challenges and Emerging Trends in Dental Practice Acquisitions
Dental practice acquisitions have become increasingly complex and competitive in recent years, posing challenges for dental professionals looking to acquire new practices. In this article, we will explore the current key challenges faced by dental professionals in acquiring practices, examine the evolving trends in dental practice acquisitions, and discuss strategies to overcome financial hurdles. Additionally, we will highlight the impact of technology, changing patient expectations, and regulatory considerations on dental practice acquisitions. Lastly, we will explore emerging trends and opportunities that may alleviate or exacerbate the challenges faced by dental professionals in the year 2023.
Current Key Challenges
- Inflation: Dental professionals looking to acquire new practices face the challenge of rising costs associated with running and funding a practice. Inflation impacts the cost of borrowing and increases the cost of running a business, thereby affecting the overall financial viability of a practice acquisition.
- Rising Bank of England Base Rate: The recent increase in the Bank of England base rate has further amplified the financial challenges for dental professionals. The higher interest rates make borrowing more expensive, potentially increasing the cost of financing a practice acquisition and running the business.
- NHS Performance and Recruitment: Dental professionals acquiring practices with NHS contracts face the challenge of NHS performance metrics, such as UDA targets. Additionally, the desire amongst dental Associates to work within the private sector, alongside changing lifestyle trends driving a preference for part-time working hours has affected the availability of dental resources, making recruitment more challenging for Principal’s looking to build their team.
Evolving Trends in Dental Practice Acquisitions
Over the past 15 years, the volume of dental practice acquisitions has increased significantly. There is now a better understanding of the value of dental businesses, attracting a larger number of buyers. One notable trend is the growth of the "small group" market, where individuals or a group of individuals own between 3 and 20 practices. This market is highly competitive, with various business models driving its growth.
Specific Challenges in Different Regions or Markets
Well-located, well-run, and established dental practices in the local community are always in high demand. However, practices in less favourable areas may face additional recruitment challenges which in turn impacts upon their saleability. In terms of group or corporate acquisitions, practices with three or more surgeries, a healthy profit margin, an established team, and a strong community presence are particularly sought after.
Impact of Demographic Shifts on Dental Practice Acquisitions
Shifting lifestyle trends, particularly among millennials and Gen Z, have affected dentistry as a whole. These generations are seeking a better work-life balance and often prefer a portfolio career split between different practices and roles. This has resulted in a shortage of dental hours, primarily affecting NHS practices. To retain dentists within the NHS, Practice Owners are encouraging associates to build their private portfolio of work whilst delivering a smaller number of UDAs.
Role of Technology in Dental Practice Acquisitions
Technology plays a crucial role in enhancing practice workflows and improving the overall image of a dental practice. Technologically advanced practices are more attractive to patients, staff, and potential acquirers. Investing in clinical technology, such as CBCT scanners, and practice management technology, like digital accounting software and practice management systems, helps practices stay competitive and appealing.
Regulatory and Legal Considerations
Dental practice acquisitions involve several regulatory and legal considerations. Two key steps that can cause significant delays are the Care Quality Commission (CQC) registration process and property/lease considerations. It is essential for dental professionals to thoroughly understand these processes to avoid potential setbacks during an acquisition.
Adapting to Changing Patient Expectations and Preferences
Post-COVID-19, patients initially had spare funds, leading to a mini "Zoom" boom in private dentistry. However, as the cost of living and borrowing increased, patient preferences shifted towards affordable care. With more patients having to seek out private dental treatments, due to the shortage of NHS dentists, affordability is a key concern. To meet patient expectations and thrive, dental practices must create opportunities for affordable care through plan conversions or pay-as-you-go options.
Strategies to Overcome Financial Hurdles
Planning the purchase and sourcing funding are common financial hurdles faced by dental professionals. Effective business planning, including creating a comprehensive business plan, is crucial before seeking funding. It is recommended to seek advice and support from reputable financial institutions and explore the whole market to find the best funding deals.
Emerging Trends and Opportunities in 2023
Several emerging trends and opportunities can alleviate or exacerbate the challenges faced by dental professionals in acquiring practices in 2023. These include the rise of new practice (squat) setups, divestment or consolidation of group practices and the ongoing impact of inflation and interest rate increases on businesses.
Acquiring dental practices presents both challenges and opportunities for dental professionals. Understanding the current key challenges, evolving trends, and regulatory considerations is essential for successful practice acquisitions. Adapting to changing patient expectations, leveraging technology, and developing effective financial strategies will help dental professionals navigate the complex landscape of acquiring dental practices in 2023 and beyond.
For further information and expert guidance on dental practice acquisitions, contact MediEstates today. Our team of professionals is equipped with the knowledge and experience to support you throughout the entire acquisition process.