Two years on from the start of the pandemic, Phil Barlow, Specialist Dental Financial Adviser for Wesleyan Financial Services, looks at how COVID-19 has impacted the dental property market and what that means for those looking to sell their practice in 2022…
The buoyancy of the dental market was an unexpected positive among all the hardship and difficulty caused by the pandemic. Similar to the residential property market, many feared there would be a crash when the pause button was pushed and we all went into the first lockdown in March 2020.
In fact, the market initially proved to be incredibly resilient, with sales and valuations reaching at least the same levels as they were in pre-pandemic times and this strength has continued.
But, as we all know given our experience since 2020, a lot can happen in two years – and much of it unpredictable. So, where does the dental property market stand now?
Chris Strevens, co-owner of Frank Taylor & Associates (FTA), recently shared his thoughts on this topic with us, and below I reveal some of his and our key insights…
Rural locations still popular
We’ve probably all heard the tales of how the move to working from home (WFH) and the desire for more outside space led to droves of people relocating from cities and towns to the countryside. Indeed, in August 2020, Rightmove reported a 126% increase in people considering properties in village locations.
Just like houses, dental practices in less urban locations also became much more popular in the early days of the pandemic, and that is still the case now.
Practices that would have traditionally been more difficult to sell before the pandemic, due to being in more rural locations, are still selling well.
Of course, there’s a question mark over what will happen as the WFH requirement is lifted and how companies adjust to that, but for now if you’re selling a practice in a more rural area, that in itself shouldn’t be a barrier to securing a buyer.
Demand and goodwill values remain high
There’s still high demand for practices.
Values of practices also remain strong. Of course, individual practice values are based on a number of factors such as financial performance, type of practice and location – but overall, it is a positive picture, for all types of practices.
The NASDAL survey for the quarter up to October 31st shows that the goodwill as a percentage of fee income for mixed practices increased to 179% of gross fees, up from 145% the previous quarter.
Private practices have remained steady at 132%, compared to 133% the previous quarter, whilst NHS practices were at 138%, a drop from 161% the previous quarter.
These figures are probably reflective of the uncertainty over the future of the NHS and the challenges those working within it face, such as the recruitment crisis, huge waiting lists, and the activity target steadily rising back. However as with all averages they should be treated as just that, as they aren’t in line with Frank Taylor & Associates own sale experience.
They also reflect the increase in demand for private dentistry as many patients struggle to access NHS treatment and the growth in the cosmetic treatment market fueled in part by the so-called ‘Zoom boom’ and also by the rise in disposable income many found they had when social activities and holidays were curtailed under the numerous lockdowns.
There are many unknowns that make it even harder than usual to predict what will happen to the dental market over the course of this year.
What will be the impact of the target activity level going back up to 100%? If dentists continue to leave the NHS (the BDA has reported that almost 1,000 dentists left the NHS in 2021), how will that affect the already imbalanced supply and demand of dentistry? With waiting times for NHS appointments of up to three years, will more and more patients turn to private? And how will these factors affect practice values and the attractiveness of your business to potential buyers?
The good news for sellers is that, while we cannot predict the future with 100% accuracy, the market remains strong, and values remain steady or increasing for all types of practices whether they are NHS, mixed and private practices.
Taking the next steps
According to a recent survey from the BDA, more than 40% of dentists are likely to change career or seek early retirement in the next 12 months given the current pressures on the service. If you’re planning to make a similar move, simply want to reduce your clinical hours or are planning to sell up and take on a different practice, now is a good time to seek some advice.
At Wesleyan Financial Services, we can support you to make sure all your business finances are in order and maximise the profits from the sale of your practice through smart investments* and retirement/estate planning.
We have a long history of guiding dentists through all stages of their professional and personal lives from buying and selling practices to retirement. That means we have the financial know-how and experience to help you make well informed decisions and achieve your goals.
If you’re thinking of selling your practice in 2022, we can help you to understand the next steps that are needed so that you can do everything you want to in the next chapter of your life.
Contact us by visiting www.wesleyan.co.uk/dental or calling 0800 316 3784.
Likewise, when it comes to protecting the value of your practice, speak to the experts within your industry who can give you guidance on the steps required to either address potential problems that might mean your practice valuation is lower than necessary, or boost your valuation.
Bear in mind that the value of investments can go down as well as up and you may get back less than you invest.