When Luke Moore and Paul Wilkinson established Dental Elite, they were on a mission to redefine the way dental practices were valued and sold. Based in Rugby, United Kingdom, and having built up a nationwide operation employing more than 30 people, they have sold more than a thousand practices over the last 12 years. Luke explains why it was important to them to create an agency that works independently, the impact of corporate dentistry and what the impending recession might mean for practice owners.
Why establish Dental Elite and what makes you stand out?
Prior to 2010, I was a director of a dental practice sales agency where Paul and I met and worked together. We sought to better educate the market on how dental practices were being valued, and to offer a service where the fee if paid by the buyer would be the same as what the vendor would have paid. As a result, vendors know we are working independently on their behalf.
Luke Moore, co-founder and director of Dental Elite. Credit: Dental Elite
How do you establish and maintain a relationship with potential clients?
We get acquainted with practice owners who might be planning to sell and we provide a free valuation without any commitment, we were one of the first agencies to offer this, and then we stay in touch, often for years. Our average incubation period is two to three years but for some it is a lot longer. At any one time we have upwards of 200 dental practices in various stages of sale. We speak to our potential clients twice a year, typically once they have submitted their annual accounts. If their profits have improved, we revise our valuation.
How do you establish the true value of a practice?
Today, the majority of valuations should be profit-based using EBITDA, which stands for Earnings Before Interest, Tax, Depreciation and Amortisation. It’s an approach that is favoured by corporate buyers and banks alike. EBITDA provides a good indication of how much future profit can be made. Put simply, if your costs are high, you are worth less. But we also consider intangible ‘value adders’, such as potential future revenue streams.
Has the dental practice sales market changed much since 2010?
The market has changed significantly, and we have helped lead the way. I have always thought that the dental market would consolidate, like the pharmacy and optical markets. It’s true that dentistry has consolidated more slowly than other healthcare sectors, but there are currently up to 12 dental groups which are very active.
What has been the impact of corporate buyers on the dental market?
Corporate dentistry has undoubtedly boosted the value of practices. Scotland used to be the poor relative in terms of practice sales, but now that so many English practices are in corporate ownership, Scotland has become more desirable and there is greater parity between the dental practice sales markets in England, Wales and Scotland.
Would a recession be bad news for dental practice owners who are ready to exit?
Inflation is biting and recruitment is tough. The beauty of being around so long is that I recognise the dental practice sales market operates in cycles. There was a cooling 14 years ago, during the 2008 recession, and the market came back with a vengeance. The banks see dentistry as a green light sector and they will still be providing loans to buyers. Even at a time of inflation and imminent recession, I am confident that the market will remain strong, albeit for some it might be better to hold tight for a little longer until the cycle for their practice comes round again.
How would you describe your approach to practice sales?
Our commitment to building a long-term relationship of trust with our clients is one of our unique selling points. We might meet a client at one of the 14 seminars we hold annually around the UK or at a dental show. Sometimes clients will ring us up and ask for our advice and we give it freely. For this kind of service we need knowledgeable staff with good customer service skills. Our team are key to our success and we believe in investing in them. We hold regular training events as well as team-building days and even the occasional weekend away.
What plans do you have for the future of Dental Elite?
We have circa 35% market share and our aspiration is to grow it. Personal recommendation from grateful clients, based on the quality of the advice we have given accounts for 60% of the practices on our books. We are the only agency of the big three in which the owners are actively involved in the business, and we intend to remain at the heart of Dental Elite. Our mission statement says we are ordinary people who achieve extraordinary results, and that is how we shall continue.