Financial Predictions for 2008 - UK Dentists

Going forward I predict prices will remain high for goodwill as demand outstrips supply.

But one must also consider the UK housing market and also the main bank's lending policies. In a rising property market banks have been very generous with lending for freehold and high goodwill valuations. However, in an uncertain and potentially falling property market will money be so freely available?

Amongst our client base as well beyond the walls of Samera we are seeing this % decline in certain quarters. As more dentists operate private practices, and also principal dentists want to work less clinical hours coupled with the need for refurbished equipment, marketing, team training ….etc, the business model of practice will change.

I predict the 50% remuneration model will change over 2008. It won't be a drastic decline but a slow and steady approach, mainly for when practices employ new associate dentists and principal dentists decide that they want to work less hours whilst still earning a respectable profit margin.

We saw in 2007 the opening of referral only hygiene centres, whilst activity in the corporate sector was manic with Oasis finally being bought at a very high price by a venture capital firm. In addition some great private squats opened up in 2007 too, highlighting the fact that perhaps buying a practice at current prevailing values is not necessarily the right thing to do.

The changing of the Dentists Act in July 2006 started to have an impact on the sector with many existing practices considering and actually going down the limited company route. The proposed changes by Alistair Darling in the Capital Gains Tax rules announced in his pre-budget report shocked the small business community, including the dental sector.

The proposed changes highlight the fact that any dentists wanting to incorporate are probably going to be better off from a Capital Gains Tax point of view before April 2008 - therefore get your skates of if you think you want to incorporate, it is quite a lengthy process!

The change in the NHS contract changed the risk profile of dentistry for banks. Although still an attractive sector for the lenders, the changes in the NHS and the demand for more private practices to open will change the sentiment amongst banks. Some banks are being much more cautious in their lending policy, whilst others are watching the sector closely.

The heavy capital expenditure required to set up practices will always be there, therefore a greater degree of discipline by the banks, dentists and also equipment suppliers will be needed if we are to see a sector develop positively.

Not much to say here, except that as the public sees and learns more about their health they will no doubt have higher expectations. The public is learning more about dentistry which will be good for the development of the sector, but also standards across the sector will need to rise.

In the context of the dental market what could this mean to you?

Well, over the last few years we have seen a growth in the private dental sector, which has been buoyant and encouraged by a declining NHS, easy access to capital from the banks etc…but going forward will this situation remain? Well I feel it boils down to consumer spending patterns, is someone's mortgage payment more important than getting their teeth done?

Or more importantly for much of the private sector is somone's mortgage payment on their buy to let property, where they are losing money, more important than getting their teeth done? For certain segments of the market, getting their teeth sorted will be a priority but for many homeowners this won't be. Understanding your target market and then packaging a service to them which they can perceive the benefit is essential. Margins will be squeezed in this changing market place, so, plan, market and organise sensibly going forward.

1. Understand your pricing policies and review your prices. If inflation is rising isn't it time to change your practice fees?
2. Understand your costs better, know what is costing you money whilst what is making you money. For every £1 spent by you is it contributing more than £1 to the value of your business?
3. Take time out to spend on growing your business - during these tougher economic times this will be essential to navigate your business during leaner times.
4. Build an internal and external team of friends and advisors to support you with your plans. Teamwork is essential in achieving your aspirations.
5. Fortune favours the brave. You are more likely to succeed by taking calculated risks, developing your skills proactively and taking action rather than waiting to see what happens!