As the lovely British summer comes around once again, our minds turn to Pimm's, BBQs, music festivals and camping.
Personally, I am not well disposed to spending a wet summers evening in a tent, sleeping on what you can guarantee will be the lumpiest, most uneven patch of earth in the whole of the British Isles.
My indifferencem of coursem stems back to my days in the Scouting Association when I was sent off, rucksack in tow, to spend three days in the wilderness at the complete mercy of Mother Nature.
When I look back at these days with a degree of affection, a wealth of memories come to mind; camp fire songs, neckerchiefs, the rather dubious-looking baked beans cooked by camp fire, and, of course the motto, 'Be Prepared'.
These two words stood by me throughout my time in the Scouting Association and, to this day, still ring in my ears whether I am planning a holiday, corporate event or getting ready for an exam.
This motto, of course, rings true for any dental practitioner as they will be prepared for any patient who walks through their door and also be prepared for the eventual sale of their practice. Now, some of you reading this article may have only just bought your practice, others may not be planning to sell for a number of years, others may want to sell tomorrow; whatever your plans however, your approach to running your practice should always have in mind the preparation for the day at which you wish to sell it.
Why should I worry about this now?
The main reason why it is important to prepare your practice for a sale is simply due to the length of time a sale can take. We regularly come into contact with clients who want a complete practice sale to go through in a month, maybe two which in the vast majority of cases is unrealistic.
Despite other factors, such as CQC and NHSE requirements, the drafting of the Sale Agreement and finalising property elements, the due diligence process alone is lengthy.
Before the drafting of the contract is under way, the buyer’s solicitor will raise extensive enquiries which will consist of numerous pages of detailed questions about the practice, the Employees and the Business with supporting documentation always being requested. This is known as the 'due diligence' process.
Many of our clients are surprised at the depth and complexity of enquiries that will be raised by a dentally aware solicitor and they can on occasions find themselves overfaced by the prospect of having to collate such a significant volume of information.
They key is not to worry as all dental practice owners will have this documentation; it is just a case of finding it in the vast quantities of paperwork which swamp dental practices in the 21st century.
The benefits of being prepared
So, what is the best way to be prepared? Technology within the dental industry is growing at an amazing pace. Recent software developments allow practice owners to keep track of all this documentation on computer. When the time comes to sell your practice it is just a case of handing over your log-in details to your Solicitor, the downloading of relevant data onto a memory stick and the submission to the buyer’s solicitors.
Of course, not everybody does it this way and there are many practices that are still very much paper based. This, in itself, is not a bad thing and it’s simply a question of implementing policies which foster good housekeeping which will save time and ultimately your money when you come to sell. Whether you have the benefit of a practice manager or not, simply keep all the information together and to hand. That way, when the due diligence questionnaire lands with a thud through your letter box as part of your sale, it will just be a case of grabbing the up to date records from your cabinet or computer file and sending them off to your Solicitor.
One of the main complaints we receive from our dentist clients is the amount of time they find is taken up by dealing with staff and HR issues. The amount of time devoted to these issues in the due diligence process is similarly daunting. There are a number of third parties (of which Cohen Cramer is one) that offer outsourcing of HR and Employment Law issues leaving you free to concentrate on the dentistry. Taking advantage of such support will yield benefits when you come to sell your practice as all of your employment contracts, policies and handbooks should all be up to date and easily accessible. Whilst the cost of such third party services can appear daunting initially, when viewed in the context of the overall amount time that will be saved in both the day to day operation of your practice and when you come to sell, the cost savings can be significant.
Whilst such measure ease the stress of the due diligence process, it also assists with the general regulatory requirements of modern dentistry, especially CQC requirements. In an age where efficient working is key to a profitable business, the advantages of a well organised practice cannot be underestimated. Say you are suddenly called upon to check an employee’s contract, if they are all contained in one file you know exactly where to look instead of spending half an hour searching a mountain of paperwork is time better spent obtaining that extra UDA or managing your staff effectively.
This all sounds simple, but we do totally appreciate that actually implementing a system of working in this way is far easier said than done and very often despite the best intentions, the thought of having to wade through such significant volumes of documentation fills our clients with dread. Here, at Cohen Cramer, we are happy to visit clients at their practice in order to assist them with the due diligence information gathering exercise and it is surprising how easily a full day can be spent obtaining documents which with a more efficient filing system could have been done in an afternoon. Being prepared will ultimately save you both time and money.
What should I be tracking?
It is very easy for us to tell you to keep up-to-date records and to keep all of your paperwork organised ready for when you sell but the majority of readers will not be aware of what in particular will be expected from them as part of the due diligence exercise. Whilst the below is not an exhaustive list, any dentally aware solicitor will generally require the following:
An Inventory of Assets:
Whilst this doesn’t need to list everything in your practice such as your favourite coffee mug or the original watercolour in reception, it does need to be an up-to-date and accurate list of assets which will form part of the sale. Perhaps just keep an ongoing record of your equipment and furniture. If you replace a compressor, take two minutes updating your list. This way, when you come to sell, you can simply print it and send it off instead of spending an entire evening with a pen, pencil and notebook listing every item in your practice and missing the latest episode of Coronation Street.
You will have to supply certificates for your autoclaves (no more than 12 months old), compressors (no more than 22 months old), X-ray equipment (no more than three years old), Portable Appliance Test (no more than 12 months old) and should it apply; fire alarm (no more than 6 months old) and emergency lighting (no more than 12 months old)
Normally you will be asked to provide the actual contracts such as those relating to equipment inspections, computer software, waste collection, or any service with which you are contract to a third party. Often you will be asked the monthly cost of the contract, whether you anticipate a cost to transfer the contract to the buyer as well as other questions.
Lease Hire/Hire Purchase Agreements:
This could be anything from a piece of dental equipment to the fish tank in your reception. If it’s on hire or lease you will be asked for the agreement, confirmation of the amount remaining and when it is due to be paid off.
If your practice is an NHS practice, a full copy of your GDS contract along with any subsequent variations will always be requested. Likewise, pay and activity statements for the past six months along with vital signs reports and end of year summaries will have to be supplied.
Signed accounts for the past three years are a definite requirement. Similarly any management accounts should also be provided.
One of the most comprehensive elements. You will need to provide vaccination records, employee contracts, registration with the relevant dental bodies, CRB checks along with any variations to employment.
This is by no means an exhaustive list of requirements but should hopefully provide you with a flavour as to what may be required.
Robert Baden Powel was right
When Robert Baden Powel first uttered those two words to the first Scout movement at the turn of the last century, little did he know the effect it would have. To 'be prepared' can apply to much more than the erection of a tent on a remote hill in the middle of the countryside; it can be used in all manner of circumstances and for anyone; especially a dental practitioner.
It may well be the case that you don’t intend to sell your practice for many years but the benefits of organising and preparing your practice for sale now will undoubtably save you time and money both now and in the future.
Thomas Coates is a partner and head of the dental team at Cohen Cramer. Cohen Cramer have in excess of 25 years experience in providing the full range of legal services applicable to dentists and dental practice owners. If you are considering selling or buying a dental practice, or would like more information about the sort of documentation you will be expected to provide as part of the sale process or if you have any legal issues relating to dentistry and would like to speak to one of our experts, please contact Thomas Coates who is a Partner and Head of the Dental Team at Cohen Cramer or drop us an email at [email protected].