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Private dental profits on the rise

A recent study has shown that private dental practice profits have shown signs of recovery reporting the first increase since 2007/08.

The study, conducted by Humphrey and Co, a NASDAL (National Association of Specialist Dental Accountants and Lawyers) firm, looked at the profits of 600 practices (made up of 650 principals and 600 associates) around the UK.

The average net profit per principal for an NHS practice came to £125,958 for 2012/13 and £124,086 for a private practice.

The statistics show profits for private dentists have risen over the past year whilst NHS profits have dropped, resulting in the two almost being equal.

An increase in expenses has affected both NHS and private practices, but private practices have been better able to adapt to these changes.

Nick Ledingham, chairman of NASDAL, explained: ‘Private practices have flexibility over the work they carry out and the patients they see, so they can absorb any increase in costs, NHS practices have no control over activity levels or prices.’

Overall profits in dental practices across the whole industry have shown very little change from the previous year.

Ian Simpson, from Humphrey and Co and who is responsible for the stats, said: ‘Private practices have experienced a slight reduction in fee income, but a large saving in costs.

‘With this being the first time we have reported an increase in private practice profits since 2007/08, are we starting to see signs of a recovery?’

Alan Suggett, NASDAL technical committee member, took the opportunity to voice his concern over the sharp increase in dental practice valuations recently.

Valuations have traditionally followed the amount practices have sold for (around 100% of gross fee income).

However, since January 2014, valuations have shot up to 128% of gross fee income and Alan has suggested sale values may well follow.

Alan concluded: ‘I think some valuers are getting very excited and are trying to push the market up.’

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A positive message although this does relate to figures for 2012/2013. To bring us up to date to March 2014 performance for both NHS and Private practices continues to push on with another positive indicator being the growing demand for private practices. From my own point of view the top values are often being achieved by buyers opting to pay above the valuation. This is the single biggest advantage for a seller to put their practice to the open market as this is where the best prices are achieved rather than selling to a select group of buyers.