The Climate for Dental Practice Growth in the UK

The Current Private Dental Practice Market in early 2021

Dental Business Guide Podcast Episode | 8th February 2021
Arun Mehra and Nigel Crossman

Arun Mehra: Hello, welcome back to the Samera Dental Business Guide podcast. This is Arun Mehra and today I’m talking with Nigel Crossman, our commercial finance head about private practice, what’s been going on in the market, especially since lockdown. So Nigel, from your perspective, what’s happened in private practice either overall or the general trend that you’ve seen?

Nigel Crossman: Morning Arun, morning everybody, what’s been happening is that the private practices have done well, especially since the reopening after the first lockdown.

Private Practices are Doing Well.

Obviously, there was a slow take up of work as people came back to the dentist. Many of those only came back because they were in pain, but a lot of people didn’t want to book appointments initially.

But what we’re finding, the trend we’re finding, especially with management information, sharing the income since lockdown, is that private practices are starting to really overperform.

Read our guide to setting up a private dental practice.

Seeing the Same Number of Patients

So that is down to a lot of reasons, and one of the reasons being that they can obviously see almost the same number of clients they saw previously. That’s the first thing. Because they don’t have a lot of downtime, they have more time between patients.

In many cases, a lot of private practices weren’t working at full 100% so they had spare chair capacity anyway. And where a practice has one or more practices, they can rotate the chairs.

We were also finding that private practices have been quicker to put in things in place like air filtration systems and ventilation and that, of course, is helped with the downtime as well. I suppose, most importantly, what’s happened here is that the NHS people, obviously have only been seeing emergency appointments.

Private is Quicker to Adapt

They might have been doing a few appointments on the side of that, but they are seeing nowhere near the number that they were seeing in the previous year. Now, people still need to see the dentist, so a proportion of those people have moved quite swiftly over to private practice and this is what has helped boost the income of a lot of private practices.

One of the big problems is getting this across to the lenders because they’re not particularly close to the sectors. Where we’re very close to the sector, you know, your wife owns a practice so I get a lot of information from that, and obviously, from our clients, we get a lot of information.

Arun Mehra: Yeah, and I think I think the lenders, you’ll see this in the accounts, how they’re reflected maybe six to 12 months down the line, I guess that’s when they’ll see it.

Read our guide to buying a private dental practice.

There is Demand From Patients

Again, I suppose it’s important that the lenders are aware that there is a demand in the private sector from patients. And there’s also demand from dentists wanting to do private, because, as you quite clearly said, there’s the uncertainty of the NHS.

So people are trying to think okay, I’m going to move further into the private sector and offer private services. What we’re seeing as a result of that is, as we said on previous podcasts, that people are starting up squats or turning their NHS buyers practices into more private and we’re seeing more competition out there.

So the demand for marketing dental services privately is growing because patients want these types of things. So as you said, Nigel, I think I’ve seen in my wife’s clinics’, The Neem Tree, the demand is very, very strong. It was strong before COVID and it’s just as strong now primarily because, as you said, people want to get their dental health sorted out and they’re sitting at home, they’ve got money in their pockets (certain people have), they can’t spend on holidays, they can only spend it on a few items.

Too Many Unknowns in the NHS

Maybe their oral health, maybe some furniture or doing something to their house. Now, will this continue post-lockdown? I think to some extent it will. I think it’s still going to be strong and, personally, I think if I was a betting man, I’d bet on the private sector as an investor as opposed to the NHS sector – because there’s just too many unknowns in my mind. But that’s just me and I’m perhaps biased, but that’s how I see it, do you agree or not?

Nigel Crossman: Yeah, I do agree. I think there are a lot of things that have changed. In the last few years people were drifting more towards private anyway. Yeah, there is a general drift towards private as there is in most things.

COVID Accelerated the Shift to Private

This COVID thing has accelerated that. We’ve even got the additional thing of next year with targets being set of 45% UDA’s – which is going to mean that’s less than half of what they were doing previously.

So again, you’ve got half the number of points in effect in the wind, and the only alternative is to go private, because you’re not going to find another NHS dentist. One of the issues lending wise, funnily enough is, as we’ve clearly seen in management information, we’ve clearly seen an uplift in income in practices and as always, with lenders, especially the main banks, it’s a bit of a double edged sword because their first thought when they see increased turnover is suspicion.

Can this be maintained? Why has this happened? What happens if this happens or what if that happens?

Private Practice is Sustainable

So it’s a question of reassuring some of these lenders that, you know, we are close to it, we know what’s happening, you can see what’s happening, and it will continue for quite a while. Yes, it’s sustainable, because the NHS service is not going to be there for them in the future, in the near future, and possibly far future.

Private practices are doing well. People are more aware of oral hygiene. People want to look nice, and you just tell that even through the last five years the growth of Invisalign. Yeah, you know that is mushroomed into such a monster.

Arun Mehra: Yeah, absolutely. And I think, as you said, COVID is exacerbated that people are on zoom all the time, talking, people want to look presentable and good and want straight teeth.

And eventually, we will get out this zoom loop and be outside meeting people and they’ve got money in their pocket, they want to spend it on themselves. So I think that’s been a real kind of catapult for the private, Dental sector. So if you were advising people on dentistry now, someone who’s got ambitions to have their own clinic or buying a clinic, what would you say to them in this instance, especially with the booming growth in private.

Nigel Crossman: I don’t think there’s all the indications we get that it’s changed that much. Because if you were buying a practice that was 50% NHS, 50% private, and then the fact is that it’s very hard to grow that NHS side.

Growth Comes from Private Practice

You’re not gonna grow it, you have contracts that are going to be the same every year, unless you get another contract from anywhere else; which is unusual. The development and the growth side was the private side.

So whilst a lot of people still like to have that security of a little bit of income that’s coming in every month from the NHS, it’s about looking at the size of the contract, I think, and making sure it’s not too big. There are plenty of practices out there to buy that can be developed.

We see a lot of private practices that have been open for two or three years that are struggling, because they weren’t opened correctly, perhaps in the right format and they weren’t done correctly, which is a shame, so they’re now for sale.

Practices Struggle Without Proper Marketing

But also, there are a lot of practices for sale where people still don’t have websites, they still don’t do any marketing or lifestyle businesses where people are happy to earn the money they’ve been earning, rather than growing the business. So there are plenty of things out there.

And yes, I think the growth in private will continue because people, you know… I was born in the 50s, and people had silver fillings back then and that’s everybody that had them.

Growth in Private Will Continue

Back then, to go to a private dentist, you had to be wealthy, but that’s not the case now. It has changed dramatically. You know, the whole dentistry industry is changing massively and white fillings are so common now, even in NHS dentists, where they are upselling for white fillings or silver fillings and that makes a big difference.

So, generally, as you said, people are drifting towards looking nicer, it’s the film star look, people want to look like their role models; that’s correct. Additionally, like you said, there are also a lot of people who have money in their pocket. Because at the moment in lockdown, let’s be honest, you can’t go out, you can’t really do anything apart from ordering from amazon, and that is it really, what else is there to do with your money?

Arun Mehra: I think you’ve hit a really important point there. Also, I think the culture of people have moved on over the last 10 years. So as a result of Amazon and the likes, people want things not in three weeks time, they want it now.

People Want Convenience

So they’re not going to wait to go to an NHS clinic. They will say, ‘oh, I’ll go on Google, they’ll find a clinic and see I can get an appointment tomorrow’ and they’re done. So it’s convenience that is a huge aspect here. And I think that’s where NHS clinics have perhaps not really considered that in their mix of how they offer services.

People want instant gratification as Amazon does with in terms of buying things but in the dental context, people want convenience. They want to be able to see their dentist tomorrow, or the next day or on a Sunday or in the evening. Do NHS clinics offer that? Some do, but very many don’t. 

Build Your Practice Around the Patient

I think that’s where the culture has to change out there in the sector, to embrace this, and I know many clinics do now, private clinics are doing these things, they’re building their businesses around the patient, as opposed to building around what the NHS says or as opposed to what the dentist wants.

You need to build your business around what the patient demands are, and then serve in that way. So yeah, it’s an interesting time and I’m a believer that patients will dictate how dentistry is offered or demanded, and patients have the power, whether you like it or not really, okay. Therefore, you need to be able to satisfy the patient’s needs.

Nigel Crossman: I think that is very true. I think life has just changed, I mean, at my age, I would never have dreamt that I will be ordering all the stuff that I need on Amazon. And I wouldn’t have believed that department stores would no longer exist. And they don’t really, they’re all going out of business. And it’s interesting that the people buying these retail stores that are struggling, are all online companies.

Arun Mehra: They’re all online, and they don’t want the premises do they?

Nigel Crossman: No, they don’t want a premises, which is going to free up; not very helpful to squat practices unfortunately, because you don’t really want to take the lease on the Debenhams building. Yeah, you know, it might be a bit big for a squat practice!

Service Industries Will Take Over the High Street

But some of the smaller units, unfortunately most clothes shops are too big, but there are still some smaller units and there’ll be a knock on effect, because that’s the high streets crumbling effect, and they have done for years with hypermarkets and retail parks and everything else they have all contributed to it.

And slowly but surely, you will have service industries in high streets – correct. And that’s what we are seeing, we’re seeing service industries, people you have to go to like tile shops, if you want to look at the colour of a tile in person, you’ve got to go there. If you want your ears pierced, you’ve got to go get your ears pierced, or your shoes mended, that sort of thing.

Can’t do that sort of thing, and dentistry, obviously, is one of the main ones you cannot have done in your own home. You’ve got to go to the dentist like you’ve got to go to the doctors. And so I think the high streets will turn very much into service areas with cafes, and things that people want to do for relaxation rather than shopping.

Arun Mehra: 100% agree with you. And as we said, we saw this pre-COVID. But now I think it’s just accelerated as a result of it. And hence, I suppose we’re getting a relaxation in the planning laws that we’ve mentioned previously, is just exacerbated at this point where you find a high street, you find an empty unit, you can put a dental practice there, nine times out of 10.

An Exciting Time for the Private Sector

Now that there won’t be really any issues. So it’s an exciting time in the private sector. Personally, I believe, I think one point Nigel mentioned earlier, where there are private practices for sale that haven’t done very well – that’s a really important point as well.

If I look back at clinics that have struggled, the ones that have struggled really haven’t either got the location right, or they didn’t really understand marketing, or they haven’t really invested in the marketing side of things, which is paramount in today’s competitive marketplace. And they haven’t redesigned.

They’ve built a clinic that’s kind of built around them. That looks lovely, and it looks beautiful, but really doesn’t get the patients through the door because they haven’t invested in that – they spent too much money on kitting out with all the latest gizmos. But quite often, they’ve run out of money to actually do the marketing, which is ultimately what brings in the customers.

Stand Out and Be Different

Okay, so, private sector in a nutshell, exciting, but tread carefully and remember, I suppose the most important thing, if you’re going down that private route, stand out and be different. That’s the really key thing. You got to stand out and be different in this marketplace. Otherwise, you’ll really struggle. Okay, Nigel, thank you for today talking about the private sector. Any last comments you want to add?

Nigel Crossman: I think I would just reiterate what you said there Arun, when you’re looking at if you’re looking at doing a squat, or even buying a small practice, you’ve got to look at your costs very, very carefully.

And then we talked about on Bootcamp, and I’d recommend it to anybody who’s thinking of doing this to come to one of the boot camps because there’s a huge amount of information.

I talked there and I talked about, you know, when you’re looking at your costs, there is what you want, what you actually need, and then what you can afford. Hopefully what you need and afford can come in line together. But you know, you can’t want everything in your surgery on day one, unless you have got lots and lots of cash.

Be Realistic and Sensible With Your Costings

And it’s those clinics that have suffered because they haven’t been set up correctly or haven’t taken the correct advice. And I say this to a lot of people, when we go back to them on the first lot of projections, they come on the phone and say ‘Why have you done this?’ And ‘why have you done that?’

Because we’re being careful, we’re being prudent and sensible, you know, this is what a bank would do to you and your costings. So you’ve got to look at it very carefully, and we have a nice conversation, eventually, people see that we’re talking sense and it brings the cost down. And so people have got to just be careful, realistic and sensible on your costings and talk to people who know what they’re doing. That is just so important. Now that affects solicitors, accountants, everybody.

Arun Mehra: Totally. Totally. Well, thanks. Nice. Okay. We could probably talk for another half an hour on this subject, but I think we’ve kind of encapsulated it well, in these 15 minutes. Okay, so thanks a lot. And everybody check out our podcast and look out for the next one that’s coming soon. Okay, thank you.

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