Profit, tax & accounting for buyers, sellers & owners

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Clear Vision Accountancy Group Limited 1 Abacus House Newlands Road Corsham Wiltshire SN13 0BH www.clearvisiondental.co.uk Rob Walsh Rob Walsh Profit, tax & Accounting for buyers, sellers and owners [email protected]

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Page 1: Profit, tax & accounting for buyers, sellers & owners

Clear Vision Accountancy Group Limited1 Abacus HouseNewlands RoadCorsham WiltshireSN13 0BH

www.clearvisiondental.co.uk

Rob WalshRob Walsh

Profit, tax & Accountingfor buyers, sellers and

[email protected]

Page 2: Profit, tax & accounting for buyers, sellers & owners

About Clear VisionAbout Clear Vision• Accountancy and business advice to

dentists and specialists• Started working with dentists in

2001 – helped a squat orthodontic business to win the ‘Practice of the Year’ at the Private Dentistry Awards in 2005

• Won AVN Accountancy Firm of the Year Award 2011 - 2012

• Author of ‘The Business of Dentistry’ - shares the nine steps it takes to create a successful dental business

Page 3: Profit, tax & accounting for buyers, sellers & owners

4 take-aways4 take-aways

1. Your numbers = MORE

PROFIT

2. Business STRUCTURE...

3. TAX SAVINGS...

4. SPEED matters...

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Due DiligenceDue Diligence

• Patient numbers• Recalls• Large treatment plans• Marketing costs• Work sent to specialists• Reception manner• Employees length of service• Enquiries to reception• Mystery Shopper exercise

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1. MORE PROFIT...1. MORE PROFIT...

1. How many active patients do you have?2. What is your exam recall rate?3. What is your hygiene recall rate?4. What is your hygiene concentration rate?5. Do ALL of your patients know about ALL

of your services / treatments?6. What is your treatment conversion rate?7. What is your marketing ROI?8. What is your profit per month per service?

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Hygiene concentration rate - Hygiene concentration rate - exampleexample

No. of active patients (private) 1000

90% of active patients (private) 900who should see the hygienist

No. of active patients seeing hygienist 450

Potential patients to see hygienist 450

£Therefore 2 x 30 mins per year 105 per hour

Cost per hour 35

Profit per hour 70

Potential profit 450 patients x £70 31,500 per annum

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Benchmarking (Sole Benchmarking (Sole Owners)Owners)

Fees £1m £1m £300k £300k

Profit £40k

£350k

£60k £130k

Net profit % 4% 35% 20% 43%

Why?

Page 8: Profit, tax & accounting for buyers, sellers & owners

Your business modelYour business model

YOU – role of MD

Supported by team and business systems

90% margin

YOUR PATIENTS(UDAs –

£6 to £42 – average £22)Associates

50% margin?Specialists

Hygienists

66% marginTherapists

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Specialists / Associates / Specialists / Associates / HygienistsHygienists

1. Are you paying 45% or lower for associates?

2. Are you paying 45% of lower for specialists?

3. Are you using sliding scales for associates & specialists?

4. Are hygienists paid by %? Be careful of high value hygiene work e.g. whitening

5. Are you paying hygienists on an hourly rate? Even for FTAs, even for gaps?

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SpecialistsSpecialists

For example:Implant per month referred £2,500 x 12 months = £30,000

Take a % e.g. 40% = £12,000 x 10 years = £120,000OR:Do the crown e.g. £900 fee per crown = £10,800 x 10 years = £108,000

Page 11: Profit, tax & accounting for buyers, sellers & owners

HygienistsHygienists

Typically £90 - £130 per hour charge

Cost £25 to £35 per hour

Average £105Cost £35Profit £70

66% gross profit

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OpportunitiesOpportunities

• Associates / Hygienists - % of pay• Associates / Hygienists - wage ratio -

materials / lab fees• OHDs high• Staffing• Expansion – hours / rooms• BEWARE:

– Rent – Lease– Freehold purchase - SIPP

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FinancialsFinancials

• Look at net profit• Add back one off costs• Add in

– New costs– Rent / interest– Marketing

• Who is doing the work?

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Prepare a business planPrepare a business plan

• From financials:– Drawings

• Personal expenditure plan• Tax

– Funding and pay back– Cash prediction – to assess affordability– Sensitivities on turnover

• Vision, business plan required• Key areas of strategy

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6 ways to grow a dental 6 ways to grow a dental businessbusiness

• Increase fees• Existing services to existing patients• New services to existing patients• New patients• Buy a list• Increase UDA / UOA contract

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2. STRUCTURE...2. STRUCTURE...

Your dental business 1. Sole trader2. Partnership – GDC Partners3. Expense sharing partnership4. Limited liability partnership5. Limited company

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Incorporation – Incorporation – THE POSITIVESTHE POSITIVES

1. Potential to save tax2. Goodwill payout - enhanced personal

reward3. Limit your liability4. Create a corporate structure 5. Easier, cleaner exit route6. Team motivation7. School fees through business (could be

beneficial)8. Use bank funding received on goodwill to

pay off debts or improve your personal assets

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Incorporation – Incorporation – THE NEGATIVESTHE NEGATIVES

1. Need more time to maintain efficient records

2. Statutory requirements to be met

3. Prepare an Annual Return to the GDC

4. Transfer your NHS contract to a Limited

Company

5. HMRC may question the valuation6. Be careful of superannuation on incorporation

& income protection policies

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3. TAX SAVINGS 3. TAX SAVINGS on on incorporationincorporation

Real life TAX SAVINGS:• Husband and wife partnership• Net profit £120,000• Incorporated business• Goodwill value £520,000• Will save nearly £100,000 in tax over

10 years

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Tax on sale of businessTax on sale of business

Share sale Limited company

10% of proceeds of shares Sell goodwill assets

Gain of 20%

Then extraction of cash at 10%

10% 30%

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Proactive accountants – Proactive accountants – what does this mean?what does this mean?

Not just year end accounts!1. Tax plan2. Advice on set up3. Advice on structure:

• Limited company• Partnership• Sole trader

4. Use of spouse tax bracket5. Accounts started within 6 – 8 weeks of year end6. Use of Accounts finished within 20 working days7. A financial forecast to achieve your personal goals8. Management accounts to ensure you know what profit per month

you are achieving9. Discussing the figures so growth areas can be examined10. Annual goodwill valuation (FOC) after accounts completed11. Communication. Communication. Communication

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4. SPEED4. SPEED matters... matters...

Example 31 March year end:

• Tax planning will take place Feb or early March– Enterprise Investment Scheme– Venture Capital Trust– Film Schemes– Enterprise Zone Trust

• Accounts prepared by mid May• Tax liability calculated by end May

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4. SPEED4. SPEED matters... matters...

1. Timely information...2. Cash planning...3. A financial forecast...4. Regular management accounts...

PLUS...5. Goodwill valuation every year..6. Communication...

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Your offerYour offer

•Phone call•2 hour Dental Business Review•Complimentary basis•One to one•No sales pitch

Complete offer sheet to book your FREE phone call

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Follow Clear Vision…Follow Clear Vision…

• On the web: www.clearvisiondental.co.uk *

*Download first two chapters of ‘The Business of Dentistry’ for FREE• Via our blog:

www.clearvisiondentalblog.co.uk • On Twitter: @CVfordentists for news, views and added value downloads

Page 26: Profit, tax & accounting for buyers, sellers & owners

At Clear Vision, we believe every business has the power to change lives, by integrating giving into its everyday business activities.

When we finish a set of accounts, a tax return, or a consultancy project, we donate a goat to a Kenyan family via the global ‘Buy1Give1’ initiative – www.b1g1.com.

Could your practice integrate giving into its everyday activities too?

Clear Vision clients make a Clear Vision clients make a difference…difference…

Page 27: Profit, tax & accounting for buyers, sellers & owners

Clear Vision Accountancy Group Limited1 Abacus HouseNewlands RoadCorsham WiltshireSN13 0BH

www.clearvisiondental.co.uk

Rob WalshRob Walsh

Profit, tax & Accountingfor buyers, sellers and

[email protected]