The financial risks of dental practice ownership

Lloyd Boston explains everything dental professionals need to know before entering into practice ownership or partnership.

Buying into or taking over a dental practice is more than a significant career change. It’s a step into business ownership, and it comes with greater legal and financial responsibilities.

While the reward can be substantial, so is the risk. Understanding the key differences between working as an associate and owning a practice is the first line of defence. In this article, we explore the financial risks that come with practice ownership and the precautions you can put in place.

Understanding vicarious liability

When you become a dental practice owner or partner, you’re not just taking on additional responsibility and a share of the profits – you’re accepting personal liability for a business and the actions of everyone who works within it.

This can include responsibility for:

• Practice loans and debt
• Property-related liabilities
• Contractual disputes
• Staff-related claims and settlements
• Issues arising from associate or clinician work.

Under certain circumstances, practice owners can be held liable for claims relating to the actions of associates or employees working within the practice. Even if you weren’t directly involved in the treatment, your position as the business owner can mean you’re drawn into disputes or legal action.

A worst-case scenario

In a worst-case scenario, personal assets such as savings, investments or property could potentially be exposed if the business cannot meet its financial obligations.

Even where claims are successfully defended, the financial impact can still be significant. Large disputes often involve high legal and professional fees and can take years to resolve.

Not all of these costs may be fully covered by indemnity arrangements, especially if the issue falls outside of standard clinical work. Long-running cases can also affect the practice’s cash flow and impact the income available to owners during that time.

While catastrophic outcomes are rare, complex disputes can still place considerable financial pressure on both the practice and the individuals within it.

Financial advice is key to understanding your personal risk exposure and the preventative measures you can put in place. Having robust legal agreements with associates, exploring appropriate insurance options and ensuring the business is properly protected are all important starting points.

While there’s no way to eliminate risk entirely, you can ensure you have protection in place should the worst happen.

The business impact

As a dental practice owner, you’re effectively running and financially underwriting a healthcare business.

This exposes you to a range of business risks, including:

• Borrowing and refinancing pressures
• Changes in NHS contract structures or UDA values
• Fluctuations in private patient demand
• Staff recruitment and cost inflation
• Compliance and regulatory challenges
• Fraud or financial mismanagement
• Arranging locum cover due to staff illness.

Strong governance and financial oversight can reduce these risks, but they can’t remove them entirely.

Risk vs reward

This may paint a stark picture, but the risks of practice ownership come with significant potential rewards.

Owning a dental practice can provide higher long-term income potential, greater control over your clinical and financial strategy, and the opportunity to build capital through the value of the practice itself. Many dentists also value the ability to shape the culture of their team and develop services beyond the limits of NHS contracts.

However, with increased opportunity comes increased financial exposure. The key question is whether your personal finances are structured in a way that allows you to absorb unexpected shocks.

Can you reduce risk?

The simple answer is yes, but it requires preparation. If you’re considering buying into or acquiring a dental practice, understanding exactly what that commitment entails is the first key step.

Strong legal agreements with partners or associates are essential and independent legal advice can help you fully understand your obligations.

If you’re already a practice owner, it may be a good time to review your insurance and protection arrangements. Is the practice fully protected against potential risks? Are there gaps in your cover?

You should also consider your personal financial exposure. What would happen if the business faced a major claim or financial disruption? Are your personal assets protected?

Finally, it’s important to discuss exit strategies. Even if you’re not planning to leave any time soon, considering the circumstances that might lead to a sale or exit (and how that would work financially) can help avoid complications later.

Speaking to a financial expert

At Wesleyan Financial Services, we understand the unique challenges facing dental professionals moving into practice ownership.

Our specialist financial advisers can help you identify gaps in your current cover, understand the financial risks of business ownership and structure your finances to protect your family.

To book a conversation with a dental specialist financial adviser from Wesleyan Financial Services, visit wesleyan.co.uk/dental or call 0808 149 9416.

Please note: charges may apply. You will not be charged until you have agreed to the services you require and the associated costs. Learn more at www.wesleyan.co.uk/charges.

This article is sponsored by Wesleyan Financial Services.