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a blog by Chris Barrow

Selling your practice in the year of Covid

I'm involved in a common conversation at the moment that begins with "Chris I'm thinking of putting the practice up for sale but should I wait until after the Covid dust settles and there is more certainty in the economy? Will my goodwill value take time to recover?"

Before going any further, I have no commercial relationship with any broker, corporate or private buyer.

Let me get to my bottom line - there is absolutely no macro-reason why you cannot put your practice up for sale today. Neither Covid nor recession are reason enough to delay. Goodwill values are robust. Payment terms may alter to reflect the times (it might take a little longer to get all of your money out of the deal).

There are corporates and micro-corporates out there looking to buy.

One of my clients has bought 17 practices in the last 6 years and currently has a further 14 in the pipeline.

Another client instructed a broker just a couple of weeks ago and already has three corporates jockeying for position.

Deals are closing at values similar to mid-2019.

The option of selling to a private buyer is becoming very interesting - one could say, improving.

There are plenty of disaffected associates out there, unhappy with the way they have been treated by the Government (falling through the cracks in the financial support system) and by their current Principals who may have withheld payments or renegotiated their package. Alternatively, they may be unhappy with their "return to work" conditions.

The brokers report an increase in associates registering for their mailing lists. The banks are ready to lend if family money isn't forthcoming.

As an aside, there is something ironic about owners seeing the grass greener if they become associates and associates looking back over the same fence and seeing greener grass as owners.

As a sage observer once said, if the grass is greener on the other side of a fence, it's usually because someone has spread more fertiliser. You cannot avoid hard work.

If you are associate looking to buy - see my post yesterday.

I've previously observed that the the majority of practice disposals are distress sales.

There were previously three categories of distress:

  • Compliance and litigation distress - I've had enough of the GDC and the Dental Law Partnership

  • Physical distress - I'm not physically able to do the clinical job anymore;

  • Financial distress - I need to sell to reduce debt, pay tax, pay off a divorce.

Add to that a new fourth category

  • Covid distress - I haven't got the energy left to work in this new world of SOPs, PPE, an uncertain NHS landscape, associates, hygienist/therapists, patients and The Covid Recession.

If you are experiencing any of these symptoms, NOW is the time to be considering a sale, especially given that it may take some time to:

  • Find a buyer - 3 months to 2 years

  • Negotiate the terms - 3 to 6 months

  • Go through due diligence - 3 to 6 months

  • Work through an earn-out - 3 to 5 years

Think about that - even if the current distress is hard to bear - there is no quick fix.

For the seller. my job as business coach is to offer sensible advice at every step of the journey, from an impartial and unemotional perspective.

Too many sellers either have too high an expectation of value and/or they become too emotionally attached to the business. It's not "your baby" - it's an activity in the nature of a trade; an entity.

I don't want my clients to sell - I always lose a client at the end of that transaction - but I do want my clients to be happy, wealthy and healthy. Life is too short to be miserable running your business.

If you can't or won't do the things that will create that wellbeing at work - it may be time for you to get off the bus.

There's no reason why you cannot disembark.

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