So you want to buy your first dental practice? Well you are going to need to save some money. The bare minimum figure you need to save is £70k. At the time of writing existing moderate sized (at least two surgery) dental practices are going for upwards of £250k for private practices and upwards of £500k for NHS dental practices. Banks are lending around 90% for NHS practices and 80% for private practices.
How did I come to a £70k figure:
- 20% deposit for a 250k private dental practice or a 10% deposit for a £500k NHS dental practice is £50k
- Solicitors fees and Accounting fees are £10k
- Contingency fund and cash to pay the business expenses for the first month £10k
- Total = £70k
100% unsecured loans are available from certain banks however relying on these for your first dental practice is a bad idea because:
- Learning to save money is important for you to become wealthy
- You are unlikely to secure these bank loans with no prior dental practice ownership experience.
- You will likely be paying a higher interest rate which will squeeze your cash flow
- You will be putting yourself under severe financial pressure
- Controlling your finances is key to becoming a successful business owner
So how do you save the £7ok despoil to buy your first dental practice. Here are 5 tips that helped me buy my first dental practice at the age of 27 years old.
1) Pay yourself first
“Do not save what is left after spending, but spend what is left after saving” – Warren Buffet
Warren Buffet, the world’s third richest man knows a thing or two about saving money. Pay yourself first. As soon as your after tax pay cheque comes in put 20% of that into a high interest rate, instant access savings account. Set up a standing order each month so that you do not have to think about it.
The average dentist in the UK earns £70k pre tax per year. After national insurance tax and income tax this will be reduced to £50k net take home wage. This means that you will be saving £10k a year at 20% savings rate or around £800 a month. It will take you 7 years to save up the £70k amount if you are starting from £0. The only ways to increase this are earn more money or put a higher percentage of your money away. I save 80% of my wage and have done so for the last two years.
2) Track Your Spending
Tracking anything whether it be financial, health or relationship, will automatically improve your situation. The reason for this is that you will be able to see when you are not on course to hit your goal and make a small course correction. Using a simple iPhone app such as Spending Tracker and writing down every time you purchase something will dramatically cut your spending.
3) Cut those expensive daily habits
What expensive daily habits do you have? It could be as simple as getting a morning coffee every morning or leaving work to go out for lunch. Consider this, a simple £3 a day morning coffee will cost you £100 a month or a £1,200 a year. That is one expensive habit!
4) Cut those subscriptions especially the ones that we don’t use
How often do you check down your direct debits and think what is this doing here. If you don’t check your direct debits then now is a good time to check. Things that I have cut are magazines that I no longer read, memberships to associations that I no longer use and entertainment packs that I swear I did not even order. Cutting these direct debits can save you upwards of £100 a month.
5) Take a weekend job
Locuming as a dentist can be lucrative especially in the weekends. Locum dentists can make upwards of £300 a day. Taking up a weekend Saturday job could boost your income by £1200 a month. This will most certainly help you with that £70k deposit.
Building up that £70k deposit is a rewarding experience that will teach you some great lessons in financial control and budgeting. Good luck on saving and if you have any other tips, please write it in the comment section below.