Dr James, 1s:

Hey team, welcome back to Dentists Who Invest podcast. I have not done a podcast on practice finance in so long and that's why I'm super excited for this episode today with my good friend, mr Jawad Anjum, expert on practice finance and CEO and founder of Stanford Finance. Am I right in saying that, Jawad? I can see that neon sign behind you. That's really cool. By the way, Thank you.

Jawad, 26s:

Thank you, yeah, that's right, Stanford Finance Founder Managing Director, and thanks for having me on the podcast.

Dr James, 32s:

Dude, a total pleasure. We've been meaning to do this for however long now it must be like six months and we finally got around to it. And I'd love to actually have somebody regularly coming on the dentistry invest podcast, uh, to speak on the subject of practice finance. So watch this space audience. Uh, this will probably not be the last time you see Jawad I'm I'm certain on that one and also Jawad, it is important to mention you do actually own a few dental practices as well, despite not being a dentist. How cool is that yeah, I do.

Jawad, 1m 2s:

I've been involved within the dental space for the past 10 plus years and, uh, it was a bit of a bit of a passion of mine. Um, it's like everything, when you're involved with something in in detail and you're helping people build, grow, uh, build portfolios, open brand new practices, you start to think, could I do that? And there's always a, there's always a way, there's always a structure. When you're in finance and when you know that type of space restructuring and so on and so forth, you sort of think it's probably a way. And then, yeah, it happened, a door opened and I took the opportunity.

Dr James, 1m 37s:

So, yeah, it gives me further intricate knowledge into, sort of my space of work at Stanford Finance, because I know what people are going through you can see how those loans pan out as well and what it takes to repay them, and then work that into your finance deals. I expect as well.

Jawad, 1m 57s:

Absolutely. Look, at the end of the day, what it comes down to is that going through it and everybody will tell you this, going through it and everybody will tell you this going through something teaches you more than theory or being involved from the periphery can teach you being involved, going through it, understanding the struggles, the challenges, the intricate elements of how to make things work, whether that's marketing, whether that's staff management, whether that's um patient journeys and so on and so forth. You know, you, you don't get to understand that um in detail.

Dr James, 2m 33s:

Um, you, you can understand it to a certain extent, but in detail and knowing what you need to look for um without going through it yourself exactly and all the thrills and spills and fun and games that comes along with running a business is something that I'm sure a lot of the audience can attest to, and it really does grow you and give you a different perspective, which is really cool. Anyway, this podcast is all about a finance review of the current market. A review of the current market for finance is a better way of describing it. So, with your finger on the pulse and your ears to the ground, how things are right now for Dentist getting finance Jawad? How is the market these days? Is it favorable? Is there a lot of interest? Is interest just as hot as ever? Slowing down a little bit somewhere in between? How you finding it?

Jawad, 3m 24s:

well. Currently the market's been stable, but there's a few different things that trigger. There's sort of one element will slow down, but another element will pick up and increase. You know, 2023 as a whole was a lot of people will tell you was slower in terms of transactions. Acquisitions were slower, there's a lot of less people bringing their practices to the market. 24 has been has picked up somewhat and there's been a bit more focus and values have still stabilized in terms of where things are. But where the shift has come over the past 12 months is that, and probably a little bit longer, is that more and more people are opening squat practices. So there's a real question mark around, not just for associate dentists buying their first one, although that's the majority. Even existing practice owners are looking at the market and the question a lot of people are asking is shall I buy a practice or shall I set one up from scratch? Now, there's pros and cons both ways, because if you set one up from scratch, it's a lot of work, a front end, and then you've got to build it to a point where it's profitable. And it's arguable that 12, 18, 24 months you're not really going to see a profit. Arguable that 12, 18, 24 months. You're not really going to see a profit um, but the costs to do that and to build a squat practice is lower. Whereas if you acquire a practice and you know on average I'd say eight, nine hundred k's an average practice value, um, currently, um, so that's what you're going to spend. So I'd probably say three times more um you'll spend to buy an existing practice. With that, what you've got is potentially, if you buy a good one um, a practice that's making you money from month one. Um, there's a bit of transition, there's a few things you've got to change, but it's making you money. But is that practice exactly how you want it? Um, and that's where you know preference comes into play. I always say to all my clients there's no right or wrong answer in that Buy or set up. It's preference, it's what you want to do and what makes sense for you. And I'll always have a consultation with a client and sort of try to get to the bottom of that by opening up a conversation and saying you know what the preferences are and understanding a lot of the whys. And I think we've said before, james, that you know a client will come and say I want this and they think they want that, but after a conversation it turns out, no, they just think that they want that. What they really want is something different. So, yeah, that's sort of where the market is A lot more squat practices. I've got lots of clients building squat practices at the moment and I'm helping raise the finance for it, creating the infrastructure to help them to get on that ladder and, yeah, it's exciting times really exciting times, good stuff.

Dr James, 6m 26s:

Well, you know what you were saying just then about how oftentimes people will approach you and they'll have a concept of what they want in their head and then, upon further inspection or with the additional benefit of information from a professional who has contacts in the market, they often change their opinion. There's a really good analogy in there for the dentist patient conversation, and when we have conversations with patients when it comes to treatment planning, we talk a lot about informed consent and you have to allow the patient to understand all their options and oftentimes the patient doesn't even have a concept of what will help their tooth. So you're there to provide them the options or sometimes they have like half an idea of what they need and the professional steps in. So it's exactly analogous to lots of situations in her life and dentists appreciate that in the patient dentist contacts in that, in that specific conversation or dynamic, but in other areas of her life we could be better at it, in my opinion, and this is why it's helpful to talk to people. Anyway, I had a question from a borrowing perspective. Is there any difference between the rates of interest that you might get on a squat on finance for a squat practice versus buying an established practice.

Jawad, 7m 41s:

Yeah, yes, so buying an established practice is a business that is, like I said, making money from day one, that can pay off loan and show serviceability of debt from day one. A squat practice is projection based. So rate yes, higher, but more so is that there's less options out there in the marketplace. Interesting because not as many lenders are um willing to take that higher risk. And you know, look dental and the dental industry is seen as a green sector. It's a low risk sector, low chance of default, so it's seen in a positive light. But a startup to some lenders is a startup, no matter which industry it's in. So there's a lot of lenders that will not touch a startup and a squat practice at all, lenders that will not touch a startup and a squat practice at all. Um, whereas with um an operating practice that's making money, um that can service that, there's a lot more people willing to do it. So there's it's multifaceted. Is that less lenders and then higher interest rates, but nothing, not sort of astronomical um, it is just marginally higher, not prohibitive, right? Yeah, yeah, absolutely it's not prohibitive at all.

Dr James, 9m 15s:

Gotcha. Okay, awesome, yeah, just curious to know, is all, and then, outside of the interest rate, any other terms that might differ.

Jawad, 9m 25s:

Again, nothing outside the interest rate, it is just the restrictions. I'd say Less options, less options. And it's even more reason to have a broker look at it for you, because when there's less options, it's harder to obtain the property. Whether it's freehold, length of length of loan is something that is looked at, but that's not different to an acquisition either in reality. So really it's just rate, rate and options interesting.

Dr James, 10m 1s:

Well, listen, it's nice to hear a concise summary of what the differences are, because otherwise it's like a big old black hole. We just don't know which is which and what that might mean. So it's helpful to even have that little summary. In and of itself. Those two things, I'm curious. Obviously, interest rates are pretty high at the minute, so I'm going to assume that that also means that borrowing rates for practices are higher they are.

Jawad, 10m 27s:

Yeah, um, you know, know they've crept up and because of the Bank of England base rate, you know, the market is in a much higher place and I think again last year, less transactions is impacted by interest rate in the margins because there's less people buying. They're waiting for the Bank of England base rate to stabilise or reduce and because of that they take a step back. Demand is therefore lower, therefore less acquisition. It's a domino effect constantly. But what has happened since last year is banks have understood the market was a bit knee-jerk last year and the bank kept their rates sort of there and then you had the base rate on top of that, which was then there. So now we've got, okay, the base rate's there, um, and it hasn't been that high for many years, but we sort of know that that it's going to stabilize, like might reduce or you know the speculation around that space. So we're going to position ourselves in a better, better place. Right now is a great time to look at financing. Um and I keep I keep reiterating this as well there's practice acquisitions, there's squat, practice builds, but then refinancing.

Dr James, 11m 46s:

You know, now is a great time to look at what you're paying, because you're probably paying too much on your interest rate, on your existing practice right now oh, I see, and actually that leads me on to my next question, because I wasn't sure if this was a thing I know it's a thing in the mortgage market, of course where you have fixed rates and variable rates and those can be reviewed after certain amounts of times and also you can start a certain amount of a certain amount of time and also you can refinance your house as well. Do those options exist in the practice finance market?

Jawad, 12m 21s:

absolutely yes almost exactly the same. You know when you, when you're taking out a deal, you can fix the one, three, five, ten years, and then you know what you pay in and exactly when you're taking out a deal. You can fix for one, three, five, ten years. Then you know what you're paying and exactly what you're paying for the time that you fix your loan for, obviously, that comes with most lenders. It comes with costs if you decide to restructure and refinance. So again, you actually need to really think about these aspects and elements, because if you've got something that's potentially going to happen or you have a plan, you've got to put that into, uh, into the equation. For example, if you fix for five years and you're thinking of either selling your practice or doing something that's just going to change your loan then in the next couple of years, then it makes no sense to fix it for five because you're going to suffer breakage costs, and then breakage costs for fixed rate loans can be astronomical and that's what you really want to avoid. So again, I can't stress this enough that have a good conversation with a good broker that's going to talk you through your options, and the reality is in this day and age, james that banks and they might hate me for saying this, but they don't have the resource anymore. It's very execution only, and brokers finance brokers will say that they are now the relationship managers that banks used to have. So we do all that work. We talk through options, we have them detail conversations to understand what's right for the client and the bank. A lot of the time and this isn't all banks, just for the record, this isn't all banks but most of them will sort of say right, here are your options, what do you want to do? And it's they'll. The client then comes to me and says this is what the bank has presented, um, what do you think? And we'll go through it in detail with them.

Dr James, 14m 24s:

So it's, it's, it's more, more and more reliant upon finance brokerage as a market currently well you know what, and it'll be interesting to hear your take on this with relevance to the dental practice finance market. What I do know is that when it comes to the income protection side of things for dentists that a lot of people feel like they're going to get a better deal if they go direct to the provider of the income protection. But oftentimes it's exactly the same price. Okay, because what the income protection broker gets paid is a commission or a kickback from the price that the client would be getting anyway. There's no additional cost there. Plus, as well as that, chances are that they can get them a much better deal, either much more cover or a much reduced cost for the same cover. So I know that that happens in the income protection world and it's a little bit of a fallacy or a false economy to think that you're going to get a better deal if you go to direct to supplier. But obviously I can't comment on the practice finance market. That's more your area of expertise. So I'm wondering how much you can say on that.

Jawad, 15m 30s:

Yeah, it's similar. It's similar, if I'm honest with you, james, because in reality there is. There is sort of an approach at times with uh, with a lot of industries, not just dental um, cut out the middleman, we'll get a better deal. Or then you know there isn't additional costs and and nine times out of ten it's not the case. It's not the case. Um, in addition, what you've got to remember is based on volumes and based on activity. Would a consumer going directly to a bank, not having a relationship speaking to, just trying to find somebody to speak to and trying to get a deal, would the deal be better for them? Or would the deal be offered to the finance broker that? Does lots of activity with a particular lender be better? And you know it sometimes comes down to the volume aspect. And in addition to that, there's also sort of structure of lend. You know brokers aren't just there to get you a deal and that's it. Boom, boom, boom, off you go. It's really understanding the structure, because a good finance broker will fight for their client, not just to get a deal approved. But what does the structure look like? What does a security package look like? Is the bank asking for too much? Can we negotiate it? Can we try to remove this, remove that? It all plays a really important part. If it's all about cost, then at best it'll be the same to go direct, that is, and potentially, using the broker, you're going to get a better deal. It's not just about cost, it's about all aspects and the structure of the deal.

Dr James, 17m 24s:

Yeah, I mean, to review anything through the singular lens of cost is not the best thing. For certain and I think a lot of dentists would attest to that Would they have a 50 pound filling that they know is going to fail on the tooth, or would they rather get it done properly? And I know, knowing what I know about dentistry, I know the vast difference in quality between someone who's going to really has the opportunity to really give care and attention to my tooth and do the proper job, no-brainer, and that exists in lots of areas of life. Paying for quality is a good thing and definitely if we get too caught up in the figure that's in front of us, well, that doesn't always happen. I'm just curious to know. So I know that when somebody goes through your broker to purchase a dental practice, that oftentimes the brokers have their own finance guys, whereas you operate independently off the brokers to give. I'm genuinely curious because I don't know the ins and outs of this, and be curious to hear your take uh to and when. We? We want to present this in a balanced way to the audience, obviously, because there'll be merits and pros and cons and doing it both ways. What are those pros and cons of going through a broker and obtaining finance or just doing it yourself and maybe having a lawyer and going through someone independent to obtain your finance. What would be the ins and outs of that?

Jawad, 18m 40s:

so I I've I've operated as a, as a broker linked to a uh, a finance broker linked to a larger brokerage. Um, I've been in the same group for many years. It's it's a good structure. It makes sense, it works. Um. Do you want somebody independent? Do you want somebody completely isolated that isn't involved with the transaction? That doesn't um, that that can't be influenced. But the influence in reality is good and bad. Um. I can't say anything negative to to that structure, if I'm honest with you, because I think it it does work well. But I have had clients um. I've got I've got one on at the moment that was being, I'm going to say, sold, but not in a negative way, was being sold to use the in-house finance brokerage for his practice that he's buying, and he wasn't comfortable with it. He felt like it was all just the in-house thing didn't sit right for him. Um, and that's fine. Do I agree with it? I think it's down to preference. I think it's down to preference, but I'm more so about being comfortable with the people that you're using um making sure you're getting the right amount of advice, advice and the right level of advice and it's advice that is suited to you. So this structure for me. In-house independent, in all honesty, is for me neither here nor there. You've just got to use a good broker that's going to have you back and it's going to support you and give you good, honest, trustworthy advice respect man.

Dr James, 20m 19s:

Well, listen, thank you so much for giving your take on that, because I was always curious as to the ins and outs of it and I knew there must have been some pros and cons either way, but I was super curious to the specifics. So thanks for laying that out super clear. Jawad, listen. I want to thank you so much for giving your time to appear on the Dentists Invest podcast. I know 100% we're going to have you back because the market keeps changing, it keeps shifting and we're going to need your hot and fast uptakes. So, looking forward to that next episode already. Guys, if anybody or, yes, guys, if anybody who's listening to Dentists Invest podcast wants to reach out to Jawad Jawad, how would they, Jawad? How would they best off be doing that? Would it be to email you phone number? How would that look?

Jawad, 21m 3s:

Either or either, or my contact number is readily available. I'm not one of them people that sort of shies away from having conversations and doesn't display my contact number, so my mobile number is displayed readily, as well as my email. So whichever suits, and happy to have conversations, happy to have as many conversations as possible. I think it's important, I think it's something that needs to happen more so, and a no obligation chat is something that I'm happy to have at any time sure, and those are on your website yeah, on my website, on my instagram and on my linkedin all aspects facebook as well, so everywhere plastered, plastered everywhere, smooth, smooth, customer top stuff and

Dr James, 21m 45s:

that is that is that website, www.stanfordfinance.com. Is that what it is? .co.uk, .co.uk. Lovely, lovely, all right. Well, Jawad, listen. Thank you so much for your time once more, looking forward to our next episode already. Hope you have an absolutely smashing tuesday and I'll see you soon.