Only one out of 10 associates end up as partners. Here are five must-do steps you must take to ensure your planned transition is successful.
- Plan ahead. Ask yourself, why would I want to bring in somebody into my practice and under what circumstances? Would I like to expand or am I simply too busy to keep up with increasing patient volume and need a second dentist to give me relief. Or, am I at the point where I want to slow down but the practice demands do not allow me to ease off? Or, am I seeking to take some equity out of the practice? It is important to know your objectives.
- Select the suitable candidate. You must be prepared to create a mentoring relationship with a new dentist and show him or her how to become a successful partner in your practice. Determine the new dentist’s value system, work ethic, integrity and desire to look after patients’ well-being. Obtain references to determine if your future partner works hard and is a quality practitioner, has any personality quirks and treats staff with respect.
- A written agreement up front. A verbal agreement is worthless. Make sure you have a written agreement in place before the new dentist sees any patients. The agreement should cover both the initial associate period and address all phases of the transition process.
- A good faith deposit. The fact that the new dentist is committed to the practice means nothing unless the commitment is backed with cash. If the issue of a deposit becomes a deal breaker, break the deal! Never enter into a transition arrangement without receiving an initial deposit of at least 10 per cent of the purchase price upfront.
- Assist in developing a patient base. Do whatever you can to assist the new dentist in building up a practice and help him or her to become successful.
There are several co-ownership structures to choose from. These are the most common.
Solo Group Arrangement
When mid-career dentists work to maximum capacity and have plateaued in terms of production and professional challenge, they often seriously consider bringing another dentist into the practice. At this stage, it’s not usually with a view to retire. Rather it is a way to achieve other goals such as reducing practice time commitment, pursuing a specialty which requires another dentist to look after the general dentistry, or simply cashing out a portion of the practice equity.
The incoming dentist often joins the practice as an associate and, once he or she is established and has developed a patient base, the sale of the practice interest is consummated. In the end there are two independent practices operating in the facility, with very little sharing of staff and expenses. Likewise, there is no shared production. The two dentists may have a buy-out agreement in case of death or disability, but there is no intention that one dentist purchase the other dentist’s practice on retirement.
Transition-Ownership Arrangement
A transition ownership arises when dentists, approaching their career sunset, look for a partner to effect the retirement transition. While the two dentists still may work as two separate legal entities, mainly for tax purposes, they share many common expenses and even some practice income. The key element of the co-ownership is to execute an exit strategy for the retiring dentist.
And always strive to create a win-win situation for you and the new dentist. Remember the sage advice of America’s foremost sales trainer, Zig Ziglar:
