Four Major Obstacles to Practice Success

No matter how talented you are or how many hours you spend in your practice, you will never reach the pinnacle of practice success if you are suffering from any of these afflictions:

  1. Super Inflated Ego. Being enamoured of your own self-importance and advertising your dental “Superman” skills at every opportunity does not build relationships with patients and staff. Nobody loves someone who thinks they can walk on water.
  2. Greed. If you’re living with the impression that a dental degree is a license to print money, dentistry will not be a rewarding career and eventually you will grow to hate your chosen profession. When your treatment planning is driven by greed, you will lose not only patients by the truckload, but also the respect of your staff. Your only legacy will be a bad reputation.
  3. Lost passion. According Rod Stewart, everybody needs passion, and I agree with him. When your passion for golf or breeding Arabian horses exceeds your passion for your career, then your future will become shaky and unpredictable. You will end up marking time in the office, with little time or energy for staff and patients, keeping your continuing education efforts to the absolute minimum required.
  4. Roving Eye. Starting an extramarital relationship with your assistant is like a ticking bomb. It is only a matter of time before it explodes, and the casualties will be your marriage, possibly the relationship with your kids, staff morale and ultimately the success of your practice. All that will be left are the smoking remnants of your retirement nest egg, and the obligation for sizable support payments. Don’t be led into temptation, hire employees based on their skills and not other more obvious attributes.

Bringing in an Associate as a Co-owner

Steps for a successful transition

Only one out of 10 associateships end in a partnership.

Here are five “must-do” steps to make sure your planned transition is successful.

 

  1. Plan ahead.

Ask yourself:

  • Why would I want to bring somebody into my practice and under what circumstances?
  • Would I like to expand the practice, or am I too busy to keep up with the increasing patient volume and I need somebody else to give me relief?
  • Do I want to slow down but the practice demands do not allow me to ease off?

or

  • Do I want to take some equity out of the practice?

It is important to assess what your objectives really are.

 

  1. Select the suitable candidate.

You must be prepared to create a mentoring relationship with the 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 the patients’ well-being. Obtain references to determine how the new dentist treats the staff, whether he or she has any personality quirks, and whether he or she is a hard-working, quality practitioner.

 

  1. A written agreement up front.

A verbal agreement is not worth the paper it’s (not) written on. Make sure that there is a written agreement in place before the new dentist sees any patients. The agreement should cover the initial associate period and address all phases of the transition process.

 

  1. A good faith deposit.

The fact that the new dentist is committed to the practice means nothing unless the commitment is backed up by cash. If the issue of the deposit becomes a deal breaker, break the deal! Never enter into a transition arrangement without receiving an initial deposit of at least 10% of the purchase price upfront.

 

  1. Assist in developing the patient base.

Do whatever you can to assist the new dentist in building production and help him or her to become successful.

Don’t bargain yourself out of the deal

Prospective purchasers often walk away from a practice purchase because they are unwilling to compromise on a relatively small price difference and, thus, miss the career opportunity of a lifetime.

We picked up the following exchange between students and established practitioners in a student forum, posted on the American Academy of Periodontology website, on the subject of purchasing and setting up your own practice.

A student posed this question to Dr. Nicholas Caplanis regarding his practice purchase.

Given what you know now, what might you do differently?

Dr. Caplanis replied: “There is not much that I would have done differently except that I probably would not have negotiated as hard regarding the practice purchase price. In my personal situation, the original asking price for the practice was approximately $400,000. The final negotiated purchase price was in the mid $300,000 range.

In retrospect, given how successful I have been in this practice, I do not feel that the $50,000 that we were negotiating back and forth is as important today as it was back then.

That amount of money could have been the deal breaker and I could have lost this practice to another buyer who was willing to pay it.

In retrospect, an extra $50,000 for the price of the practice would have not really changed my financial situation that much. My advice, therefore, is “don’t be penny wise and dollar foolish”!”

Closing the sale: 7 “Must-do’s” to maximize practice value

If you are planning to sell all or a portion of the dental practice here are some tips to turn your valuable practice asset into cash.

  1. Allow lots of time. Don’t rush to book the airline tickets to your retirement home in New Zealand. Don’t wait until health problems force your hand. Purchasers are astute. They can sense very quickly if you are in a hurry to retire, all of which is reflected in a lower offer.
  2. Never let billings slip. It does not matter how much money you made in the last 15 years, the revenues and the cash flow in the year of the sale is what counts. A practice with slipping profitability is a hard sell.
  3. Be involved. Unlike a home sale where the broker does all the work and the purchaser does not really care. If he ever meets you in a practice sale, on the other hand, you are the best salesperson. When you and the prospective purchaser “hit it off”, you can bet that the practice sale will go smoothly. Personal bonding is the glue which will keep the deal together.
  4. Do some housekeeping. Make sure that your practice has curb appeal. It means that your office is in good repair with fresh paint and clean carpets.
  5. Be realistic. Set a reasonable price and have it backed up with a professional Practice Valuation.
  6. Make sure that long-term commitments can be assigned. Ensure that the lease for the premises can be assigned and without your continuing personal guarantee.
  7. Prepare professionally looking documents. This would include a practice and patient profile, as well as up-to-date financial statements and billing records. If you are in a group practice, make sure that the cost-sharing and buy-sell agreements are up-to-date.

Do you have a practice transition plan?

When you start thinking about the practice succession and bringing another dentist into your practice, you must have a solid transition plan in place. This plan not only helps you spell out your financial and retirement goals but also provides a roadmap for the dentist joining a practice. It is important to share your transition plan with the new dentist. Do you want the new dentist to start as an associate and become a co-owner of your practice in a few years hence? There are many options to consider, and you must spell out what your vision is and set a timetable. You need to find a successor who shares your goals and vision otherwise the transition is doomed from the start. You must create a win-win situation, and by laying your entire transition plan on the table, you create the right negotiating climate needed for a successful deal.

The reason most selling dentists do not share their transition plan is because they don’t have one. In one situation, where both parties were ready to ink the deal after months of negotiations, the seller got cold feet and was ready to back out of the sale, unless he was guaranteed to work for another five years as a full-time associate. This of course was unacceptable, as the practice could only support one full-time dentist. The selling dentist realized that he didn’t have enough funds put aside for retirement, so he needed to keep working. A dentist who pulls the plug on a deal after months of negotiations loses total credibility. Make sure you have a solid transition plan in place before you put up your practice for sale.

If you are thinking about transition, give us a call. Over the last 35 years many dentists have called us to quarterback their practice transition. We take a business approach to practice transition: practical, no-nonsense, creative and cost efficient.