Successful practice transitions do not just happen. Like anything else in this life, they require planning. If you are thinking of transitioning your practice, you need to work through the following steps:
Develop a plan. You need to write out your “wish list” for what your transition will look like. If you are selling 100 percent of your practice and leaving that practice in two to four weeks, then obviously you do not need as detailed or as comprehensive a plan. However, if you are considering a phase-out type of transition, you will need to develop a well thought out strategy.
Determine the value of your practice. To have an effective strategy, you need to have an understanding of the real value of your practice. The most effective way to accomplish this is to employ an impartial third party who is experienced in dental transitions/sales. You want to find someone who will understand your transition strategy as he/she assists you in determining a realistic fair market value — one that you can reasonably expect — for your practice. During this process an important element will be to address the tax issues after the fair market value is determined.
Select an associate. You will need to find the right person to enter your practice. The only way you can find that individual is to clearly define in your “wish list” exactly what you are looking for. In preparation for the interview process, you should develop questions that will tell you if the person you are interviewing will meet your expectations and fit the “corporate culture” of your practice.
Be sure the associate’s plan is a good fit with your plan. This is a critical step in the process. You need to be sure that the dentist who is applying for the position is seeking an association under your “transition-planning schedule” and not the reverse. With the right plan, you will remain in control.
Have a written agreement with the associate. This is extremely important, since it prevents misrepresentations, misunderstandings and, hopefully, hard feelings that occur when expectations do not become realty for either party. Obviously, there should be an “engagement period” in an attempt to ensure compatibility in terms of patient treatment philosophy and compatibility. You also should clearly communicate what is being sold, when it will be sold, and what the price will be. Without this information, it will be difficult for an associate to commit to your “transition plan.”
Work side by side with the associate. During the engagement period, you need to assess the associate’s ability and whether you want to enter into a long-term relationship with this person. As important as it is to get input from your staff during this time period, you need to continue to be actively involved so that you can properly assess your staff’s observations.
If, after the assessment period (usually three to six months), you determine that the candidate is not the right person, you should terminate the relationship and start the process again. Although this action is not an easy one, you owe it to yourself — as well as the associate — not to lead him or her on with unrealistic expectations when you have determined this is not the right person for your practice.
The importance of a written plan and agreement becomes very clear. It will force you to think through the process and determine whether a buy-in and buy-out phased transition is something that is best for you or whether you want to remain on as a solo practitioner until you are ready to sell 100 percent of your practice.
Working with a practice transition specialist can greatly assist you with the development and implementation of your “exit strategy”. Having a sounding board who has expertise in the dental area can reduce much of the stress that the transition process generates.
John M. Cahill, MBA, of John M. Cahill Associates has more than 30 years of experience in the dental industry, including all aspects of appraisals, sales, purchases, and buy-ins in connection with dental transitions. Cahill is a member of American Dental Sales, Inc., and can be reached at (510) 844-0330 or by email at firstname.lastname@example.org. See the classified ads for names and addresses of ADS members in your area.