The Dental Practice Transition Period

There are many issues that have to be agreed upon in order to sell a dental practice. One of them is the transition period, which is the time from settlement to the time the seller leaves the practice. The purpose of this article is to address key points that should be considered in order for the seller and buyer to decide what is best for their situation.

The first issue is how long the seller wants to keep practicing. Some want to retire as soon as their practices are sold, while others prefer to phase out gradually. If a seller chooses the latter, there need to be enough patients in the practice for more than one doctor. A solo practice may have sufficient patient flow for only one dentist. Even if there is a large patient base, the buyer and seller need to address whether both doctors can work at the same time (number of operatories) or whether they need to work separate hours. It is becoming more common for the buyer to want the seller to stay because s/he has another office and needs the seller for coverage or because a group is the buyer and prefers to have the seller for a longer period of time.

If the seller is going to stay, the seller’s days, hours, compensation, and benefits must be addressed. In most cases, the seller is paid the same as an associate (e.g., a percentage of collections). The transition needs to be spelled out in the practice contract. If the seller is going to stay and treat patients, there should be a separate employment contract. If the transition is going to be short (no more than a month) and the seller will not be treating patients other than to finish work in progress, there may be no compensation.

Buyers often think that sellers have to stay six to 12 months in order to introduce patients. However, it is usually the staff that introduces a buyer to patients. When patients visit, the staff interacts with them before they meet the new doctor. Staff has the opportunity to tell patients about a new doctor and make introductions. I know how important staff members are from the many situations I have brokered where sellers were deceased. As long as the staff remained and a temporary dentist was hired, those practices remained mostly intact. Patients who left were generally ones who moved away from the area.

A letter to patients is usually sent after a practice is sold. This letter is from the seller, and it lets patients know about the change, has a paragraph about the buyer, and finishes by letting patients know that the staff will be remaining and that their patient records will remain intact. The parties can split the cost of these letters, or the seller can pay for the printing and the buyer the postage. Some suggest that patients not be told the practice has been sold (should use the word transferred in the letter) for fear many patients will leave. Since most patients tend to return to where they’re used to going, it is not a good idea to mislead them. The staff will know, and patients will find out. It is much better to be up front and honest.

If the transition is going to be a buy-in followed by a buy-out, there are additional issues that need to be addressed that are beyond the scope of this article. The buy-in/buy-out can be an excellent transition method in the right situation, but it is complicated. In a specialty practice that relies on referrals from other doctors, the transition may be longer. The key here is not so much for the seller to be doing treatment but to be introducing the buyer to the referral sources.

The more flexible the seller is regarding the transition, the easier it will be to find a buyer and put a good deal together.

Philip A. Cooper, DMD, MBA, has been helping dentists transition their practices in New Jersey and Pennsylvania since 1985. He is a member of ADS Transitions and can be reached at cooper@ameriprac.com and 800-400-8550.