As dental practice brokers, we hear all the sad stories about failed associateship arrangements. In almost all instances, the parties enter into an associateship with the best of intentions, but, somewhere along the way, problems develop and statistics show that about 70 percent of all dental associateships fail. Let’s take a look at a few of the most common causes for these failures and discuss some preventive measures both parties can take on the front end to better ensure a successful transaction.
The way I see it, professional associateships and partnerships are actually quite similar to a marriage in terms of the emotional and personal feelings they can stir up. So, if we can do some effective premarital counseling during the courtship phase of forming an associateship, the chances of having a successful business arrangement will be enhanced.
Quite frequently, I see an older dentist and a younger associate diving into an associateship arrangement when they basically know nothing about each other. They have not taken the time to sit down and communicate effectively with each other about their practice philosophies, compatibility, or each party’s expectations about the association. This lack of communication early in the process may very likely continue after the parties begin working together, and the result will be their inability to resolve differences of opinion later on.
As with the breakup of most professional partnerships, the major reason for the failure of most associateships is money. In nearly every case, one party feels he or she is not getting his or her fair share. The conflicts about money can surface under the guise of many different situations, but a majority of these conflicts stem from the fact that there was no written contract in the beginning. Many young dentists will jump into a situation because they need to start working to support a family and/or make those payments on their school debt that is coming due. They fail to realize the importance of having a written contract.
Frequently, older dentists don’t properly assess the limitations of their patient base and office space. After the associate starts, the senior dentist realizes that the patient load is barely sufficient to keep the associate busy two days a week. In other cases, the owner dentist is not willing to assign patients-of record or even new patients to the associate because he is not yet ready to slow down and does not want to give up patients. Again, the bottom line in this situation is money. If the associate dentist can’t stay busy enough to provide adequate compensation, then why is he hanging around?
Other issues related to money include: 1) the associate’s income expectations may be unrealistic; 2) the owner dentist decides not to pay the associate what they had verbally agreed to; 3) the associate realizes that the managed-care and/or capitation patients are now his responsibility; 4) it’s now 12 months into the associateship and the owner says he is not willing to sell at the verbally agreed-upon price and time; and 5) the parties cannot come to an agreement on the price and termsofthe buy-in or sale.
Success of an associateship involves a compatibility between the parties, and the only way to determine compatibility is for both doctors to spend some time together — preferably outside the dental office setting — discussing dentistry and other important areas of life. Once both parties find common ground for them to work together, it is time to talk to someone who knows dentistry and has the expertise to put together an associateship agreement. This agreement should contain the method of compensation for the associate, the length of the agreement, whether it is a buy-in or buy-out arrangementor other options, a method for establishing the practice value at a designated time in the future, a restrictive covenant, responsibilities for lab fees and insurance premiums, independent contractor or employee arrangement, and management responsibilities.
It doesn’t matter how much one party feels he or she can trust the other. Everything needs to be put into a signed, written agreement. When an associateship is developed in this manner, this “marriage” has a better chance of staying the course.
Dr.Bill E. Avery is president of Professional Practice Sales & Appraisals, Inc., a firm specializing in dental appraisal and brokerage in New Mexico. He has over 35 years experience in dentistry, and is a member of American Dental Sales. He can be reached by phone at (505) 821-0015 or through the ADS Web site at www.dentalsales.com.