Student loan debts, desire for work/life balance, and the benefits of a colleague in the office are among the many reasons more dentists are considering taking an associate dentist position. The trend is not limited to young practitioners. Many experienced practice owners are deciding to sell their practices and work as associates. They cash in their equity, get to do the dentistry, and leave the considerable practice management chores to someone else.
On the surface this seems like it would be an easy transition to make. Find a position, and start working. Or find an associate, and put the person to work. Most of these considerations seem obvious when you think about them. But every year I’m hired by at least one practice to turn around a failed association. There have been problems because almost always, one or more of these “obvious” considerations were disregarded.
Most often this happens when a solo practitioner adds an associate. No. 1 on my hit list is a solo practitioner who is so busy he or she can’t stand it and who needs an associate. Except there’s a problem: the practice is actually too small to support two doctors. If the solo doctor sees patients four days and has a six-day workload, it is going to feel busy.
When a new associate takes up the two days of work, the practice will feel distinctly not busy. Unless the senior doctor is willing to give up a significant amount of his or her workload, the new associate will likely seek another position that offers the opportunity for a busier schedule and higher income.
So, both parties in this situation need to agree on a business plan for the new two-doctor practice. That business plan should include provisions for attracting more new patients, assigning existing patients, the doctor work schedule, increased staff requirements, and physical facility utilization, to name a few of the major items. Without a clear plan of who, what, and how, a new association will be bumpier than it needs to be.
No. 2 on my hit list is mismatched expectations. Is the position a job only? Is it a trial period leading to a possible buy-in of the practice? Is a future buy-in required of the associate? When and how will the buy-in occur? How much will be bought and at what price?
Without the issues discussed here being clearly agreed upon and committed to in writing, trouble surely lies ahead. Nearly every month, I get a call from an unhappy associate who is now looking to buy a practice. The source of the dissatisfaction is often that an expected practice sale and purchase did not occur for some reason.
There are many issues tied for No. 3 on my list. It is perfectly reasonable for the potential associate to investigate these issues as part of the evaluation process. The owner should not be put off by the questions.
|Revenue sources of the practice – Heavy reliance on deeply discounted PPO plans, state benefits, insurance, lower margins, and the amount the owner can therefore compensate the associate. Again, awareness of and agreement on compensation is an obvious hot spot.|
|Contractor or employee – The tax implications can be significant, and this issue is frequently left hanging at the start of the association.|
|Covenant not to compete – This is a real source of conflict between parties.|
|Compensation for exams and radiographs – Owners never want to pay. Associates always want to be paid.|
It is best to negotiate and settle as many areas as possible before starting. This will help the association last longer.
Steve Jordan has 36 years of experience in the dental industry. For the last 17, he has been owner of PMAgroup LLC, an Ohio-based practice brokerage company. Steve is vice president of ADS, a national association of independent practice brokers. He can be reached at 330-335-9042, 888-419-5590 ext. 330, or SteveJ@adstransitions.com