Dental practice buyers and sellers may think that a sale is complete when the sale agreement is signed, the check issued, and handshakes completed. However, a successful transition needs much more work.
Since 1984, I have sold over 250 practices. With this experience, I developed a practice-transition checklist. Results include the following:
• Less than 2 percent patient loss six months after the sale.
• No practice failures. An average production increase of 25 percent within six months.
The purpose of the checklist is to plan for a seamless practice transition. The goal is for the patient to see no changes in the practice, except for the person doing the dentistry.
What are the key elements of a good practice transition? The elements should include a positive staff and a well-written letter of introduction to patients. With these two elements in place, a buyer’s patient loss will be minimal, even if the seller does not stay with the practice. Fewer than 10 percent of my sellers stay with the practice for more than a few days. In general-dentistry practices, a long-term seller transition is not necessary to achieve less than a 2 percent patient loss and an average 25-percent increase in practice production.
Before the actual closing date, many important (and some “red tape”) tasks need to be completed:
• The letter of intent, sale agreement, leases, and other documentation need to be reviewed and approved by buyers, sellers, financial advisers, and attorneys for both sides.
• The financing source also will have several documents that need to be reviewed and approved.
• Insurances, such as commercial liability, life, disability, practice overhead, Workmen’s Compensation, and malpractice.
• Licenses and ID numbers, such as federal, state, and local tax-identification numbers.
• Business licenses and a dental license.
• OSHA, DEA, and other registrations.
• Insurance-carrier agreements and fee-schedule approvals.
The staff needs to be involved in the transition when appropriate. This usually is after a letter of intent has been signed and practice financing approved. The goal is to transfer the loyalty of the staff from the seller to the buyer. The receptionist is the key person in terms of retaining patients in the practice. The patients will pay attention to her enthusiasm for the transition and this will help allay any fears they may have about the new dentist.
Do not make any staffing changes until the buyer is secure in the practice. It can be a fatal mistake to fire the receptionist early in the transition.
The seller must mail a well-written patient letter of introduction to active patients and referral sources. This is an important element in transferring patient loyalty. The letter can accomplish a lot if it is sincere, takes the patients’ feelings and fears into account, and praises the buyer’s character and background.
To prepare for the increase in new patients, the buyer may want to spruce up the practice. A new coat of paint works wonders. In a practice where the seller may have neglected the facility, it is an inexpensive leasehold improvement. One buyer improved the initial impression of the office merely by using brighter light bulbs. The goal is to make the patient contact cycle be a positive experience for the patient.
The Seattle coffee company, Starbucks, focuses on the “Starbucks experience”: an inviting, enriching environment in the stores that is comfortable, accessible, stylish, and elegant. Store design and staff training emphasize the quality of everything the customers see, touch, hear, smell, or taste. They want to send the subliminal message — everything here is best-of-class.
Look at the dental practice-transition the same way.
About the Author
Gary Schaub, the owner of HELP Appraisals & Sales Inc. has over 30 years worth of experience in healthcare and dental practice appraisals, sales, and transitions. Gary Schaub is also a member and Chairman of the National Practice Valuation Study Group, and has conducted numerous seminars and lectures for various national dental societies. Gary has even conducted four Table Clinic presentations at American Dental Association meetings.
– This article was first published in Dental Economics.