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Ontario Dentist - April 2002
by Timothy A. Brown, A.L.A.
The new owners of a dental practice will often make their greatest errors in judgement in the first years of practice ownership. This is the actual process of learning to be a business owner and it happens all the time, in all of the professions.
Some of the dentists whose practices I have sold reported to me that it was frustrating to witness the new owner's errors during this crucial period. They were often tempted to offer advice based on their many years of experience, but at times it did not appear needed in the opinion of the young dentist. Yes, transitions have their shortcomings.
If you are party to a long-term transition, be prepared to witness the new owner's mistakes. It's one of the "privileges" of ownership, but this learning curve must happen in order for the new owner to mature. Sit back, say as little as possible and wish them good luck. Try not to interfere too often or give conflicting instructions to the staff or patients, as this may make matters worse. In some transactions, I witnessed pride and stubbornness inflame a common sense issue.
A new owner will usually introduce some new technology, equipment or materials in the first year. This can require modifications to the treatment planning system previously employed in the practice. Once again, this can upset the former owner and lead to conflicting advice to patients, who do not understand why their dentist of many years does not agree with the new dentist. As a result, patients may choose to leave the practice if they are confused by conflicting advice.
In transactions we have arranged where the selling dentist is asked to stay on, or it is insisted they stay on, I have discovered that the associate agreements are terminated prematurely about half the time. Essentially, the perceived need for the previous owner to stay was established early in the sale, yet when reality set in a few months later, one party or the other realized they did not enjoy working together.
Make a graceful exit
Holding on for some preconceived notion that you are needed, if you are the previous owner dentist, is an over-appraisal of your true business value. We all have great personal value, mostly to our clients and patients, but our commercial or economic value can be easily replaced by the large number of very capable dentists who are seeking practices, especially in the major centres of Ontario. My advice to the previous owner in such a situation is to face the facts and quit with dignity.
However, with most issues I write about, I will acknowledge the exceptions. Practices with an annual gross income of roughly $600,000 or more - and there are many that I have appraised - may require the availability of more than one full-time dentist to treat the extensive patient flow. The typical Canadian dental practice has an annual gross income of approximately $400,000 so this exception likely does not apply to more than half of the dentists in Canada.
Whether the hygiene department does a large percentage of gross may determine if a new owner can handle the entire practice. In those instances where the buyer cannot manage the patient flow, I recommend that another dentist, usually the previous owner, be contracted as a part-time associate for one or two days per week only, for a maximum term of six months. If a good working relationship develops, both dentists can renew the contract for another six months, and so on. I highly recommend against long-term associate contracts for previous owners, if only to prevent the unfortunate need to break a contract or enter into professionally embarrassing arguments about them. It is easy to renew an agreement - very easy.
"In those instances where the buyer cannot manage the patient flow, I recommend that another dentist, usually the previous owner, be contracted as a part-time associate for one or two days per week only, for a maximum term of six months."
Beware of partnerships
In the event the previous owner/associate does not work out, there are always dozens of very capable dentists available to help, either as a short-term locum or long-term locum/associate. Most brokers know of many dentists who are looking for work these days and they can more or less replace another dentist very quickly.
Unfortunately, many dentists also believe a solution to the transition dilemma is to enter into a partnership so they can sell part of the practice now, say 50 per cent, and worry about selling the rest of the practice later. This may allow you to relieve yourself of excess patient flow and take more holidays, share the management duties and enjoy all the other benefits of partnership.
However, the pitfalls of such a scheme are typically overlooked, and I remind you that more than half of all partnerships end prematurely, often with terrible consequences. Don't try to beat the odds. Please accept that I say this with respect to those of you in partnerships, but I do not recommend them, under any circumstances. And 90 per cent of the young dentists who are looking to buy a practice today don't want to get into a partnership either. They have heard all the stories.
I recently asked some fourth-year students why they entered dental school. One of the top three reasons was, "To be my own boss." They rarely say, "To be in a partnership with other dentists." Very simply put, the typical buyer wants a solo practice. I am puzzled and often wonder why some dentists, in mid or late career, complicate their business affairs by entering into a partnership.
Solo dental practices work. They work really well. Stay in solo practice and work until you simply don't want to do it any more. Consider my "Sick, Sick and Tired or Wealthy" theory that many of you may already know about, then sell the entire practice at once and get all your cash on the closing date. That's my simple advice.
Your patients will not go without treatment just because you are not available any longer, I can assure you of that. Your staff and patients will miss your unique personality when you depart, yet there are many dentists who will be fully capable of duplicating your basic dental skills.
What next?
And finally, selling your dental practice does not mean giving up dentistry. It only means exiting from ownership, not the profession. You can work forever as a dentist, simply by becoming a locum in other practices. You may not be in a familiar environment, but you've worked in other practices before, so why not try it again at a later stage of your career? It just might be the thing you need to stay interested, and you will continue to earn an income for years to come. In other words, you can always be a dentist. Who says you must be one in the same practice for life?
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