Should I bring on an Associate before selling?

“Is it a good idea to have an associate work in my practice for a time before selling the practice?”

When a dental practice creates enough demand from patients for more doctor hours, it’s a good idea to think about what direction to take regarding the future of the practice. In one sense, referring out treatment to specialists that the doctor doesn’t enjoy providing makes room for patients who are committed to the treatment the doctor enjoys. On the other hand, bringing on another doctor to fulfill the unmet demand for dentistry can help the practice grow and ultimately position a new doctor for a partnership or transition.

It’s very important here to note that the practice must sustain enough demand for dentistry for two doctors; it isn’t enough to suggest that just “bringing on an associate” is a good idea when there isn’t enough business to keep one doctor busy every day.

From the associate’s perspective, working in a dental office as an employee or independent contractor is necessary in order to earn a living as it may not be feasible, for whatever reason, to purchase a practice right away. As it is with the employer, making sure there is enough demand to fill a full-time schedule for all parties involved is the key. Often times, an associate dentist is introduced to the practice when the demand does not justify a full-time position. The result is a disappointed associate who may not stay and seek work elsewhere.

Another point of view is that of a dentist who may wish to work in a practice before making a decision about purchasing. On the surface, this seems to be a reasonable request, but what are the benefits to the owner or the buyer, and what are the risks?

From the buyer’s point of view, he or she would prefer to become knowledgeable about the day to day operations of the practice, how patients who frequent the practice are treated, and business systems and philosophy of the practice, to see if these characteristics match his or her ideals. In addition, the buyer may wish to learn if he or she is like-minded with the employees working in the office. The buyer may also wish to learn about the range of procedures performed in the practice and whether or not he or she is capable of keeping up with the pace of the owner who is more often than not more experienced and skilled. Finally, the buyer may want to know if he or she is matched well to the socioeconomic profile of the patients of record.

On the other hand, the seller may want to learn more about the personality of the buyer and determine if he or she can manage the practice. A question in the seller’s mind may be, “Can this buyer generate the production and resulting income necessary to meet the current expenses and the debt required to purchase the practice?” It’s also a good idea for the seller before the sale to train the buyer on the unique characteristics and business systems of the practice to help assure the quality of services delivered in the past continues.

Both points of view are important to each party in a practice purchase or sale, however, the risks are much greater for the owner and may have a significant negative impact upon the practice value. For example:

1. Patients and staff may be unnerved by the sudden arrival, and departure, of the associate dentist, and some patients may even choose to go elsewhere as a result.
   1. With a specialty practice, the referring doctors may abandon ship and begin to refer to other specialists due to the change in practitioner.
2. The owner is required to explain to patients, or referring sources, that he or she will be resuming the care of the patients in the practice. This in most cases results in a loss of income while the owner and staff are burdened with the task of damage control - explaining the short-term change of practitioner.
3. The owner may have reduced income hours while feeding patients to the buyer to form the impression that the practice is busy. In uncertain economic times, decreased patient flow can only be spread around so much.
4. Marketing and introductions of the new associate dentist may have to be retracted, causing more suspicions or questions from the community of patients and / or referring doctors.

It may be necessary to consider such a transition plan when, for example, a specialty practice located in a remote area has few other buyers to seriously consider purchasing the practice. All this being said, working as an associate to buy-in is not recommended for the aforementioned reasons; the risks are too great to the seller.