Dr Phillip Palmer, February 2002 - Transitioning in a dental practice, whereby you gradually sell a part of your practice to a younger dentist can be an attractive proposition at any stage of your dental career. In fact doing one transition alone (i.e. adding just one dentist to your practice) can easily add a million dollars over 5-6 years to your financial situation, done in the right manner. However these are a number of cases where 2 or 3 transitions have been developed, with general dentists and specialists, adding huge amounts to each dentist's financial wherewithal.
As dentists, we have always been given methods, techniques, tools, materials and information to enable us to provide excellent dental care. We spend many years at university mastering an intensive learning process, directed at basic sciences and clinical training.
However, while we made a tremendous investment of time and money in our education and training, we were never given any real tools to make decisions about practice establishment.
Nobody told us anything about purchasing practice, buy-ins, and practice expansion through associateship and mergers, or practice exit strategies or different types of practice sales. All these make up the basis of what has become known as "practice transitions". In the past, we have all heard nightmare stories about:
Until recently, the life cycle of a dental practice has remained relatively unchanged. Traditionally, practices have gone through four phases:
FIGURE 1 The Transition Life Cycle Traditional MOdel (D Griggs) |
FIGURE 2 The Transitional LIfe Cycle - New Life Cycle New Transition Model (D Griggs) |
FIGURE 3 Practice Growth Cycle (D Griggs)
When I graduated in 1969- 1970, few models of a dental practice existed other than the solo dentist. "Squatting" was common, and relatively risk-free. Group practices, partnerships and other non-solo practice arrangements were rare. The prevailing attitude among most dentists was characterised by strict individuality and independence. To many of our profession, that remains the attitude. Why lose your identity and complicate your life by entering into an associateship, partnership or group practice.
But times have changed. Today, many dentists struggle emotionally and financially with the changes happening around them. Increased competition for new patients, rising overheads, decreasing profits, and the multitude of government regulations and practice management challenges, all exist in our dental market place.
As a result, dentists are quickly changing their attitudes towards practice transitions. In fact:
• Non -solo practices are becoming increasingly popular as expensesharing arrangements are explored. Why not consider working arrangements that might result in lower overheads, professional camaraderie and shared practice responsibilities.
• Many dentists now can take advantage of buy-in or purchase opportunities within the practices in which they already work. In these cases, the associate no longer views the practice strictly as a short-term employment opportunity.
Transitions do not refer merely to retirement of a practitioner. They can be, but usually are not, mere exit-strategies. Rather, a transition can be designed to ensure the continuity of excellence in care and caring for the patients, as well as your team. At the same time, a transition can create enhanced lifestyle for both parties. It also creates opportunities for new dentists to experience early success from the mentorship of the senior dentist, as well as allowing for a carefully orchestrated transfer of goodwill.
The benefits of a carefully orchestrated transition strategy, to both the primary dentist and the transition candidate can be enormous. They include:
Usually the only way the associate can buy-in is from the senior dentist giving them the money via wages. Thus the senior dentist is very motivated to make the incoming dentist successful. If you have more than 1000-1500 charts, the chances are that you have "hidden value" in your practice, that you will never be able to access. Most practitioners treating their patients' comprehensive dental needs cannot service more than that number of patients. Thus if you have more than that number of active patients, there is almost certainly enough patients to keep
another young dentist busy, making you and him money, until he buys it from you.
What's in it for him? Can you imagine how much easier your practice life would have been, if you knew at the beginning what you know now? How much quicker would you have gotten to where you are now-clinically and financially, if someone had been mentoring you? In actual fact, that's exactly what will happen-you will have an opportunity to mentor and coach a new dentist of your choosing, to help them learn as much and as quickly as possible. And it will be set up so that the more you manage to help them, the more both you and they will make. You will make it very worthwhile financially for the new dentist-they will gain from any increase in practice value that they build up from the beginning.
Sound complicated? Well it isn't really, but every case is different; there's no absolute formula that will work in every situation. It all depends on the correct agreements being struck, and the necessary arrangements being put in place from the beginning. These agreements include:
All the paperwork may sound like a nuisance, but the value to everybody when it all comes together makes it extremely worthwhile.
[Published Australasian Dental Practice, February 2002]