Practicing with another dentist for any length of time should be approached with the same care and effort that one would prepare for a marriage. While selling a dental practice and then working for the buying doctor can generate the money necessary to fund a retirement program, there are concerns that need to be dealt with. These concerns are:
- Is the practice strong enough to provide both buyer and seller with the income necessary to meet the financial needs of both. One of the best ways to figure this is to count the number of active patients in the practice. Most consider a patient to be active if the patient has been in for a visit at least once during the past 12, 18 or 24 months. Based upon 18 months, the practice should have a minimum of 2,000 active patients if both doctors wish to maximize their production. If the practice has 2,000 active patients, the practice has the potential of realistically producing $750,000 to $1,000,000 per year. This figures out to each patient accounting for $375 to $500 per year of dental care. This is only a rough estimate and can vary with location.
There are other factors that need to be considered that we don`t have time to deal with in this article. If the practice does not have the strength needed in its patient base, the selling or buying doctor could find himself/herself competing with the other doctor for enough patients to allow each to reach their production levels. This can lead to finger-pointing, blaming each other for not being fair and a tense office atmosphere.
- The relationship can be very difficult and stressful if there is a mismatch between individuals. While all factors involved in developing a workable relationship are important, the most important is "professional compatibility." Professional compatibility entails being able to accept each other`s practice philosophy and the quality of each other`s work. Without professional compatibility, the transition is doomed for hard times.
- Another aspect of the relationship that can create some problems is "control." Building a successful dental practice requires a lot of commitment and hard work. Many doctors find it very difficult, once they have built a successful practice, to give up control to someone else and spend the balance of their dental career working for another dentist. The buyer is now making decisions with regard to the hours that the seller will work, how many assistants the seller can have, the number of treatment rooms available, when the seller can take a vacation, what new patients will be seen by the seller, what laboratories the seller can use and the list goes on. All of these concerns can be dealt with in an employment agreement, but the buyer now owns the practice and is in control. The person in control will find a way to win all battles.
- While financially selling your practice and working as an employee may provide you with the dollars necessary to fund your retirement, you can`t be sure that it will. It also could create a lot of stress in your life or the life of the buyer if you cannot get along with each other. The last years you devote to your practice should be and can be enjoyable and profitable. There is a belief by some people that your peak years in dentistry are when you become 45 to 50 years of age. There is a belief that most doctors die at the chair. These statements can be misleading unless you have all the facts. Many doctors do not find their practice decreasing in size and profitability as they get older. Many doctors have found their last 10 years of practice to be their most profitable.
Some doctors have found that if they don?t want to sell their practice and go to work for someone else for 10 years, they still can fully fund their retirement in the last 10 years of their practice. In a future article, we will address how to accomplish this.
Remember, there is no one better way to deal with selling your practice at retirement. For some doctors, selling a practice and working as an employee for a specified length of time may work well. In some cases, you may want to sell half of your practice now and sell the balance when you decide to retire. In other cases, it may be best to find a doctor to work in the practice for a specified period of time, then sell the practice and retire. In still other cases, it may be best to work until you wish to retire, sell your practice and find new happiness outside of dentistry. The key is to spend time trying to determine what you would like to do. Hire a qualified consultant or broker who has worked with doctors to help you determine what is the best option for you.
Tom Smeed is founder and president of Healthcare Practice Management, Inc., a dental broker, appraiser and dental practice-management firm. He is one of the founding members of American Dental Sales, the largest group of dental brokers, appraisers and consultants in the United States. For details, contact the ADS member in your area (See the ADS classified ads).