by Sandy Roth
Several years ago, a client with whom I had been working for about five years decided to retire. Until his 67th birthday, he simply couldn't envision himself not practicing. Our work together had focused on strengthening his staff, enhancing their behavioral skills, and developing relationships. His practice had become truly distinctive, and he was highly invested in attracting a buyer who would continue to serve his patients in the manner to which they had become accustomed. Sadly, it wasn't to be.
Initially, with the help of a practice-transition specialist, he brought in a "baby dentist" who hopefully would look to him for mentoring, guidance, and wisdom. The plan included an initial associate arrangement for a specified number of years, followed by a formal transfer of ownership and waning of involvement for the senior dentist. Although the young man expressed great interest in this idea during the interview, it was not one he embraced once on board with the practice. Because I know this client and his gracious, warm style so well, I don't believe this younger dentist was overwhelmed, smothered, demeaned, or limited in any way. The staff was supportive and totally committed to the transition's success. The patients were open to the new dentist. But the relationship failed. Something else was at work.
Twice more, my client attempted to find a younger associate to join his practice and continue the traditions that had been so successful. Twice more, his attempts failed to produce the desired goal. Then came the birthday that signaled it was time to put down the loupes and retire the handpiece. Once again, my client went searching for a partner, but this time, he and the transition specialist agreed that the goal was to find a buyer who could hit the ground running. My client would immediately cut back to two days a week, and, shortly thereafter, to one day, working only with reconstruction clients in process of completion. The new owner would work with new patients as well as with existing patients and would have a full schedule from day one. The buyer would immediately take over practice leadership as well as management of day-to-day business matters. The staff was committed to remaining in the practice and making the transition successful.
An out-of-state dentist bought the practice and the plan was put into motion. Everything seemed to be in place. However, six months after the transfer of ownership, the practice was in a shambles. The buyer was under investigation for personal and professional drug irregularities, the lab bill had not been paid in two months, the staff was ethically conflicted over the quality of his dentistry, and the young dentist was in denial over the gravity of his situation. This turn of events was heartbreaking for everyone involved.
Could this outcome have been avoided? Who knows? Sadly, this is just one of many failed partnership stories I've heard. In truth, creating a successful partnership is difficult; I see many, many fail. Most should never have been established in the first place. If the parties had taken the time and sought guidance to fully address all of the relevant issues, they could have seen the warnings signs and stopped before making a very costly mistake. "Divorce" between partners is expensive and takes both a financial and emotional toll.
While I do not broker practice sales, make associateship arrangements, or consider myself a practice-transition specialist, I have a great investment in contributing to the success of the plans my clients establish. When are they considering either an associate or partner, I encourage them to do two things first:
å Be clear about why you want an associate or partner. What price are you willing to pay to achieve this purpose? The price includes a huge amount of time, energy, and effort as well as a willingness to relinquish a substantial amount of control as a sole owner. Sometimes dentists tell me they want an associate primarily to have coverage during vacations and continuing-education events. That seems like using a bulldozer to topple a sandcastle.
In other cases, dentists are overwhelmingly busy and view adding an associate/partner as a way to take advantage of and build on their success. Many business models show how an associate can grow into a practice and expand its reach, but paper plans and reality are often quite different. Many human factors exist that can easily scuttle the ship.
ç Have your accountant run the numbers. Be clear about the financial implications of adding a partner or associate. In many cases, dentists learn they can work an additional two to three years past their retirement target date and net the same amount as they would through selling their practice.
Given this factor, many dentists whose motivations are primarily financial find that the additional work, stress, and obligations associated with adding a partner are not worth it. This is a part of the due diligence dentists often overlook.
My long-time friend, Avrom King, stated recently that more than half of all dental partnerships and associateships are dissolved within the first five years. Of the approximately 40 percent that continue, only half of the principals report that they would repeat the experience. King believes that forming a partnership is more difficult than creating a healthy marriage. Very few of the partnerships that remain do so happily and profitably. Most partners stay in their unhappy "marriages" because the cost of divorce seems too high. It's another example of money overcoming other, equally important quality-of-life issues.
Unfortunately, I have seen very few functional, rewarding partnerships. It may be that dentists are trained to compete rather than to collaborate. And while there are notable exceptions, I'm seeing new dentists enter the profession with a very different work ethic and a greater sense of entitlement than their forbears. Few of these young dentists seem to be looking for mentors. Moreover, many are so deeply in debt that they make decisions based solely on cash flow and finances.
Add to that the fact that many older dentists — those looking for partners and associates — have put so much into their practices that they have strong proprietary feelings about their "baby." This possessive attitude prevents them from viewing a partner as someone with whom they must collaborate. Understandably, an individual who buys into a business has the right to put his mark on it, and it is often hard for a principled dentist to let go.
Then add the reality that most dentists have little to no human resources training. They neither hire nor train staff well, and those deficiencies hamper them when selecting a partner or associate. These factors can make business operations unpleasant and decrease the likelihood for a successful relationship.
While it isn't easy to create a successful partnership, it isn't impossible. Dr. John Bryson, of Tupelo, Miss., with whom I have worked for over 12 years, and his partner, Dr. Richard Caron, have demonstrated this point very well. Theirs is a fine example of a successful partnership.
Dr. Bryson states that while there are many advantages to practicing in a partnership, there also are significant disadvantages. "Any practitioner who is considering a partnership should evaluate both sides carefully before committing," he says. Table 1 outlines Dr. Bryson's tips that any dentist who considers a partnership will find valuable.
Dr. Bryson adds that there are other partnership scenarios, but the one mentioned in Table 1 is the most common. He continues, "The obstacles and opportunities are similar for most situations. These are the realities of partnership practice from our experience and from our observation of several other practices where partnerships worked or failed to work. In our practice, the single greatest reward is the ability to collaborate daily with a peer who shares the same values and goals for our work. Good partners are willing to share the leadership and management burden and challenge one another to be the best they can be.
"I also realize that many dentists are stubbornly independent, and that collaborating is not something they value. Someone once observed that, if ordered to form a firing squad, most dentists would stand in a circle! Unfortunately, there is little help available from counselors, consultants, CPAs, and attorneys. Most practice-transition specialists are committed to the walk-away sale of a practice where the senior dentist is around for only a brief period of transition. My personal bias is that these types of practice sales aren't that beneficial for either the selling or the buying dentist. The reality is that in such walk-away sales, the seller rarely gets a price he feels is fair, and the buying dentist probably fails to get the value he had anticipated, due to the tenuous nature of his relationships with the patients and team."
I really admire Dr. Bryson's candor and willingness to share his experiences.He has also been a long-time client of Cain, Watters, and Associates, a fee-only financial planning firm in Dallas, Tex. that helped him include a solid practice transition into his financial planning strategy.
Are successful partnerships possible? Yes. But not without planning, determination, the right attitude, a willingness to work very hard, and some help from people with the skills and insights you may need. Before you embark on such a venture, consult with others who can help you avoid all of these traps and create a successful partnership.
Table 1 — Tips for a healthy partnership
1First, let's dispel the two most common myths about partnerships:
• Cost sharing reduces overhead and produces higher profit potential. This myth came from early management consultants attempting to apply business efficiency models to dental practice. For example, partners may save by sharing the costs of a cephalometric X-ray unit, but these savings are minimal over the long term, and certainly not sufficient to justify partnership.
• Less staff will be needed, reducing overhead. Nope ¿ in all likelihood, it's just the opposite!
2Advantages for the junior dentist:
• The opportunity to practice with a developed team. This may well be the greatest advantage for the junior dentist. A good team will make the dentist's life easier and the practice more enjoyable and profitable.
• Clinical mentoring. Junior dentists never know as much as they think. Having a mentor close at hand can shorten their learning curve exponentially.
• The opportunity to experience a private practice without the significant start-up investment required for a new practice. It's fair to assume that the senior dentist is entitled to some profit from the work of the junior dentist, since he has taken the financial risk as the owner of the business.
3Advantages for the senior dentist:
• None! At least, early on. Senior dentists must realize that their management responsibilities are going to increase dramatically. Also, mentoring a junior dentist will involve considerable time and energy. After one to three years, some financial advantages will begin to emerge if the financial agreements are properly structured. Don't expect to take on a junior dentist and have your life become easier. That may be possible in a few generic practices, but it's not going to happen in a strong, relationship-based setting.
Once the junior dentist has become integrated into the practice, there can be a significant financial reward for the senior dentist. When the junior dentist buys into the practice, it allows the senior dentist to reap some of the equity from the practice at its peak and invest it for retirement.
As the senior dentist approaches retirement, he or she can work fewer hours without compromising the value of the practice or patient care. In many cases, the senior dentist can work fewer hours without any loss of income because he can focus more fully on larger cases, if he desires. In fact, this is the time to start bringing in a new junior dentist and begin the process all over again.
Have you considered?
Take a moment to evaluate the following issues. These points underscore just how fragile a partnership can be. If any of these important variables change (assuming they are in place at the beginning), an evolving relationship can easily be damaged.
• Clarity of purpose
• Common mission
• Duty to your partner
• Good faith and fair dealing
• Personal responsibility
• Written agreements
• Ability to foster goodwill
• Ability to collaborate
• Common courtesy
• Kindness despite disagreement
• Desire to succeed