We ask two experts the same question to give you two different answers on a complex issue
"I am finalizing the sale of my practice and plan to retire immediately after settlement. My staff is highly experienced and well compensated. The purchaser told me that his advisor strongly recommended that he replace them as soon as possible, with staff at lower salaries and fewer benefits. Is this a good idea?"
By Gary Schaub
This question is easy to answer based upon my first practice sale. Believe it or not, this is a true story. Almost 30 years ago, I sold my first general dental practice in Portland. What I learned from it is still relevant today.
My seller's long-time receptionist had to move out of state before the sale was completed. However, a dentist who had just purchased a practice down the hall had fired all of his long-term staff, because he wanted younger employees. His receptionist moved to my client's practice, and dozens of patients followed her. My buyer's practice grew so fast that he later started a satellite office.
About two years later, the buyer down the hall who had fired his staff asked me to sell his practice. He was leaving private practice and going to become an employee in a large corporate practice. Why? As he told me, the biggest mistake of his career was to fire his staff when he originally bought the practice. So many patients left with the receptionist and the hygienist that he could never recover financially.
Based on that experience, I tell my buyers to never make any changes in the practice for at least 90 days, unless critically needed. The only change for staff and patients should be the new dentist. Get to know the lay of the land before possibly upsetting the staff and patients. The staff's major concern during a transition is their job security. Don't screw up their morale by being a stupid buyer and firing staff too early.
This strategy pays off - I have had only one failure in more than 400 transitions, and my maximum patient loss after a sale is less than 2%.
Gary Schaub is the founder of HELP Appraisals & Sales Inc., a dental and medical appraisal and brokerage firm in Portland, Oregon. He is a member of American Dental Sales and can be reached at (503) 223-4357 or (855) 463-0101.
Tom Snyder, DMD, MBA
Sometimes advisors do not understand the impact that their recommendation to hire new staff for cost-cutting reasons may have on patient retention. If the seller is retiring after settlement, the only bridge that patients have to the practice is the staff. Granted, highly-compensated staff can be a financial burden to a new owner, but what is a better alternative - significant potential patient loss or higher overhead for a short time period?
Imagine a long-term patient visiting a dental office and being greeted by a new dentist and entirely new staff! If their dental experience is not favorable, do you think they will return? It is a good possibility they will not, as the patient may ask friends for a dentist referral.
Dentistry is one of the few health-care professions where relationships make a difference. If you are concerned about staff costs, give the current team a chance to perform. If there are a few staff positions that are highly paid, address that issue several months after you assume ownership. This is especially true in fee-for-service practices where strong patient relationships are the norm. From our experience, the last positions you should replace are on the hygiene team. Replacing the hygienists immediately may be an issue as the recare patients will no longer have any connection with the clinical team.
Sometimes staff fringe benefits are a more significant issue than the actual salaries. The two benefits that cause the greatest concern are health insurance and pension plans. If you purchase a new insurance plan to reduce premium costs, consider requiring staff to assume part of the premium, if that is an issue. If the owner had a qualified pension plan, it is unreasonable for staff to expect a well-funded plan to continue. You should, as an alternative, offer them a simplified retirement plan that includes employee contribution and employer contribution.
So, avoid being too aggressive in changing your team at the onset, as patient loss can become a self-fulfilling prophecy.
Tom Snyder, DMD, MBA, is the director of transition services for Henry Schein Professional Practice Transitions. He can be reached at (800) 988-5674 or [email protected].