Gretchen Ohlmeyer Lovelace, MS, CFP, CPM
In an attempt to protect Allied shipping during World War II, the War Advertising Council produced a series of propaganda posters that reminded the public about information security. One of the most famous posters warned against careless talk with the slogan, "Loose lips sink ships."
Though dentists need not fear the scourge of U-boats, they would be wise to remember this slogan as it applies to dental transitions and retirement. Many dentists are unaware of the potential damage done to a practice by premature disclosure of a transition to patients and staff. In today's wired world, news is spread instantly via social media. Consequently, without adequate safeguards, it can take less than a day to destroy the value of a dental practice.
Here are a few situations where the dentist paid dearly for "loose lips." After consulting with her malpractice insurance provider concerning pending retirement, an endodontist sent out letters to all referring dentists indicating that she was closing her practice. She then took out an ad in the local paper telling all of her patients that she was closing her practice. After she completed these two tasks, she contacted a broker to sell her practice. She was informed that there was no practice left to sell.
A dentist who planned to retire in three years informed his long-time staff and patients because he "wanted to be open and honest." His workload decreased as his patients scrambled to find new dentists. The practice, which was grossing $750,000 per year, decreased to $250,000 per year by the time the dentist contacted the broker at the end of the second year. The dentist was astonished that his honesty could have driven his patients away and diminished the value of his practice.
What could have been changed in these cases that would have been beneficial to the seller?
1. All dental staff members must sign a nondisclosure form before being informed. Each staff member should understand that the maintenance of the patients is paramount to maintain value in the practice. The staff's future employment and the practice value will depend on discretion and silence.
2. A dentist cannot abandon his or her patients. Proper and timely notification letters must be sent. However, this notification is best done as an introduction to the new buyer of the practice. This letter is about the "merits of the buyer" and not the "goodbye" letter to patients.
3. In the case of death and disability, the rumor mill spreads misinformation along with news of the tragedy. The sale of the practice becomes a fire sale and must be handled within days, not weeks or months, of the death or disability. Practice value drops immediately upon the death or disability of the dentist, and continues to drop on a daily basis. It is essential to act quickly in these cases.
4. Telling staff and patients of pending retirement without also presenting a transition plan is essentially the same as closing the practice doors. Without a specific roadmap for moving forward, staff members and patients will start looking for new jobs and new dentists.
There is a right time and a good way to inform your staff and patients of your transition. Your broker will walk you through the process, and keep in mind that "loose lips sink ships."
Gretchen Ohlmeyer Lovelace, MS, CFP, CPM, is the past national president of ADS Inc. Gretchen lectures at LSU School of Dentistry and at national, state, and local dental associations. Her primary focus is ethical practice transitions. Contact her at email@example.com or (877) 674-9564.