The associate buyout

April 1, 2013
As happens with most dental practice brokers, I frequently get calls from dentists who are considering bringing in an associate so they can eventually sell their practice to the associate and retire in a few years.

by Bill Avery, DDS, PhD

As happens with most dental practice brokers, I frequently get calls from dentists who are considering bringing in an associate so they can eventually sell their practice to the associate and retire in a few years. For simplicity's sake, I prefer the "sell and walk away" transition method where the seller stays in the practice on a progressively reduced schedule up to 60 days after closing. Over the years, dentists have been sold the idea that the associate buyout is the only proper way to transition out of a practice, but they usually have not been properly advised about all the intricacies of that process. As a result, my initial consultation with practice owners who want that type of transition involves telling them exactly what's involved in bringing in a compatible associate, and discussing the stages leading up to the buyout.

One of the first things to consider before choosing an associate is the size of the practice, both in terms of patient base and physical space. The practice should have in the neighborhood of 2,000 active patients and at least 25 new patients each month. The owner should be booked at least a month in advance in order to refer some of the patients to an associate. The typical practice should have three or four operatories, the hygienists should be using one or two of the operatories, and the doctor should be working out of two operatories. In order to have space for an associate to work, there must be some creative thought given to scheduling, which may include the owner giving up operatory time, extending office hours, and more.

If we determine the practice fits the criteria regarding patient base and operatory space to bring in an associate, then the following things should be discussed with the owner:

  • Since it will take some time for the associate to become self-supporting, is the owner agreeable to a decrease in income for a few months in order to adequately pay the associate a proper base salary? This decrease may come in the form of the owner reducing his or her production and shifting that production over to the associate.
  • It is important for the seller and associate to agree on plans for the future buyout. It is the owner's responsibility to find an associate whose plan for the buyout is compatible with the owner's plan and not the reverse.
  • How will the staff accept the associate? Will they accept new procedures and ideas and the extra work that comes with another doctor in the office? Sometimes there may be a key staff person who cannot get along with the associate. Is the owner willing to possibly give up that staff member in order to keep the associate on board?
  • The owner must be willing to undergo an "assessment period" of the associate of up to six months, and if it's determined that the associate is not the right person, then be willing to terminate the relationship and start over again. This can be difficult, but it is unfair to both parties to allow an unworkable situation to continue.
  • If after the "assessment period" both parties are pleased with the outcome and want to move ahead, a buy-in/buy-out agreement needs to be structured. It is extremely important to have a written agreement to try to avoid any misunderstandings or hard feelings between the parties.

Hopefully, this limited discussion will encourage you to thoroughly think through the process, and will help you determine the best way to transition out of your practice.

Bill Avery, DDS, PhD, spent 20 years practicing periodontics. For the last 19 years, he has been helping colleagues transition their dental practices, mainly in New Mexico and portions of west Texas. Dr. Avery is a member of ADS Transitions and can be reached at (505) 821-0015 or (888) 419-5590, ext. 505 or through the ADS website at ADStransitions.com.

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