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Transitioning with a seller’s spouse

July 1, 2006
Are you planning to transition a practice with the wife or widow of the seller? Will you be taking over a practice with the seller’s spouse working...

Are you planning to transition a practice with the wife or widow of the seller? Will you be taking over a practice with the seller’s spouse working in the business office or serving as a key provider of dental services? If so, it may be a little more challenging.

Having worked with numerous dental practices where the buyer is dealing with the seller’s spouse, we have learned that there are some important points you should be aware of in this type of a scenario.

For starters, be clear and realistic about your expectations. If the reason for selling involves relocation, retirement, or disability, this may impinge upon the working dental spouse’s availability or ability to commit to a transition time post sale with a new buyer.

When the spouse of the selling dentist works in a key business area of the practice such as front desk business assistant, practice administrator, scheduling coordinator, or collections manage, he or she has a key role in the practice and is typically extremely well versed in its operation. It is great to have the spouse present during meetings with potential buyers because he or she can answer many nonclinical questions. The spouse also intimately knows the practice inside and out.

As a side note, we typically see higher net profitability in the dental practices where the dental spouse is an active employee. This is especially true when it comes to scheduling and collecting payment for services!

When the spouse is an associate dentist or hygienist in the practice, another major challenge is the availability of a replacement for a key provider. Depending on your geographic area, it may be extremely difficult, thus impacting the value of the practice if the spouse is not remaining. In some areas, it is actually easier to sell a practice than find associate dentists to join the practice!

When evaluating a practice opportunity involving a dental spouse who is a key employee:

Assess how active the dental spouse has been in the practice.

Examine the spouse’s compensation - is it excessive, not enough, has he or she mastered over the years?

Will the spouse stay on long enough to impart the “lingo” and intimate practice inner working knowledge to his or her successor and to the new practice owner?

If the spouse is an associate dentist or hygienist, you need to know their future plans. The spouse will have to sign a restrictive covenant not to compete with the new practice owner.

This issue can be a bit of a double-edged sword. What is best to do? Hire someone now and get that individual fully trained so the spouse can exit prior to the sale or wait and see how things unfold?

Who should hire the new replacement? The potential buyer? If the sale hasn’t closed yet, the seller may not want to incur more payroll expense. Alternatively, the buyer may not want to initially deal with two people on the payroll while the new person is being trained and cash flow is tight. What is fair?

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No one is a mind reader. It is essential that all parties clearly communicate their desires, fears and expectations to facilitate a successful transition.

Sarah Lynch is an owner of Jim Kasper Associates, LLC, Keene, N.H., and is vice president of American Dental Sales, Inc. She has 11 years’ experience in dental transitions, appraisals and practice brokerage. She can be reached by phone at (603) 355-2260 or by e-mail at [email protected].

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