When a dentist calls me and indicates he or she wants to transition out of their practice it never ceases to excite and captivate me. Apart from obtaining a dental degree in the first instance, a transition is probably one of the most critical decisions in the dentist’s career and one in which I always enjoy participating. The first critical step is to arrange a convenient person-to-person interview to determine exactly what is on the dentist’s mind. This meeting is not unlike the patient who makes an appointment to undertake some major dental care–probably something they have been thinking about for a long time. Like the dental appointment, the transition interview requires a thorough examination, diagnosis and treatment plan.
One of the first questions we ask is, “Why now? What is it that got you thinking about changing your mode of practice?” In most situations the dentist, after years in practice, is generally thinking of easing up on the daily workload, taking more vacation time, and somewhere down the line, retiring altogether. Usually they haven’t given a great deal of serious thought to such specifics as: “Should I bring in a partner, perhaps an associate, or should I retire completely?” The good news is that they have made
that essential, primary decision. They’ve asked for help. Dental practice transitions should never be self-assembled. Dentists don’t have the experience and there is far too much at stake–such as the rest of your life–for any “do-it-yourself” endeavor!
Once the preliminaries are out of the way we pose the all-important question that influences everything else that happens from this moment on. “What do you want to do with the rest of your life?” This is the point where we get a real feel for what possibly lies in wait at the end of the transition road. Does the dentist want to stay in practice and work half time, two days a week, whatever? Are there long hoped-for vacations or oft-desired hobbies just waiting to be embraced and experienced? What does the family think of all of this? Is there a personal financial management program in place that’s targeted to a comfortable retirement? The answers to these questions are fundamental to formulating a transition scenario that is to everyone’s advantage.
It is at this point we strongly recommend an evaluation of the practice because at the end of the day this assessment tells us where the value is in the practice, and where value can be enhanced; that determines how, when and with whom any transition can take place. And we always stress that this bottom-line dollar value is separate from, and in addition to, any resources the dentist has in a retirement fund.
The hard assets of the practice–equipment, leases, leaseholds, instruments and consumables–are here and now and relatively easy to evaluate. The task gets more difficult however when we assess the true strength that marks the success of any dental practice–the patients. And counting charts is by no means the only indicator.
Every successful dental practitioner wears, or certainly should wear, two hats as both a conscientious health care professional and an astute business person. From the business side we concentrate on practice goodwill where the primary determinant is cash flow–gross cash flow and net cash flow–that ultimately derive from many factors, including patient flow, acceptance of meaningful treatment plans, re-care, retention and referrals. Think of how much more valuable your practice is if you can show a potential buyer that you’re fully in control of both the professional and business sides of your practice and consequently your practice gross and net cash flow have a history of steadily increasing in value.
In some cases it may become evident and advisable that a “soon” transition should be delayed. The sign of a good evaluation is that a dentist can see how and where a practice value can be strengthened and increased based on what’s there today, now. With this new knowledge base, and by giving themselves more time–ample time can be your best ally and too short a time your greatest enemy–there’s opportunity to monitor and improve the systems identified in the evaluation.
Associate? Partner? What works?
The purpose of the initial transition interview is to find out what the dentist wants to do for the rest of his or her life. If that’s the purpose of the exercise then it’s our job to help the dentist to determine the right fit. The conversation inevitably leads to how long the dentist wants to or needs to continue practicing and at what pace. Once we’ve addressed the length of time the dentist wants to stay “in harness,” the number of workdays per week or month that allow for a reasonable overhead, and the all-important well being of the practice itself, the interview inescapably turns to the mechanics. Depending on individual circumstances and preferences, there are a number of very viable options from which to choose.
If the choice is another dentist joining you in practice, in what role? An associate on an appropriate percentage base can provide the owner-dentist more leisure time and a desirable income. Such an arrangement can work well and can be planned to lead to either a direct buy-out or a reversal of roles where the owner becomes the associate and works either full or part time. Or, the choice may be a buy-in partnership with a cost-sharing arrangement that frees up the seller’s overhead, time and administrative responsibilities to suit his or her needs. There are a number of possible buy-in arrangements, each bearing their own advantages and disadvantages.
Whatever the arrangement, and apart from central issues like facility management, staffing, marketing, re-care, hygiene supervision and referrals there are three all-important, over-riding essentials that must always be addressed when one dentist joins another in practice. These three are patient flow, compatibility, and space and it shouldn’t surprise us that the first two–patient flow and compatibility–go somewhat hand in hand. It is not only central that an adequate number of patients are available to satisfy the needs of two practices but there also must exist a finely tuned personal/professional compatibility on how to treat the patients. Adequate space is a pretty basic need and if the problem is relatively minor it can often be worked around by staggering days and hours. However, common sense tells us that two dentists and two hygienists are going to have a lot more than scheduling problems if there are only three operatories.
Sadly, experience has shown that in the absence of one, two or all three of the above-mentioned essentials, and despite the best intentions of all involved parties, planned associate/partner transitions can and do fail to succeed. What then are some other options for the dentist wanting to slow down and eventually retire? If the practice is running efficiently and overhead is under control, the dentist may, over a period of two or three years, choose to slow down and then close the doors, period. It’s certainly been demonstrated that this “go-it-alone slow-down” mode can generate enough or as much money as the dentist would gain from a sale. Another “I’m out of here” approach that can do well is to continue to work for a few years enjoying a good return on the practice as an investment and then sell the entire practice on a Friday to some fortunate buyer who will move in and take over on Monday morning.
Planning: It’s Paramount
By the conclusion of the first interview we may have a pretty good idea of not only what the dentist wants to do with the rest of his or her life but we also have a preliminary, workable overview of the practice itself. But more often than not, the interview has left the dentist with numerous questions and much food for thought about the decisions they’re going to have to make in order to satisfactorily plan any transition. This is when we need a second interview–shorter this time –because by then the dentist would have pondered over what transpired during our first me
eting and have a fair idea of which options they want to discuss. This becomes the true genesis of a transition planning process.
Our job is to see if what the dentist wants to do is feasible and realistic. This is where we help the client set in place a defined course of strategic planning determining where the dentist wants to go, identifying all the external factors that can influence the destination, assessing the assets and liabilities brought to the process and then setting out a road map to get the dentist where they want to be. Such a plan can also involve a financial planner, an accountant, a lawyer and even a practice management consultant.
The American author, Lester R. Bittel, who has written more than 50 books on management and supervision, seems to have captured the essence of strategic planning: “Good plans shape good decisions. That’s why good planning helps to make elusive dreams come true.”
Your transition need never be an elusive dream. By:
creating a “mind’s eye” vision of what is possible,
establishing achievable goals,
seeking the expertise you need,
developing a plan–preferably in writing and one you visit often, and
having confidence in your own capability,
you can do what you want to for the rest of your life.
Dr. Bernard Dolansky is a practice transition consultant with Equity Professional Services and Director of Professional Relations for the Ash Temple group of companies. He practices Endodontics in Ottawa.
John Kropp is a financial and business planning specialist with Equity Professional Services and a Vice-President of Ash Temple Limited.