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Successful partnership 101

May 1, 2003
Of all the challenges faced by the dental practitioner, one of the most difficult is transitioning a solo practice into a group practice. The benefits are many, but so are the stresses and tensions involved.

By Flossie Riesner

A road map for the courtship and marriage of dental partners, part I

Of all the challenges faced by the dental practitioner, one of the most difficult is transitioning a solo practice into a group practice. The benefits are many, but so are the stresses and tensions involved. There are specific things the senior dentist can do to help pave the way, and reduce the time frame and pain of the struggle.

In this article, I will present the advantages for the established dentist of taking a partner into your practice, the economic benefits of a larger practice, how to begin the process, supervise and introduce your associate to your patients and staff, and how it will feel to become the senior partner. My husband and I ran a successful general dental practice, developed it to accommodate additional dentists, and then sold off half to one associate and eventually the remainder to our second associate, retiring from the practice to play instead of work. The road map we used for this journey and what we learned from the experience is described below.

Why transition to a multiple dentist practice?

By far, one of the most important reasons to transition your practice into a multiple-dentist operation is the increased value of the business. As the profitability of the practice grows as a result of the additional collections, the dental practice, like any business, grows in value and — when the practice is sold either in shares or in its entirety — it will result in many more dollars for the seller. The practice, grown into a partnership, may be the most valuable asset you will ever own. Many dentists, wishing to work less and less, decrease the size of their practices as they get older. At the time of retirement, the practice is worth very little. The time to sell your practice is at the height of its productivity. You need to start the process now.

We found that there are ways to restructure your practice that make it more profitable for everyone involved. In practices that have hygiene departments, building up the production in this area is one of the key items in providing the cash flow that the associate will use to fund his or her buy-in — as an owner, he or she now would be entitled to a share of the profit from the hygiene in the practice. If there is no hygiene department, other structures can be put in place to create the needed cash flow for the associate. Many dentists have learned that a consultant used properly during this period can be very helpful with the process of building up the productivity of the entire practice. If structured properly, the sale can also take place with very little adverse tax consequence for either party. Note: Contact Cain Watters and Associates at (972) 233-3323 for more information.

Sharing a dental practice with a partner creates tremendous freedom for both dentists. It allows each dentist to take a vacation, care for a sick relative, or take care of his or her own health needs without the worry of the financial burdens of office overhead. The staff can continue to be productive in the absence of one dentist, since the second dentist will be able to keep the office open most of the regular hours. A solo practitioner often pays staff to clean the office or reorganize systems in his or her absence; however, without the doctor around to supervise, often little is accomplished. To retain good staff members, some doctors give their staff extra vacation time when they are away and the office is closed, but this does not take care of the patient's needs.

With multiple dentists, a pension and/or profit-sharing plan for the doctors and staff becomes more affordable and feasible. The doctors can shelter a significant amount of money from current taxes and, through the years, build up a sizable retirement fund. The financial burden is often too great to warrant having the plan when one dentist individually must absorb the total cost. In addition, when costs are shared by more than one dentist, other benefits like medical insurance for the doctors and the staff can also be offered. These are benefits that help attract excellent personnel to your office.

Because of cost-sharing, group practices are often better able to afford modern high-ticket items such as digital X-ray units, intraoral camera systems, and CAD/CAM milling machines, allowing the practice to be on the cutting edge of dentistry and be more successful.

There is more cash flow in a group practice, so more dollars can be spent on marketing to grow the practice to the next higher level. If the fixed costs can be kept at approximately the same level as before the partnership and the direct costs — which include salaries, payroll taxes, laboratory fees, and supplies — can be kept at 42 percent of collections or below, the additional dollars collected as a result of having another dentist could have a profit rate for the doctors in the practice of as much as 58 percent. With only one dentist, the profit may only be 35 to 40 percent or less on the total collections of the practice.

Managing a dental practice and physical plant has many responsibilities. Invoices from vendors, deposits, and payroll have to be handled in a timely fashion. Staff members need to be hired, coached, and even fired sometimes. The equipment must be maintained and serviced, new equipment must be researched and installed, the physical plant needs to be redecorated and kept clean, and supplies need to be purchased. Having a responsible partner allows the sharing of these and other responsibilities to decrease the stress on the one doctor.

Starting the process and recruiting an associate

Begin looking at your practice as a business that, one day, can be partially or fully sold to another dentist. Begin to consider sharing the patients with another doctor. Letting go of the emotional attachment to your practice will allow it to grow larger.

Think of all possibilities for maximum utilization of the existing physical plant — longer hours, more open days, and converting unused space into treatment space. Challenge your previous assumptions. Be a positive thinker. Yes, you will be able to find staff to work early and late shifts as well as Saturdays, and you do not have to be the one to work those additional hours and days. Two-income families are in need of a dentist who can see them during evenings and weekends. Believe it!

Let everyone in your network know that you are looking for a full-time associate who will become your partner. Call all your dental colleagues. Notify your laboratories and the detail people from your dental suppliers and service providers. Register with all available supply house and dental society computer databases that link dentists looking for positions with those who have positions available. Put classified advertisements in newspapers under "Business Opportunities" and in dental journals.

Speak on the telephone to each qualified candidate who applies or who appears on any database of which you become aware. Grant a personal interview to anyone who seems remotely satisfactory. Sometimes great candidates do not come across well at first on the telephone, so give all possible candidates a chance to come to your office.

During the interview, make note of how the candidates present themselves. Eye contact is very important. Take a photograph of the dentists you meet so you will remember their appearances. They should fill out an application for employment, which includes the names and phone numbers of many references, especially school instructors and previous employers. Ask lots of probing questions about their philosophies of dentistry and — since dentistry is a people business — about their feelings toward people in general. Talk about their background and about their willingness to work whatever schedule you believe will be best for your office. Of course, you need someone who is a competent, ethical, and honest dentist. You also need someone who will be willing to postpone immediate gratification and work hard in your office where goals will be realized in the future.

The next step is to check all references for those applicants you really liked and could consider as a future partner. Ask each reference if he or she would hire this dentist to work in the office again, and listen intently to each response. We found that if associates say that you may not call their references because it may compromise their present position, make it clear that you must be able to call these references after they are hired.

Invite candidates who still interest you to spend a day in your office observing. Encourage staff members to get to know the candidate and listen carefully to their feedback. If the dentist already has a dental license in your state, allow him or her to do some dental treatment on a patient so you can observe and evaluate. Once you have selected the dentist who you hope will be your associate and eventually your partner, consider having some personality testing and counseling together to determine if the personalities involved will be compatible. Note: Select Professionals — (513) 831-6939 — does this very well. Often there are suggestions that result from this process that make for a much more comfortable relationship.

Have an attorney draw up an employment contract, which includes an enforceable non-compete covenant that goes into effect after a 30-day trial period. Include a paragraph that has a two-week notification period for termination of the contract by either party. This may seem like a short time but we found that, if the relationship is not working, even one day will seem too long. Unless associates have had several years of experience, they should be hired as employees with a fixed salary. The amount depends greatly on the location of your practice, but is generally $40,000 to $60,000 per year. You should include medical insurance if it is a benefit for all of your regular employees and malpractice insurance with the same carrier that you are already using. The contract should also provide for the next stage of the relationship when the new doctor's compensation will be based on a percentage of production — customarily between 30 and 40 percent of collections. The time frame when the new doctor would move to this stage of compensation would be mutually agreed upon at the time, usually within 6-12 months. It is necessary that the two doctors meet several times before the employment begins. There are many issues to be handled, and advance discussions will prevent misunderstandings later on. The contract must be signed before the employment begins.

It is very important that you do not make any decision about or discuss the value of the practice at this time. The value will be determined at a later time. Do not promise to sell any part of the practice on any definite date. The sale should take place when the practice has the ability to support the two doctors financially. Group practices often break up when the buy-in has taken place too early and there is not enough profit for both doctors to live on. Generally the sale of a part of the practice could take place in about 18-24 months.

Supervising and mentoring the associate

There needs to be a consistency in the manner in which the dental care in your office is delivered. You will want to be sure that the quality of the work of the associate is equivalent to your standards. You have spent many years building the dental practice that you have, and you have every right to insist on the level of quality for your patients. Associates need to learn the techniques that you have been using in your practice and adopt them into their own manners of practicing dentistry. If they have been out of school only a short time, they should start out assisting you with your scheduled patients, then you should assist them with treatment. Gradually begin scheduling them patients of their own, with the understanding that you need to be able to supervise the care.

Be gentle and caring with new dentists — provide coaching, but insist that they still do the treatment. Do not take it away from them. Be sensitive to their weaknesses and fears, and try to help them to grow in their dental skills. Even with experienced dentists, do not rush this period. Encourage feedback about them from the staff, and communicate any concerns to the associates. After you feel completely comfortable with the quality of the care, you can begin scheduling patients for the associate into expanded hours when you are not in the office. This process may take several months, depending on the experience and skills of the new doctor. The added cost of having the associate in your office will be offset by the growth in the practice in the months and years ahead. See it as an investment in your future.

Teach the associate every aspect of managing the practice, including the maintenance and troubleshooting of equipment, who to call for repairs, the laboratories and supply houses used by the practice, and ways to conserve to help control costs — including performing some of the repairs in-house. He or she should be taught all you have learned in the years you have built the practice.

Schedule a regular weekly lunch with each other, to both share difficulties with patient treatment, discuss staff management problems, and to develop a relationship. You each need a logbook to note issues you want to discuss and decisions that were made together. You may end up practicing dentistry together for 10 or more years, and the investment of time in developing mutual respect will make the work environment much more pleasant.

Editor's Note: The second part of this article will appear in the September/October edition of Dental Equipment & Materials.

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Flossie Riesner is a dental management consultant, international speaker, and president of Riesner Consulting, founded in 1999. She pre viously ran a successful dental practice with her husband for more than 20 years in Lansdale, Pa., and holds a bachelor's and master's degree in mathematics. Her clients include practices in 15 states. She can be reached at (215)368-1522 or by e-mail at [email protected].

Dental Equipment & Materials recently asked Michael Robinson, a Patterson sales representative who has worked with clients in the western two-thirds of Oklahoma for the last 19 years, for his impressions on the upgrading of equipment toward the end of a dentist's career.

"If you look at the current demographics in dentistry, I think dentists will see that if their practice isn't modernized, it is going to be a detriment when he or she is trying to sell it. Younger dentists are going to look at the facility and think, 'I'm already spending this much money to buy the practice, and now I'm going to have spend this much more to bring it up to date? Why don't I just go up the street to the next practice for sale?'

"In many cases, dentists need to look at their practices from top to bottom. Look at the nuts and bolts of the practice. Look at the chairs, lights, X-ray units, cabinetry, and even the basic design of the office. Does the equipment need to be updated? Some dentists currently have a single entry into the operatory. If a buyer comes in and doesn't like that, he or she probably won't spend the money to buy the office and then move all of the walls. Things like that have to be considered.

"It's really an education process for both the younger and the older dentists. The younger dentists have been in dental school and haven't really seen all of the advantages of rear delivery versus side delivery versus chair-mounted delivery. They need to 'kick the tires' and really look at which one fits their needs.

"Buying decisions can be tough for the younger dentists. They will go a trade show and see that a lot of the equipment looks exactly the same. To differentiate, they may start looking only at price. If you only look at price, you can get into trouble. You may be looking at replacing that piece of equipment five years down the line instead of 15, so the cost savings is gone because of the poor return on investment.

"Meanwhile, the majority of the older dentists don't think they need to upgrade their equipment. They may not have toured the office down the street and seen the difference in age in the equipment. Day by day, equipment ages, and that needs to be kept in mind."