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Articles

The Professional Advisory

  1. Is it Time to Move?
  2. Staging A Dental Practice
  3. The High Cost of Dying
  4. Deal-Busters
  5. Patients - Attract and Retain
  6. Should I Stay or Should I Go?
  7. Is There a Buyer for Every Practice?
  8. Good, Better, Best - The Market has Spoken
  9. Smooth-Sale-ing
  10. Buying Time
  11. Patients, Patience, Patients
  12. A Real Patient
  13. Why Do a Practice Valuation? I'm not Selling
  14. Irrational Exuberance or The New Normal?
  15. Do dental equipment and dental technology affect a practice value?
  16. Finding and Being a Mentor
  17. Bigger is Better
  18. Daves Top Ten List for Buyers (Vendors should read this too!)
  19. How Well Do You Know Your Practice?
  20. Dave
  21. What will happen to dental practice Values in the next 10 years?
  22. Your Premises Lease is an Important Asset
  23. What are Associates Thinking?
  24. There is Life Outside the GTA
  25. When Is the Right Time to Sell My Dental Practice?
  26. Mergers are a Viable Option
  27. Is Your Associate an Asset or a Liability?
  28. Has your Practice Facility Kept Up With Your Billings?
  29. The 100 per cent of Gross Myth
  30. The Past, The Present and The Future
  31. Caveat Emptor
  32. Overpaid Long Term Staff
  33. Selling your Practice in Stages
  34. A Potential Pitfall of Selling Shares
  35. Value in Your Practice Through Balance
  36. Only Trusted Staff Can Defraud You
  37. To Own or Not to Own Practice Real Estate? That is the Question.
  38. Coping With A Large Patient Base
  39. Successful Dental Practice Transitions
  40. Taking Care of Business
  41. The Investing Dentist Phenomenon
  42. Two areas to focus upon that could negatively impact the value of your practice
  43. Organize your Debt in Order to Sell your Practice
  44. Having a Better Team
  45. How Do I Prepare My Practice For Sale
  46. How Do I Prepare My Practice For Sale? Part 3
  47. How Do I Prepare My Practice For Sale? Part 2
  48. How Do I Prepare My Practice For Sale? Part 1
  49. Advice to My Son or Daughter Graduating from Dental School
  50. Transition - What to Expect
  51. Discussion on Digital X-Rays
  52. Partnerships and Shotguns
  53. Strategic Planning - How to Get Started
  54. Calling All Vendors - Practices have Gone Up in Value
  55. Purchasers: Expect to Pay More for a Practice because of Lower Professional Corporation Tax Rates
  56. Matrimonial Practice Valuations
  57. Purchaser's Guide to Affording a Practice
  58. Location Improvements Throughout Your Career
  59. Small Practice Valuations
  60. Partnerships – The Best and The Worst
  61. Changing Location When the Opportunity Comes Along
  62. Visual Presentation of Your Practice
  63. Presentation of Charts
  64. Your Premises Lease Can Be Your Worst Enemy
  65. How to Select an Appraiser for Your Practice
  66. How Are Your Billing Ratios?
  67. It Pays to Invest in Your Tangible Assets
  68. The Importance of Separate Financial Statements
  69. Five Time Frame Levels to Sell a Practice
  70. 12 Suggestions to Safeguard Computer Data
  71. How to Buy a Visible Practice
  72. Why is there a shortage of good practices today?
  73. The Importance of Equipment in the Purchase of a Practice
  74. The Balanced Practice
  75. Will My Practice Be Saleable in The Future?
  76. Buyer Be Aware
  77. Excess Profit - The Second Key
  78. Patients and Profits are the Keys
  79. Plan Ahead

Volume 53: Is Your Associate an Asset or a Liability?

Download the PDF version now!

The question of how you can grow your practice often comes up when we are presenting our findings after completing a Comprehensive Dental Practice Valuation. Many of our clients are surprised to hear us report that an associate may not be the best way to achieve that goal. Their understanding was that in order to grow they need more hands to do the dentistry and therefore an associate will provide for that. Additionally, they will argue that in order to be able to take more time off they need an associate to be there to keep the practice open and the revenue coming in. If that is the case then an associate is one consideration but there are a few other possible solutions that warrant review first;

  • Consider an expanded duty hygienist. This has proven to be a very effective solution for many dentists. One of the additional benefits is it allows you to focus your efforts on some of the more comprehensive aspects of dentistry which many dentists find more challenging and rewarding.
  • Look critically at how your days are booked. Are you being as efficient with your time as possible? Many times if you adjust your scheduling you will find that you can be more productive without working more hours. If you are unsure of how to analyze this, consider hiring a consultant who is an expert in this area. The investment will be extremely valuable.
  • Consider referring out treatment to specialists. If you find yourself taking too long to complete the procedure or continually have to re-treat certain types of cases, a specialist may be a good solution. Alternatively, there are many specialists that will see your patients in your office which is another good option.
  • Consider adding new technology or improving clinical skills. If you are too busy with your regular dental procedures, you can look at improving both your current clinical skill set, and the adoption of the new technologies that are now available. In most cases, this strategy can generate more profitable procedures, speed up the delivery of most procedures, improve the profile of your practice, and importantly, may give you a greater level of job satisfaction.  

 

If you determine that the only solution is to bring on an associate then consider the fact that you will be risking the single biggest asset you have in your practice, the Goodwill. I say “risking” because we have all heard the stories of the associate who has been with a practice for a few years and leaves to set up close by and many of the patients follow him or her. It does happen and it can have a devastating impact on your practice’s profit and value. You can try to limit the risk by having an enforceable agreement with your associate but even then, there is some risk. You can also limit the risk by ensuring that the patients are still your patients. You should still see all the new patients and try to limit the number of patients that are only seen by your associate. Perhaps you could let the associate do only certain types of treatment on your patients and you do the rest. Resist the temptation to allocate some patients to the associate and some patients to you.

If you do have an associate, or are going to add one it is imperative that you engage an expert “dental lawyer” to prepare a reasonable associate agreement that is enforceable and assignable. You should also pay very close attention to the level of production that your associate contributes to your practice. When we are involved with the sale of a dental practice that has associate’s these contracts and the production become critical to the new owner. If for instance you have an associate who is responsible for 50 per cent of the professional billings (not including hygiene revenue) and you do not have an agreement with that person, I would suggest the goodwill value of your practice is severely at risk. Practice sales have fallen apart due to the high producing associate being informed of the sale just prior to closing, and being presented with an associate agreement for the first time and justifiably refusing to sign it. Why would he or she want to sign an agreement with someone they don’t know and may not have even met? They may demand a higher percentage or even worse, decide to leave and either set up or join a neighbouring dentist with “their” patients who are really your patients. This would come as a terrible shock to you as you are just preparing to enter your retirement years and now have to re-build your practice instead. In the end your involvement with your patients and a very good contract with the right person will determine if your associate is an asset or a liability.

David Lind is a Principal in Professional Practice Sales Ltd. (www.ppsales.com), which specializes in the valuation and sale of dental practices.  He can be reached at (905) 472-6000 or 1-888-777-8825 or e-mail at: david.lind@ppsales.com

 

 

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