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Articles

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

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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

 

 

The Professional Advisory

  1. One Year Later

  2. Dealing with Unsolicited Offers

  3. Covid-19 Practice Sales Update

  4. When is the Right Time to Sell Your Practice and Why?

  5. Partnership Pitfalls

  6. The Real Cost of a Dental Practice Set-up

  7. Smaller Practice Realities

  8. Dental Market Update - 2019

  9. Creating Your Own Most Valuable Practice (MVP)

  10. Small Practice Economics

  11. The Market is Very Efficient

  12. How Can Dental Practice Values be Rising and Declining?

  13. Hygiene as a Value Driver

  14. The Value of a Good Team

  15. Is it Time to Move?

  16. Staging A Dental Practice

  17. The High Cost of Dying

  18. Deal-Busters

  19. Patients - Attract and Retain

  20. Should I Stay or Should I Go?

  21. Is There a Buyer for Every Practice?

  22. Good, Better, Best - The Market has Spoken

  23. Smooth-Sale-ing

  24. Buying Time

  25. Patients, Patience, Patients

  26. A Real Patient

  27. Why Do a Practice Valuation? I'm not Selling

  28. Irrational Exuberance or The New Normal?

  29. Do dental equipment and dental technology affect a practice value?

  30. Finding and Being a Mentor

  31. Bigger is Better

  32. Dave's Top Ten List for Buyers (Vendors should read this too!)

  33. How Well Do You Know Your Practice?

  34. Dave's Top Ten List for Vendors

  35. What will happen to dental practice Values in the next 10 years?

  36. Your Premises Lease is an Important Asset

  37. What are Associates Thinking?

  38. There is Life Outside the GTA

  39. When Is the Right Time to Sell My Dental Practice?

  40. Mergers are a Viable Option

  41. Is Your Associate an Asset or a Liability?

  42. Has your Practice Facility Kept Up With Your Billings?

  43. The 100 per cent of Gross Myth

  44. The Past, The Present and The Future

  45. Caveat Emptor

  46. Overpaid Long Term Staff

  47. Selling your Practice in Stages

  48. A Potential Pitfall of Selling Shares

  49. Value in Your Practice Through Balance

  50. Only Trusted Staff Can Defraud You

  51. To Own or Not to Own Practice Real Estate? That is the Question.

  52. Coping With A Large Patient Base

  53. Successful Dental Practice Transitions

  54. Taking Care of Business

  55. The Investing Dentist Phenomenon

  56. Two areas to focus upon that could negatively impact the value of your practice

  57. Organize your Debt in Order to Sell your Practice

  58. Having a Better Team

  59. How Do I Prepare My Practice For Sale

  60. How Do I Prepare My Practice For Sale? Part 3

  61. How Do I Prepare My Practice For Sale? Part 2

  62. How Do I Prepare My Practice For Sale? Part 1

  63. Advice to My Son or Daughter Graduating from Dental School

  64. Transition - What to Expect

  65. Discussion on Digital X-Rays

  66. Partnerships and Shotguns

  67. Strategic Planning - How to Get Started

  68. Calling All Vendors - Practices have Gone Up in Value

  69. Purchasers: Expect to Pay More for a Practice because of Lower Professional Corporation Tax Rates

  70. Matrimonial Practice Valuations

  71. Purchaser's Guide to Affording a Practice

  72. Location Improvements Throughout Your Career

  73. Small Practice Valuations

  74. Partnerships – The Best and The Worst

  75. Changing Location When the Opportunity Comes Along

  76. Visual Presentation of Your Practice

  77. Presentation of Charts

  78. Your Premises Lease Can Be Your Worst Enemy

  79. How to Select an Appraiser for Your Practice

  80. How Are Your Billing Ratios?

  81. It Pays to Invest in Your Tangible Assets

  82. The Importance of Separate Financial Statements

  83. Five Time Frame Levels to Sell a Practice

  84. 12 Suggestions to Safeguard Computer Data

  85. How to Buy a Visible Practice

  86. Why is there a shortage of good practices today?

  87. The Importance of Equipment in the Purchase of a Practice

  88. The Balanced Practice

  89. Will My Practice Be Saleable in The Future?

  90. Buyer Be Aware

  91. Excess Profit - The Second Key

  92. Patients and Profits are the Keys

  93. Plan Ahead

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