Dental Strategies For Success library
Positioning for Transitioning Case #2
Study of a Failed Transition
Practice-Profile: Solo dental practice for 25 years
Time passed and the doctors seemed quite happy with their relationship, both personally and financially. The associate-doctor remained busy, and the owner-doctor was able to make more profit and take more time away from the practice due to the associate’s participation. Both doctors felt that they had a win-win situation.
...That Ends Well
The associate began voicing these and other concerns to the owner-doctor. Fortunately, he was open to the idea of a future partnership with her, and he assumed the first step would be to determine the value of his practice. Based on that, he asked his personal financial advisor if he could appraise his practice. The advisor agreed to help, and after looking over various practice financial reports, he arrived at a value. In his opinion, the value seemed appropriate for a well-established dental practice. The owner-doctor agreed, and he felt good about being able to offer a partnership opportunity to his associate – especially since he had never been offered a similar opportunity when he was an associate.
Conflicting Expectations Spoil the Plan
Upon hearing her concerns, the owner-doctor was befuddled. He wondered, “Was she aware of the investment and risk he had taken in order to eventually establish the practice? Was she aware of the additional cost involved in bringing her into his practice? Was she not remembering how many long-established patients had been transferred to her over the years?”
The doctors soon found themselves dealing with partnership issues that never occurred to them at the beginning of their relationship. Their once pleasant conversations became progressively more confrontational with "eruptions" occurring on almost a daily basis. Soon the doctors began avoiding each other in the hallway as they were too uncomfortable talking any further about their future relationship. Eventually their relationship deteriorated to the point of no return, and the associate pursued another opportunity in a nearby community. Since there were no formal agreements between them, the associate was not restricted from practicing in the same area. This left the owner-doctor worrying about how many patients might follow the associate to her new location, and how this happened as he thought he had offered her the “opportunity of a lifetime.”
Why Transitions Fail
- Current Practice Value
- Buy-In Price and Terms
- Tax Structure
- Co-Owner Income and Expense Projections
- Cash Flow Analysis
This type of analysis provides the foundation upon which preliminary and long-term agreements can be constructed. The agreements become the practice business plan, outlining not only how a future partnership could unfold, but how all doctors would enter and exit the practice in succession much like the operation of a successful law firm.
Read the first article in the Positioning for Transitioning Series on Strategies for Early, Mid and Late Career Doctors.
Statements of opinion not necessarily endorsed by ADA Member Advantage, ADA Business Enterprises, Inc., or the American Dental Association, or any of its subsidiaries, counsels, commissions, or agencies.
W. David Griggs, DDS, has been a practice transition consultant for over 28 years and has been involved with over 2,000 transitions during that time. He has personally experienced the benefits and pitfalls of 'transitioning' as an associate doctor, practice owner with associates, seller, and purchaser of a private practice. Dr. Griggs is the author of 'Successful Practice Transitions,' the best-selling book from PennWell Publishers. Dr. Griggs is currently the president of The Transition Group in the Tampa Bay Area (thetransitiongroup.com).
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