A common occurrence in dental practice transitions is where the seller puts a dental office for sale but, for whatever reason, will stay on with the practice after the sale closes. This can happen for a variety of reasons, however, when it’s driven by the selling doctor, it’s often a case where the doctor wants to “sell my dental practice” but isn’t actually ready to retire. These situations can be problematic. Here at ddsmatch Southwest, we believe a good dental practice transition is one where everyone is happy with the outcome. Here are some tips we have about when selling doctors should stay one and what expectations both the buyer and seller should have.
Why Do You Want to Stay in the Practice After the Sale?
The first thing you need to consider is why you want to stay on. If you want to facilitate a smooth and successful transition, that’s great. Having the selling doctor stay in the practice can help with many potentially problematic aspects of the transition.
- Staunching the loss of patients. Experience has shown there will be a certain amount of patient attrition in a transition. Having the doctor patients are familiar with can ameliorate patient loss. Additionally, the selling doctor can work on finishing up treatment plans with certain patients where it makes sense to not try and hand the case off to an unfamiliar doctor. However, depending on the patient experience, this may not always work out. A patient may not appreciate that the familiar doctor is still practicing in the office if they are being seen by the unfamiliar doctor.
- Easing the transition for the staff. One of the trickiest parts of putting a dental office for sale is quelling fears of the staff. They are concerned about their job security and how their work environment—which is heavily influenced by the personality and management style of the doctor—will change. By having the buying and selling doctors working together during a fixed transition period can alleviate these concerns. The changes will occur gradually and with the cooperation of the selling doctor who can provide insight as to why things are done the way they are. Changes that are implemented are done over time, perhaps with more consideration given to established practices.
- Guidance and training for the new doctor. While every transition is different, it is likely that your practice is being bought by a younger, less-seasoned doctor, one who may only have a few years experience out of dental school that has never managed a practice before. Being able to leverage the knowledge of the selling doctor as the buyer finds their footing can be invaluable.
It is important to note, however, that for these goals to be achieved, both doctors must fully accept that, as of the close of the sale, there is a new owner. That means there is a new boss, and it’s not the selling doctor, who is now an employee. The selling doctor is there to be a resource and support to the buying doctor, not to try and enforce their own way of doing things. Change is coming to the practice. The selling doctor can help to facilitate it, but should not work against it. That’s a battle the selling doctor will lose while alienating the buying doctor, and possibly the staff and patients as well.
Do Not Expect to Have Your Cake and Eat it Too
To be sure, when you put your dental office for sale, the end of that process is that it’s no longer your dental office. Along with control over staff, policies, practices, and other aspects of the practice, you are also losing your claim on the practice earnings.
Ask any dental transition specialist and they can tell you stories about excessive demands that sellers put on buyers to keep drawing on the earnings of the practice for years after the close of the sale. In one instance, a third-generation doctor with a lucrative practice was demanding an eight-year employment contract with a minimum guaranteed salary and a long-term position for her dentist father. Needless to say, that deal did not go through. In another instance, an orthodontist was requesting to stay on with a minimum of 120 days per year at $1,750 per day (working out to at least $210,000 per year). These doctors are not really ready to sell, much less retire. Such requests are unreasonable and you will be hard pressed to find a willing buyer.
Part of the issue with these kinds of onerous demands are that they will unfairly (if not impossibly) tax the resources of the practice. If you put your dental office for sale but demand to stay on with ongoing compensation equal or greater to that of a full-time associate, you are, in effect, adding the financial burden of an employee where there wasn’t one before (unless you are selling to your associate). It’s unlikely that your practice can support that. If it could, you would have already had to add an associate to keep up with they practice’s workload. If you haven’t reached that point, it will be very difficult for the buyer to pay you.
You might look at your books and think there is plenty of money coming in to support your salary at an associate level. While that may very well be true, you may be overlooking the fact that you probably don’t have a dental practice loan or student debt that you have to service. Your buyer most certainly will and they will need those excess earnings to pay for the education and practice they just bought.
Finally, with regard to compensation if you do stay on for a period, a fair amount would be what you would have offered an associate, whether that be base salary, commission, or a combination of the two. It’s unlikely that your practice will be able to afford to pay you at the level that you’re accustomed to. But that is reasonable because you will no longer be the owner, will full rights to all excess profits.
Are You Really Ready to Put Your Dental Office for Sale?
If this discussion is giving you pause, the question you may need to ask is whether you are really ready to put your dental office for sale. Some doctors may be at a stage of life where they feel like retirement should come next but aren’t psychologically prepared for the change—they have something to retire from but nothing to retire to. If this is the case, as you begin the dental transition process, you should consider what you will do once you no longer have an office to come to each day.
Other doctors may be ready to stop seeing patients and start hitting the links every day but perhaps are concerned about whether the proceeds for the sale will really be able to provide for the level of comfort that they’d like. In that case, you should consider staying in your practice as the owner for an additional period of time as you earn and save a little more. Regardless of the circumstances, selling before you are ready, either psychologically or financially, can cause regret that may be easily avoided.
If you aren’t really ready to retire but aren’t necessarily interested in being a manager or sole proprietor anymore, you have a couple of options that can work to your benefit:
- Buy-in to buy-out: under this model, you would add a partner to your practice with a plan for the new partner to eventually purchase full ownership of the practice. This is a good option if your practice can support another doctor, or if you have a good candidate in another sole proprietor that can bring their own patients with them. Under this model, you can work towards your transition in a way that is comfortable and meets your dental practice goals.
- Become an associate: if you are not ready to stop treating patients but would be happy to relinquish the responsibilities for managing the practice, this could be a good option. Recognizing that it would likely involve a pay cut, you would have several options. You could sell your practice to another doctor and be an associate in the practice. You could sell to a DSO and remain as an employee in your practice. Or you could sell outright and find an associate position in another practice (you’d have to consider, however, the impact of the non-compete agreement that you’d have to sign as a part of the sale of your dental practice).
ddsmatch Southwest Can Help You Meet Your Dental Transition Goals
If you are considering a dental practice transition in the next five years but are not sure what option is best for you, ddsmatch Southwest can help. We will discuss with you what you think you need to get for your practice to retire the way that you want, how soon you want to retire, and what kind of buyer you are looking for, be it an outright sale, an associate, a partner, or a DSO. Also, we offer a free, no-obligation Practice Transition Assessment to help you determine what will best help you get to where you want to be before you put your dental office for sale. Contact us today to find out what we can do for you.