A recent dental graduate had an opportunity to purchase a large practice (over $1,000,000 of annual gross income) in his chosen area. The practice represented a once in a lifetime opportunity that would place him years ahead of all his classmates, in both practice size and income. The current owner wanted to change careers and would continue to practice two days a week for a few years while building a new and different business.
The dental graduate came in for a consultation and asked the following questions:
What would happen if I couldn’t handle that much production?
The seller will teach you how to produce the work that is required by the practice and will continue to practice with you for a while after the closing, so you will only be taking on a portion of that production for the first two or three years. That will give you plenty of time to learn. The seller wants you to do well and will be the best instructor you’ll ever have.
What happens if the seller dies before I learn how to handle the production?
You could take out a life insurance policy on the seller for the full purchase price and continue to carry it until you feel confident that you can handle the practice. If the seller dies, the proceeds of the insurance policy will pay for the practice.
What if the seller leaves the practice early or becomes disabled?
If the seller becomes disabled or leaves the practice early, you could handle the production from the first day. You might have to practice six days a week for ten hours a day to do all the production, but you will do it (it’s much better to have more patients than to not have enough patients). In time, as you get more efficient, you’ll gradually decrease the number of hours and days per week that you will have to work to do the same amount of production. The work will get done, and the money collected, whether the seller stays or not.
How will I know how to run a practice like this?
A practice this size will usually have a well-trained staff in place. The current owner does not spend his time managing the practice hour by hour. 95% of the time is spent on clinical production and maybe 5% on management duties. The staff takes care of scheduling, collections, etc., and they will nurse you through the learning process because they all want and need their jobs.
How do I know the patients will stay after the seller is gone?
The patient’s best and most logical referral source for their next dentist… is their former dentist, not their next door neighbor, not their cousin or other friends. Unless you make a concerted effort to drive those patients off or hurt them while undergoing treatment, there is absolutely no reason for them to choose to seek treatment from someone else.
What if the seller and I don’t get along?
Both parties will greatly benefit from getting along. The seller will certainly want you to do well, so the patients continue to get proper care. You want to make sure the seller remains happy, so the patients do stay with the practice once the seller leaves. Getting along creates an environment of cooperation and understanding usually lacking in other business relationships. Ambiguity is the most destructive force in relationships. You both should have a clearly defined, equitable agreement that lends itself to a workable and rewarding relationship. Our clients seem to be outstanding practitioners and very responsible people. Most problems can be worked out by responsible individuals, and AFTCO provides a comprehensive contractual agreement that addresses the more complex or unforeseeable issues that can arise during the practice transition period.
The young doctor bought the practice and in just three years he added one full-time associate who eventually bought into 50% of the practice and the practice revenues increased by 100%. The seller stayed for two years after the closing and then left to devote full-time to his new business venture. Those who want to learn and understand the business of dentistry will call AFTCO at 800-232-3826 or visit our website at www.aftco.net. It's time to call AFTCO!