With a cohesive relationship and a well-orchestrated plan, partnerships can tremendously benefit a practice. Partnerships offer greater opportunity for practice growth, work-life balance, mentorship and smooth transition planning for retiring doctors.

Like most fruitful relationships, a successful partnership doesn’t form overnight. It requires a significant amount of time and effort combined with a teamwork mindset to build a relationship based on mutual trust and respect.

While there isn’t a black and white formula for creating a partnership, understanding some helpful tips and principles will set up a solid foundation.

The key: preparation and diligence on the front end will pay off in the long run.

1. Be Prepared Mentally, Clinically, Financially

Dental partnerships are often referred to as “work marriages,” as they consist of a unique, collaborative dynamic that demands time and effort to be successful.

Ensuring that all doctors are ready to enter a partnership is an important first step. Before fully diving in, it’s suggested to take a step back and think about who they are as individuals.

Consider questions like:

• Personally, do both partners enjoy and work well collaborating as a team? If it’s a single-doctor practice, is the current owner ready to give up some control?
• Clinically, does the new doctor have the right experience? Is their clinical speed and philosophy complementary to the other doctor?
• Financially, does the new doctor understand their personal finances and liquidity for the lender’s requirements? Do they know what they can afford to buy into? Is the selling doctor financially able to support the new partner and ready to give up something financially (even in the short term)?

While some doctors are not built for a partnership, it can be the right path as long as they’re honest with themselves about who they are and their expectations. Reflecting on these questions can help set expectations before getting too far into the process.

2. “Date Before You Marry”

Similar to a typical marriage, doctors should initiate a partnership with the knowledge they are compatible and can communicate with each other. It’s not ideal to walk down the aisle without meeting the spouse-to-be, and similarly, the dating phase is crucial for a partnership.

It can certainly help if the new doctor works in the practice first, but even after some experience, asking key questions and engaging in important conversations prior to the partnership is essential. The doctors should have a clear understanding of each other’s goals, visions, strengths and weaknesses.

Consider questions like:

• Why is the current owner looking to bring on a partner? Perhaps it’s to grow the practice more than they’re individually capable of, or they’re nearing retirement and want to transition out slowly.
• What is the new partner looking to accomplish in the partnership? Together, the doctors can lay out their vision for the practice and where they want it to go in the years to come. This is a critical step before the doctors talk price or partnership terms.
• What qualities does the new doctor bring to the table, and what is the current owner’s reasoning for bringing in this specific doctor? A complementary skill set could be incredibly beneficial to growing the practice.
• How does each doctor work in a collaborative setting? Consider who they are as people, how they interact with patients, clinical and managerial skills, adaptability, communication style and ability to have uncomfortable or difficult conversations.

With the need for a strong connection, engaging in these discussions can help validate the relationship or allow the doctors to step back and re-evaluate. Just like in a marriage, the honeymoon phase isn’t always present, and there will be challenges. The more the doctors understand each other, the better they’ll be able to handle those challenges. The doctors don’t have to be exactly the same or best friends, but they should have mutual respect for each other.

3. Do the Due Diligence

After the high-level conversations, it’s time to get down to the nitty gritty of the buy-in or sale. Due diligence requires the buyer (the new doctor) to research and analyze pertinent information about the seller (the current owner) and the practice. On the seller side, the doctor is expected to be transparent in sharing the financials and practice details.

This process allows the new doctor to be better equipped to understand the asset they are buying. Ultimately, it will allow the buyer to move forward in the partnership with certainty, and it also proves to the bank that the practice can support the new doctor.

To understand the opportunity, risk and potential of the practice, the buyer needs to assess the practice’s financial and operational documents and consider various factors.

This can include specific details in categories like:

• Overall practice health: practice overhead and profitability, operational efficiency, number of operatories, equipment health, marketing efforts, referral patterns
• Patients and staff: active patient count, new patient flow, number of staff members and their roles, clinical history (via chart audit)
• Partnership dynamics: percentage of the practice being purchased, legal structure, how the money will be split

The due diligence process can be lengthy and complicated, which requires significant effort from all parties, but the goal is to ensure the buyer understands and trusts what is being presented by the seller. A transition advisor like NDP can be a helpful resource for both buyers and sellers during this process.

4. Lay the Foundation with a Strong Operating Agreement

It’s important to define how the partnership will function for the years to come. This is accomplished with a strong operating agreement. This document lays out the partnership terms and variables, ensuring that the doctors’ expectations are clear and all the “what happens if” scenarios have an answer in the event they occur. It helps to mitigate risk and ensure everything is in line to keep all doctors protected in case of a worst-case scenario.

The operating agreement should be a collaborative document between the buyer and seller. Typically, 70-80 pages in length, this document should be pretty exhaustive, including but not limited to terms regarding management decisions, how the doctors will pay themselves, expense splitting, admission or removal of partners, exit plans and terms for how to govern disability, death or the partnership dissolution.

As the operating agreement can be an intricate piece in the partnership, NDP can assist in facilitating the document’s progress, negotiating the terms and engaging an attorney to formalize the agreed terms.

5. Foster a Collaborative Relationship

It bears repeating that partnership is centered around two common themes: collaboration and communication. Running a practice is more than just clinical; prospective partners must be ready to work through patient relationships, team relationships and general business responsibilities.

Failed partnerships can occur for multiple reasons, including a lack of contribution from doctors, inability to work with others or lack of communication. Oftentimes, it’s because expectations weren’t clear up front, or there wasn’t enough thought put into the reason behind starting the partnership. Investing time and being diligent in the selection process can help foster a long-lasting partnership.

A Team in Your Corner

At NDP, we want to ensure you’re set up for success as you take on this career milestone. If you are preparing to buy into a practice or bring on your own partner, our team can be a guiding hand through the process. Contact us today for a complimentary call.