By Bridget Schwebke, RDH, CPA
For some doctors, the seller workback period is simply a standard step in the transition process. For others, it carries significant emotional weight, requiring thoughtful consideration about identity, legacy, and life after ownership.
The seller workback, in which the selling doctor continues to work in the practice after the transfer of ownership to the buyer, is more than determining the length of time. Sellers must understand that this period often involves serving as an associate or independent contractor, releasing some control, and adapting to a decrease in personal cash flow.
The seller workback involves a full spectrum of options and decisions, and they should be discussed and negotiated well before the deal closes. Although there is no single timeline that works for every seller workback period, the best arrangement accommodates the buyer and seller’s goals and the needs of the practice. Here are several important factors to help doctors evaluate their options and determine the best arrangement for them.
The Value of a Seller Workback Period
A seller may choose to remain with the practice post-close for several reasons, and those reasons often influence how long they stay involved. Some motives relate to personal preferences or life circumstances, while others reflect what is best for the practice or what the buyer needs during the transition.
Common reasons for a workback period include:
- Patient Continuity: One of the most important aspects to consider during a transition is how new ownership will impact patients. Many patients form loyalty to the doctor they’ve seen for years. The selling doctor likely has detailed insight into the unique needs of each patient, so a gradual introduction to the new doctor is helpful for building knowledge and trust, and it’s also an important transfer of goodwill.
- Buyer and Staff Confidence: The buyer may need mentorship to lead a team and run a practice, so this seller workback allows them to gradually build their leadership and business skills. Additionally, the transition is a significant change for the practice staff, so a familiar face during the workback period can help ease staff concerns and facilitate the integration of the buying doctor.
- Ongoing Clinical Involvement: Some buyers request clinical help to assist with the production. And some sellers choose to remain with the practice simply because they enjoy practicing and caring for patients, while others do so to meet personal financial needs.
Questions Every Seller Should Consider for the Workback Period
- Do I want to continue working, and why?
- Am I financially ready to walk away after the sale?
- Do I truly enjoy practicing, or am I afraid of the unknown aspects of retirement?
- Do I trust that the buyer has enough experience and confidence to lead?
- How comfortable am I becoming an employee in a practice I used to own
- What does success look like to me one year after closing?
Determining the Right Length of Time for the Seller Workback Period
Understanding the motives for the workback and the practice needs will help determine the right timeframe for the workback. While timeframes will vary based on each unique situation, below are examples of workback lengths and the scenarios they may best support:
- Less Than a Year: A year or less is the most common length of time for seller workbacks. In practices or specialties that rely heavily on referrals or in fee-for-service practices where the revenue may be closely tied to the seller’s patient relationships, this workback period may be the best option. This gives the seller plenty of time to transition goodwill and finish cases or treatment if needed, while the buyer settles in with the staff and learns the ropes.
- More Than a Year: A longer workback period of more than a year works well if the seller still enjoys practicing but wants less responsibility in the business or wants to scale back on days worked. The seller may also be simply planning for retirement but not quite financially ready yet.
Is There Always a Seller Workback Period in a Transition?
There isn’t always a formal seller workback period. In most transitions, there is a brief period (typically a month or so) post-close where the seller will make introductions of referrals and patients and assist with any operational diligence or goodwill transfer. This period is part of the purchase price. Anything beyond this period would be considered a more formal workback.
It’s not uncommon for sellers to step away immediately, especially when the practice’s size or cash flow does not justify a post-close clinical role. If the seller feels personally ready to immediately step away, the buyer feels ready and confident, and/or perhaps the buyer is not a new face in the practice, a workback period may not be necessary. It all depends on each party’s situation and preferences.
Negotiating the Seller Workback
The seller workback is often a point of contention for both buyers and sellers. Buyers and sellers each have their own preferences, life situations, financial situations, and timelines, which can drive their vision of the seller’s involvement post-close.
The seller associate or workback agreement is a legal document used specifically for this period. This document is the employment or independent contractor agreement that may detail the post-close workback terms for a seller. It may include non-compete restrictions, compensation terms, schedule expectations, decision-making authority, and other obligations or terms negotiated as part of the process.
To help reduce challenges post-close, it’s critical that the document is thoroughly discussed, understood, and agreed upon.
Common Challenges During the Seller Workback Period
Even with a great workback agreement in place, some doctors may still encounter challenges. Below are some roadblocks that may occur during the workback:
- Reluctance to Release Control: In some cases, the seller may not be fully ready to relinquish control of the practice. They may assume the buyer needs them to ensure future success, when in reality, the buyer feels ready to handle the work on their own. This can cause the buyer to feel micromanaged or undermined when they may have had different expectations.
- Lack of Buyer Readiness: In contrast, some buyers may not feel ready to take over the practice, or they may lack the clinical or business skills to do everything immediately post-close. This could lead to buyer-seller tension and stress on practice if the buyer needs more hand-holding than expected to become a successful owner.
- Undefined or Misunderstood Expectations: Some of the most common challenges simply stem from a lack of communication in the negotiation process or a lack of details in the workback agreement. If the terms weren’t clearly discussed or understood by both parties, the doctors may be left feeling frustrated, and this could require a realignment of vision.
Every transition is different, and the ultimate goal of the seller workback period should be to create the smoothest possible transfer of ownership. It’s vital to consider long-term practice stability, patient retention, operations, and the buyer’s readiness when negotiating a workback period.
If you need help creating a transition strategy or have questions regarding your unique situation, contact NDP for a complimentary coaching call. We can help negotiate a customized arrangement, ensuring a successful outcome for both parties as they move forward in their careers and beyond.
Bridget Schwebke
RDH, CPA, Head of Consulting
A graduate of Tennessee State University, she holds a Bachelor of Science in Dental Hygiene and a Master of Accounting in Science from Northern Illinois University. Read more about Bridget.