Hint: It's not all about money
Perhaps you’re a doctor welcoming the idea of owning a practice, or maybe you’re an owner who is ready to transition a part or all of your life’s work into the right hands. Regardless of your point of view in this scenario, there are evident elements that buyers typically look for in their ideal practice and sellers need to know about.
There are the obvious priorities buyers typically look at: location, the office’s physical appearance, new patient flow, staff, technology, financials. While these factors should be considered and thoroughly examined, there is one significant element—specific to the actual transition—that both sellers and buyers may overlook: mentorship.
“Selling doctors see patients all day, every day and that’s what they’ve done their entire career,” senior financial analyst Matt Doyle said. “Meanwhile, buyers have spent the past several years focusing on education, learning and understanding what they need to do from a clinical standpoint. Mentorship gives them a view of the profession outside of a classroom environment and smoothly brings them into the practice to learn both the clinical and business side.”
What does mentorship look like in a practice transition?
Mentorship is a matter of integrating the new doctor into the practice and ensuring there’s a smooth hand-off between the current owner, existing patients, staff and the new doctor. The patients and practice staff are accustomed to the way the existing owners has always done things. How might these parties react to change? Mentorship offers the new doctor a guide to walk alongside them as they come into an established, fully staffed practice. It also offers the current owner confidence in handing the practice to a new business owner. Win-win.
Mentorship may take shape in a variety of ways, but there are two particular approaches that we often see during the transition period: a mentorship program or seller work-back arrangement.
Mentorship programs typically involve the current owner bringing on an associate with the understanding that this individual will eventually purchase a portion or all of the practice, but they first spend time in a “dating period.” This dating period allows the associate to learn about the practice operations, see what works and what doesn’t work and ultimately be integrated into the practice.
Mentorship programs are especially beneficial for less experienced doctors who want to get to ownership quickly yet may not be able to qualify for a loan immediately following dental school.
“The associate doesn’t have production support to show a bank that they can handle that level of production in order to get that loan,” Matt said. “We’ll see a lot of these individuals come out of residency, go into mentorship programs and then purchase the practice a year and half to two years after their residency program.”
Seller Work-back Arrangements
An important element for sellers looking to sell the entire practice, a seller work-back arrangement is another transition approach that allows for mentorship and integration. This is where the owner sells the practice and stays on to continue working for a designated period of time, and typically, the buyer is a more seasoned doctor. This arrangement is a great option for sellers who are getting ready to retire but still enjoy practicing dentistry; they just relinquish the administrative and managerial responsibilities.
Work-back arrangements are also helpful for dental specialties that are heavily referral-based, such as oral surgery, periodontics and endodontics. The doctors in these specialties have several referring doctor relationships, so it’s important they make introductions and transfer those relationships to the new doctor. A seller work-back arrangement carves out time for this to happen.
Confidence for the New Doctor
Becoming a new business owner can be as daunting as it is exciting. The buyer is a brand-new employee coming into a full functioning dental practice. They may have an idea of the day-to-day work, but they wouldn’t know the full scope of the specific business aspects or how staff members interact in the practice.
Especially for young doctors coming out of dental school, mentorship plays a significant role in ensuring that the individual learns the ropes of business ownership. Young doctors may have experience on the clinical side but have a limited amount of financial or managerial experience.
When the current owner focuses on guiding the new doctor and integrating them into the practice, the doctor can observe how the practice runs business, the type of equipment used, where upgrades can be made and current marketing tactics.
Another big advantage is the new doctor can learn about the team culture and staff personalities. As the risk of staff turnover and hiring challenges are prevalent at this point in time, it’s important to be mindful of the established team and how they operate and interact with each other.
“You wouldn’t want to rock the boat because you don’t understand the communication style of the office manager,” Matt said. “It would be terrifying to become an owner and then all of the sudden staff leave and you have to figure out how to hire people as well as how to run a business. This mentorship period allows the buyer to see how personalities mesh within the practice internally and prepare to work with unique office dynamics.”
Lastly, mentorship allows the new doctor to feel included in the practice and excited for their career. It’s a fresh start at a new practice with plenty of room for opportunity. Mentorship equips the doctor with confidence to tackle this journey.
Peace of Mind for the Exiting Doctor
As the current owner prepares to leave the practice, there is one piece that is fairly evident: the emotional aspect.
“There’s clearly an emotional piece for the buyer, but it’s a lot more of an emotional process for the seller,” Matt said. “The seller is not only colleagues with their staff, but in the case of those long-time employees, oftentimes a second family. They want to ensure the staff trusts the person that’s taking over what they built. Mentorship gives them the ability to leave on good terms, see patients, transition them over and make everyone feel comfortable.”
Ultimately, the current owner wants to leave knowing their staff and patients are well-cared for. By setting aside time to integrate the new doctor into the practice, the exiting doctor can have peace of mind as they make the final hand-off.
Integration Within Partnerships
Mentorship and integration can look a little different when the sale comes in the form of a partnership, as opposed to a walk-away sale.
“If you buy 100% of the practice, you’re 100% your own boss,” Matt said. “If it’s a partnership opportunity, you two are equals, and that’s difficult if you’ve been a single-doctor practice for many years. You’ll still be your own boss to some degree, but you’re now making decisions together with another doctor. That’s certainly a hurdle to get over.”
By establishing a focus on integrating the new doctor, both are set up for success. The two doctors will spend a lot of time with each other, so it’s imperative they’re both on the same page. The goal is to form a solid relationship with the other doctor and ensure that personalities work well together.
The Key to a Successful Transition
Both buyers and sellers have key priorities in mind for their ideal practice, but mentorship should not be overlooked. In many cases, mentorship can be the key to a successful transition, preparing the practice for a thriving future.
At NDP, we understand that dental transitions are not straight roads with only one end result. As there are various factors to consider, we strive to provide guidance in tackling any pieces of the transition process. Talk to an NDP team member today to get your questions answered.