As a future dental professional, you may be excited by the idea of one day owning your own practice. In fact, according to THE NEXTDDS Student Transition Survey, 47% of graduating dental students plan on pursuing an associateship or employee dentists position immediately following graduation. A position like this offers you the opportunity to gain confidence, build your skills chairside, and consider one day having a dental practice of your own.
Employer dentists are planning for the future. They want to be profitable—building up the value of their practices—while also making sure to bestow some wisdom, training, and systematic management to the new dentists to make sure that their practices will be left in their image. This buy-in operation is a very delicate process, one that may go through various peaks and valleys before you even sit down to discuss the transition. Things may fall through, or new conditions may entirely affect the opportunity to buy-in. Thus, you should know what aspects of purchasing a practice you’ll be confronted with, and be sure to do all negotiations up front.
1. Numbers Game
Almost always, it comes down to numbers. Is there room for two owners in the practice? How in advance is the employer dentist planning his or her exit strategy? Are they taking a pay-cut for the transition? Is the practice expanding to more services or demographics? Taking a look at these preliminary estimates will give both parties a better idea of if the move makes sense.
2. When Will We Negotiate?
Most buy-ins don’t begin until well into the associateship proceedings. Thus, planning a set date when both parties can work out agreements will be necessary. This period of time, instead, can be used for you to get to know one another, making sure that you have a productive and harmonious working relationship.
3. Negotiating Percentages for Value
Once that time comes, how much of the practice will be purchased? Will it be half, more than half, or a full buyout? It will also be important to mutually determine payment terms. The value of the practice will also come into question. Typically, between the value at the time of your initial employment to the time of the buy-in agreement, the median price will be the value. This is something that can be foretold through calculations such as percentage of gross collections.
4. Getting Financing Involved
Chances are, you’ll be providing the investment through a bank loan. The bank will work out the basics of debt, assets, and equity. If the owner of the practice also owns the building, he or she might ask for an option and a right of first refusal to purchase a percentage of the property.
5. Taxes and Profits
Work out the taxes, seeing which aspects are supportive of the buyer and seller. Taxes are a very important aspect to the buy-in, so do not take this part lightly. Profits also need to be split, based on production and who performs at a higher rate than the other/
6. Preparing for the Transition
If you’re buying in a large portion of the practice, chances are you will now want a say into how things are managed and the overall scope of the practice. Work out these kinks as well in the negotiations. Because of this, it’s important to ease the existing practice owner into a well-deserved retirement, rather than burn bridges. If you can, help them make that adjustment.
7. Jumping Ship
It would not bode well for you if the soon-to-be retiring dentist were to leave to work for a competing practice. Make sure that grounds are laid out to avoid this move. Hopefully something like this would not happen after the buy-in proceedings, but it’s important to be prepared for anything that could happen. If everything is agreed up upfront, nothing should be compromised.
Autonomy in one’s job is a much sought-after prospect. Many dental students like you pursue a career in dentistry in order to work for themselves: making their own schedule, managing a team, and running their businesses. Buying into a practice is a huge achievement for both parties involved. For the retiring dentist, this will be an opportunity to reflect on his or her legacy, and know the practice will be in good hands. For a young dentist, this will be an opportunity to become a leader and operator. Now it’s up to the you to lead the practice to a successful future.
Additional resources on THE NEXTDDS regarding practice ownership include: