So, who are we really dealing with? New Graduate “concerns” can be summarized by the following list:
Repayment of student loans and other debt. Most students leave dental school with $250,000 to $550,000 in school debt. This has to be issue number one in their minds. How will I be able to service this debt and make a living, much less ever own my own practice? Surprisingly, graduates are not becoming owners. This is what has driven the rise of corporate practices. An unlimited number of doctors that will never become owners. This will drastically limit the price of practices for sale because there are no future doctors wanting ownership. If you are a senior doctor looking for an associate rather than a partner, this is great for you. Prior to the year 1999, over 95% of graduates from dental school became owners. Big change.
Relocating and home acquisition. Most students either want to move back home or move to a location that buys them an edge. When I say edge, I am referring to a location with more opportunities, good financing available, with a moderate cost of living. For a young doctor looking to buy into a practice, I will say that most graduates make the mistake of wanting to locate in a large metropolitan area. Generally, it is over saturated with doctors and the level of competition makes it difficult to have a successful practice. One of the biggest mistakes recent graduates make is purchasing a home without first owning a practice. This common occurrence limits where you could eventually end up. It limits your success and creates or limits your options. Secondly, I see doctors make a decision to work in a community where they would like to own, only to find out that their non-compete clause makes it impossible to quit and still own or work in that area.
Family concerns. There are always external pressures pushing young doctors to a particular part of the country. Statistically the doctor, whether male or female, will end up within a 2-hour drive of the female’s parents. Consider this in your interview. Young doctors need to consider this when even beginning your search. Be realistic about the external pressures that will inevitably occur when you are searching for a location to work and live.
Investing in the future. How should I balance debt reduction with savings? Should I rent or own? Will this be the right choice? Who can I trust for advice? Investing for the future is not just about money. It includes business skills, life skills, and growth strategies. The sad reality is that most doctors will end up working for someone that is not ready for an associate and has no idea of when to add the next doctor. Odds are you will end up working for a practice where you will have little chance at learning the business of dentistry or being exposed to a clinician who could mentor you in the clinical side of dentistry.
Clinical skills. Remember: That dental license is just a learner’s permit that makes us almost not dangerous. Hopefully, every young graduate is aware that they fall short on competence. They know they need a mentor or coach. This is why you have to actively search out the correct choices in taking that associate job.
Business skills. Young doctors have been brainwashed by their dental schools to believe that they must go into an associateship to build clinical speed and learn the business of dentistry. While we all need a mentor, most of these graduates will end up working for the typical “average dentist” or in a DSO or corporate structure. A doctor who has failed to grow his business or is just “average” is probably the worst mentor this young doctor could pick.
Money management skills. This could include investing for the future if we consider the financial hurdles each young graduate faces. It includes how to negotiate a contract while wondering if this is the right thing to do.
Lack of real-world experience. We all spent many years in school. This is the first time that we were faced with providing for our families while juggling the hats of being dentist, spouse, parent, banker, accountant, etc.
Fear of being taken advantage of. Everyone, from the dental supply companies to the hiring doctor, wants something from them. They feel both flattered and used. They realize for the first time that the decisions they make today could affect them for the rest of their lives. A daunting task at best.
According to the ADA, 84.6% of dental graduates are practicing as associates or independent contractors one year out of dental school. 94.4% of senior students said they could not afford to start their own practices. An interesting thing is that 72% of all associate jobs fail within 15 months. This should impress you even more: 75% of all dentists practice alone. We are seeing a change here also. Multiple doctor practices are currently growing at 20% a year, and solo practices are decreasing 7% a year. So, here is the problem: All the graduates feel they must associate with a senior doctor upon graduation. Problem is the senior doctor has no clue about how to work with another doctor, much less know how to manage their practice to the level that another provider should be added. The young doctor soon feels that they were misled in working for this senior doctor. They feel that they are doing all the work and the senior doctor is making a financial killing on their labor. The truth is both sides are completely wrong. The relationship was doomed from the beginning. Without the proper strategy, systems, documentation, and attitude from both parties a multiple doctor arrangement will always fail. We will spend the rest of these articles showing you exactly how this transition can be done with a 92% success rate. I warn you; you cannot leave out even one step. Do not attempt to modify the system. It is a recipe that has been perfected through over a thousand transitions. We’ve seen every way possible to mess this up. If you are in a hurry and want to move at a faster pace than reading each of these articles, you can order my book on associates and partners called The Roadmap at www.summitpracticesolutions.com.
Associates never last when:
The senior doctor was not fully committed to the practice. If you are the quintessential “Average Dentist”, don’t even begin the process. You cannot see the associate as a means to just have more time off, or someone to dump unpleasant patients on. This is why most associateships fail within 15 months. You must have the energy, proactive management style, and a “whatever it takes” attitude before starting down this path. You are going to have to change before considering making a transition.
The senior doctor and the staff are not poised for growth. You cannot expect this to work if you cannot manage to turn up the number of new patients, cut overhead, expand hours, and involve the entire staff in strategically bringing in the new doctor. This decision to bring in a new doctor will require a new commitment from you and your staff. Business as usual is out the window. If you want more, you are going to have to be more. Be sure and read chapters 16, 17, and 18 in The Super General Dental Practice: Free at www.supergeneralpractice.com
You must have an inexhaustible supply of new patients. For a general practice we recommend from 50-75 new patients per dentist per month. Remember that while you may produce a lot per new patient, the new doctor will only produce about 50% of that for each new patient seen. Doctors generally attract patients about 10 years on either side of their ages. If you are sixty or older the patients on the upper 10 years are dead (just kidding) which leaves you the ones 10 years younger. A young doctor will attract more people his or her own age. For many of you, children will begin frequenting your offices again. As the senior doctor, you are responsible for bringing in the new patients. If the young doctor could do it, they would not need you. While it is normal to expect the young doctor to promote the practice and bring some new patients in, you are the one who must step up and increase your marketing budget, increase the office hours, and motivate the staff to increase more internal referrals. It is a foolish thought for you to hire an associate and tell them they need to build their practices inside your practice. This is foolish folly.
Working as an employee was never the vision of why we went to dental school. Associates leave because they want ownership, or they feel like they are being taken advantage of. A doctor who would work for you as an employee for years is the wrong doctor for your practice. Think about it. If they don’t have ownership vision, then they probably won’t have that fire in their belly to work hard to grow the practice, sell dentistry, inspire patients to refer, and become a valuable member of the team. Without an offer to buy in you will attract a poorer candidate for the position you are offering. It will just be a job for them: A paycheck for work rendered. I don’t know about you, but I want more than that out of a relationship with another doctor.
Things to know before bringing someone into a practice:
From now on we will refer to any new doctor who will work for you in an associate relationship as the Trial Partner (TP). From day one, we want the young doctor to understand that we are not looking for a long-term employee. We are trying to develop a long-term partnership. This partnership could end up being “legal” owner or a cultural employee that acts like an owner and you partner with them to help hit those earning goals and dental competencies they need to achieve. From the very first day we want them thinking like an owner. They should be concerned about new patients, overhead, and staff relationships. They should want to expand the hours in order to increase their exposure to more patients. They should be looking toward owning a fractional share of your practice sooner rather than later. Employees, on the other hand, will whine and complain, show up late, leave early, live paycheck to pay check and show no concern about the team (and maybe little or no real concern about the patients). Start referring to the young doctor’s position as the Trial Partner (TP) and see the difference. An ownership mentality is exactly what you want in your new doctor.
Associates/Partners don’t eliminate problems. They magnify them. If you do not have your house in order, you will face a most daunting task to balance this new relationship. When I use the term “house in order”, I am referring to the benchmarks outlined in chapters 16-18 in The Super General Dental Practice (SGDP).
You must have an adequate facility, equipment, and staff to make this a seamless transition. There is a myth that adding a doctor requires that you expand your facility. It is not impossible to have 3 doctors, 4 plus hygienists in a 6-op office and by breaking up the week into 6-hour shifts, 11 or 12 hours a day a practice can produce over a million a year per doctor and another one and half million from the hygiene department and not even see one another. (Rick Kushner has done it with hundreds of offices.) It is not crowded, and the overhead can dip into the 50%-57% range.
While slightly ambiguous, you must know yourself and your staff. A group of people who work together every day in a dental office is not necessarily a team. You may just have a group of people who happen to work in the same office. A team mentality is paramount to making a successful transition to multiple doctors. If you know that your leadership and management skills have taken a back seat to your clinical skills, you will have to start to lead and manage once again. There are no “born leaders”; this is a learned trait and an area where anyone can improve. You cannot be an absentee owner and expect your office to run both effectively and efficiently without great systems and leadership from you. Take the time to read the chapter on Donor Practices in SGDP chapter 8.
Because the “Associate” never feels at risk, never feels the need to really learn the business systems, and never learns how to optimize revenue, they fail to ever own the process of operating the practice at the optimum level. Ownership brings focused, persistent attention to running the business. Do not make your time with an Associate/Employee just a stop on the way to their ultimate goal of ownership somewhere else.
NOTE: If you are one of those doctors that is just looking for an associate and not an eventual partnership, you can skip this area. If on the other hand you are considering bringing on an associate with the idea of selling fractional shares in your practice, read this paragraph with the attitude of understanding the staging of a successful transition. Associateships do not require enough commitment from the junior doctor to later follow through with a transition or buy-in/buy-out. Without structured contracts leading to a transition, the junior doctor may opt to remain as just an employee or associate, it would leave all and any issues undefined, such as terms and price of the sale to be negotiated later. This would probably put the buyer/junior in the bargaining position because he or she would usually be the party least needing the continuance of the association. In other words, he or she would usually be more flexible to leave in case terms could not be agreed upon. Furthermore, the longer the junior is present and working in the practice, the better this bargaining position would tend to become, because the more the senior would usually desire or need the association to continue and the less, he or she would want to risk turnover. Therefore, the senior, in this case, would be the party most likely to need to make concessions, in order to retain the junior and keep the transition from perhaps breaking up. Leaving issues undefined does not necessarily favor the junior party. It tends to favor whichever party would be most flexible to termination. Usually, once into a transition, the senior, programming for upcoming retirement or sustained growth in this practice or multiple practices, would be less flexible to termination and trying to start over with another junior. On the other hand, once into a transition, the junior may have more desire for its continuance than the senior and then the senior would have the bargaining advantage. Ideally, there should be no such strategy involved, but unless both parties were more-or-less equally committed, the one most desiring continuance of the arrangement would usually be at a disadvantage. This is the reason that structuring the transition or sale from the first day with comprehensive contracts and financing will ensure a successful transition strategy.
Michael Abernathy, DDS
PS. This topic is fraught with details. Please feel free to contact me so I can give you a specific answer or solution to your individual situation. I look forward to hearing from you.