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Issue #44 - 4.29.08
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Should I Retain the Seller and Staff?
We’re frequently asked by many purchasers whether or not it makes sense to retain the seller for a period of time after purchasing a dental practice. Quite frankly, it depends on two things: first, the size of the patient base and second, the clinical experience of the purchaser.
Patient Base
As we’ve discussed in prior columns, the size of the patient base is a critical predictor of practice success, whether hiring an associate or retaining a doctor whose practice you purchase. If the practice is saturated, meaning there are in excess of 1,700 active patients plus a pool of patients that can be reactivated, it may be prudent to retain the selling doctor for a period of time, perhaps even indefinitely. It’s important to determine the accurate size of your patient base so you can properly plan for retaining the seller. In cases where you are purchasing a practice that has a good mix of complex restorative procedures but your clinical experience is not there yet, consider retaining the seller to learn from him/her for a period of six months to a year. This may be a prudent alternative to referring more complex procedures to area specialists. Take advantage of the seller’s experience for this period of time.
What’s also important is the personal and professional relationship that you have with the seller. If you’ve been an associate with the practice prior to purchase, chances are you have a good rapport and the goodwill transfer can be orchestrated very nicely. However, if you’re in a situation where you moved to an area and purchased a practice outright, that’s another story. You really won’t know how things go until you work with the selling doctor for a period of time.
If the practice can support more than one doctor, the seller’s profit as your associate may help you pay the practice acquisition loan. We’ve had clients who have retained the seller indefinitely and essentially had the seller paying most of the loan!
Insufficient Patient Base
If you are purchasing a smaller practice with a limited patient base, then the selling doctor typically will not remain for more than several months, perhaps a couple of days per week, in order to finish cases, introduce some patients and ensure a smooth transition with the staff. We have also found that well-designed letters of endorsement are a good way to transfer goodwill to a new purchaser in smaller practices. There is also technology available today that uses telephone messaging (Elexity) in the voice of the seller to call all patients to announce retirement and introduce the successor. This can also be a very effective approach in transferring goodwill.
Staff Retention
Staff retention can become an issue, particularly if you are purchasing a practice that has high staff overhead. Often many established practices have long-standing employees who have been loyal and effective and are highly compensated. In cases where you are purchasing a practice where the selling doctor is retiring, it does not make good business sense, in our opinion, to terminate all staff members. If the seller leaves immediately after the sale and you elect not to retain key staff members, who will your newly acquired patients know? Patients may be concerned when a new voice answers the phone, a new hygienist treats them at their recall appointment and a new dental assistant helps the new doctor. The patients are essentially visiting an office that they have no familiarity with—hardly an effective way to retain your newly acquired patients. Even if the overhead for a period of time is more than you planned, imagine the cost of losing patients that may decide to visit another doctor more conveniently located to where they live or work. Therefore, if you want to ensure greater success with patient retention, retain key staff members for at least six months before making any sweeping personnel decisions. Your staff can be key allies in getting patients to accept you as the new doctor.
At the end of the day, retaining the selling doctor is highly dependent upon the amount of patients that you have acquired and the relationship that you have established prior to the sale.
Dr. Thomas L. Snyder, is Managing Partner of the Snyder Group, LLC, a nationwide practice transition and financial management consulting firm. With more than 75 years of experience in the field, The Snyder Group can provide you a full range of services relating to practice transition matters and retirement planning. They can be reached directly at 1-800-988-5674.
If you would like additional help, email Dr. Snyder at drsnyder@thedentistsnetwork.net.
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