Deferred Transitions: Practice Sale and Partnership
By Thomas L. Snyder, DMD, MBA, Director Henry Schein Professional Practice Transitions
Suppose you have been searching for the right candidate to become your successor. However, you may need a few more years at the helm before passing the baton and the timing is not right for you to immediately transfer 100% ownership. Alternatively, if you are considering a partnership, your patient base may be inadequate to support both doctors. Perhaps your new associate needs more time to develop clinical skills to assume a productive partner role.
In both instances, more time is needed to achieve the desired results. Deferred transitions have been growing in popularity as an effective strategy, especially in smaller communities where there is a shortage of associates and possible competition from other doctors in your area who have similar goals.
First: Establish a Baseline Practice Market Value
Creating a sale price for a future sale or partnership buy-in is a critical first step in designing your deferred transition plan. By locking in the value of your practice value, your candidate will not be penalized for their efforts in working hard and in many cases may help your practice to grow.
If your associate knows they will not have to pay for what they have contributed, there are no constraints for them to work hard and earn as much income as possible during the employment phase. Doctors who want to have their practice “re-valued” immediately before the transition lose sight of the additional income they can receive due to the efforts of a highly motivated associate!
We have often found that this perceived loss of future practice value is more than offset by the increased net income we see on doctors’ tax returns in the few years immediately preceding the transaction. However, when it’s time for the transition to occur, your practice value should be updated – inflation will erode your baseline value because you will be selling your practice for less than the original value due to the “time loss of money”. We suggest that you consider adjusting your baseline value by utilizing the Bureau of Labor Statistics Inflation Calculator. This easy to use tool is found at BLS.gov.
To update your value, you simply enter the original baseline value with the month and year it was created and then enter in the month and date of the then future time frame. This will result in a current value based on the Bureau of Labor Statistics inflation database. In the event you purchase additional assets during the employment phase, you add the current market value of those assets to the updated baseline value. In the event you purchase a patient list from a retiring doctor, during the employment phase, the market value of that list needs to be factored into the updated baseline value as well.
Deferred sales work best when the timeframe is within a 2-3 year period. In a deferred sale, the biggest risk you face is your potential purchaser changing their mind and moving to another opportunity. To protect yourself from this occurring, we recommend that you request a down payment between 10-15% of the baseline value to serve as a lever against a change of mind.
Conversely, if you to elect not to sell in the prescribed time period, the down payment would be returned to the purchaser. Another issue that must be considered is the credit profile of the buyer changing during the employment phase, resulting in the associate’s inability to obtain bank financing for the transaction. If you really like your associate and still want him/her to be your successor, you may have to consider seller financing. Otherwise you will have to start the process over!
It is also important that all necessary agreements are prepared 90-120 days after your associate joins the practice. This way all key issues are negotiated well in advance so there are no surprises two years later when it’s time to close the deal. Your future employment (if applicable) should be discussed and negotiated as well.
The buy-in value for the deferred partnership is done in the same manner, as a deferred sale, by creating a baseline market value at the beginning of the employment phase. It is also critical to establish metrics to determine the overall practice target revenue that the practice must achieve for the economics of the partnership to work. You also need to establish your future partner’s individual monthly production goals to ensure they will be able to afford the buy-in.
Typically, production goals should be sustained over a 3-4 month period. Once these two metrics are satisfied, partnership is ready to be initiated. All of the terms and conditions of your partnership agreement should be negotiated prior to embarking on this transition and documents should be prepared so all parties know what is expected of them and how the partnership will function.
In conclusion, deferred sales and partnerships have a rightful place in the transition planning portfolio. When properly designed and with all transaction documents prepared well in advance, this will result in a successful outcome for both parties.
If you would like additional help, email Dr. Snyder at email@example.com
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3 Benefits of Online Scheduling and How to Make It Work for Your Practice
By Sally McKenzie, CEO
Scheduling appointments with your practice shouldn’t be a hassle for your patients, but all-too-often it is. They call when they have time during the work day, only to be placed on hold or told the team is out to lunch. Instead of scheduling an appointment, they hang up frustrated and wondering if they should try a different practice instead.
You don’t want to lose patients (and money) because they have trouble making an appointment, which is why I suggest you consider implementing online scheduling into your practice. With online scheduling, patients can request an appointment from their smartphone, tablet or computer whenever it’s convenient for them.
There’s no doubt online scheduling offers benefits for your patients and your practice. Here are three, as well as tips on how to choose the best system for your office.
1. It makes scheduling easy for busy patients. Just like you, your patients are busy people. They have to juggle work and family obligations, and scheduling a dental appointment usually falls to the bottom of their to-do list. With online scheduling, they can easily make an appointment when they do have time, whether it’s first thing in the morning before they start their busy day, over their lunch hour or in the evening when they’re winding down.
Zocdoc, an online scheduling tool for the medical industry, recently reported that 45% of appointments booked through the system come in after business hours. Many of the patients who schedule see a doctor within 24 hours after making an appointment request. While you shouldn’t expect a 45% increase in patient visits after implementing online scheduling, you should expect to reach those busy patients who just don’t have time to call during the day.
2. It shows your practice is up-to-date. These days, patients expect to be able to handle just about anything online – and that includes scheduling dental appointments. If you don’t offer that option, patients might start to wonder what else is out of date in your practice.
3. Your team will love it. Managing patient phone calls can be stressful for your team members, and it takes them away from other revenue-generating tasks. If you implement online scheduling, they won’t have to handle nearly as many calls per day, which also gives them more time to focus on creating an exceptional experience for patients who are in the practice.
Now don’t get me wrong. Your team members should still be properly trained to answer phones and schedule patient appointments. Online scheduling will just reduce that workload a bit.
Online scheduling will also make your team members more efficient, especially if you invest in a system that syncs with your practice management software. They’ll have a lot less data entry to worry about, saving them time.
Choosing a system that’s right for you
Just like with any other dental product you might invest in, there are a variety of online scheduling options available; you just have to decide which one will work best for your practice.
Patients should be able to easily book appointments from your website or social media profiles. You’ll have a practice-specific URL that features information about your practice and also gives patients the ability to book appointments. And don’t worry – you won’t have to design the website or figure out scheduling functionality all on your own. The hosting company does that for you. Just be sure to keep your profile updated with the most current practice information.
Investing in a system that syncs with your practice management software makes the process pretty seamless. When patients are ready to schedule, they can see available times and choose the one that fits their schedule. Both systems stay up to date, so there’s no chance of patients selecting a time that isn’t actually available – which does occur when the systems aren’t synced. If that happens, someone from the office will have to call or email these patients and ask them to choose a different time, which is annoying for both your team members and your patients.
There are other systems that read your schedule but don’t add appointments. So every time an appointment is confirmed through the booking system, one of your team members will need to enter it into your practice management software. Other options make it possible for patients to email requests for an appointment time. If none of the suggested times work, an employee must reach out with alternatives. While it might be more convenient than making a phone call, it isn’t the most efficient system.
Grow your practice with online scheduling
Scheduling dental appointments shouldn’t be a hassle for your patients. If it is, they won’t do it. Offering online scheduling makes the process easier. More patients will schedule appointments, leading to increased productivity and revenues.
Sally McKenzie is CEO of McKenzie Management, a nationwide dental management, practice development and educational consulting firm providing knowledge, guidance and personalized solutions that have propelled thousands of general and specialty practices to realize their potential.
Interested in speaking to Sally about your practice concerns? Email her at firstname.lastname@example.org or call 1.877.777.6151.
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