A Simple Guide to Purchasing a New Practice.
Buying a dental practice is one of the biggest purchases that a dentist will ever make. A dental practice has the potential to deliver the kind of career and service that the dentist envisions. Many difficulties in transitioning dental practice ownership from one dentist to another can be eased if the incoming dentist knows exactly what he or she is buying before signing on the dotted line.
When a dentist purchases a practice, he or she buys more than just a building and a team. A dental practice is a complex culture, so it is critical to understand all the intricacies of that culture. Occasionally a dentist buys a great dental practice and the transition seems easy. However, even in such ideal circumstances, dentists have to learn how to maintain and increase the value of that practice.
FOUR QUICK RECOMMENDATIONS
I like to think of it in terms of being a captain of a ship. Even if a captain takes over a well-run ship, he or she needs to know how to inspect and mend the sails, how to navigate in both storms and calm waters, and have a destination in mind so that the ship keeps sailing on a steady course. Sometimes a captain can catch a favorable wind that takes the ship where it needs to go, and other times the seas can be a little choppy and force anyone off course.
1. When buying a practice, the first thing I recommend is that you do your research. Don’t make an impulsive purchase based on something superfluous—such as the location being near your house or your favorite shops, or because it looks fancy and might attract “posh” or high net worth patients. Understand the management style, the accounting procedures (see number 3), the finances (see number 4), and the overall state of the practice—both the clinical and the business sides.
2. The second thing I recommend is that every dentist act as his or her own consultant. Spend as much time as possible at the practice. Learn whether they have an effective and efficient recall system, hygiene program, and accelerated hygiene strategy.
Ask the following questions: How are patients treated in recall? How often are they called/contacted? How do they make appointments? What’s the median age of the patients? It’s important to look at systems and how those systems lead to the financial health of the practice.
3. The third thing I recommend is that every dentist understand the accounting procedures. Make sure that you know the major expenses, minor expenses, discretionary expenses, and owner’s compensation expenses.
Ask how funds are allocated and whether they are in compliance with industry standards or not There are standards that all dentists have to abide by. Dr. Jim Downs, with The Dr. Dick Barnes Group (DDBG), teaches a course called “Know Your Numbers,” which helps dentists forecast what production should be for the forthcoming year.
4. The fourth thing I recommend is that every dentist look at the numbers. Review accounts receivable, accounts payable, cash flow, who owes and who doesn’t owe, and what collections are on a regular basis. If collections are not at 98 or 100 percent, there may be a problem. When collections are below 98 percent, it indicates that a fair amount of outstanding monies need to be collected. It’s good to know who owes the practice money and how the practice handles collections.
Smart people surround themselves with smart people. Get advice from accountants, financial advisors, and attorneys. Listen to what they tell you and consider their business analysis of the practice. In addition, consider finding a coach and/or a mentor. Develop relationships with colleagues and other professionals (suppliers, industry influencers, etc.) who are also trying to navigate the same waters.
Example 1: I once helped a dental practice through a new-owner transition and we had a curveball thrown at us. As patients came in for their exams, they told the dentist that the previous doctor had diagnosed treatment and that the work had yet to be done. Plus, the patients claimed they had already paid for the treatments in full. We found no records that payment had been received in advance for treatments. The predicament put the dentist in a “lose-lose” situation—either he had to accept the patients at their word and do their dental work, or risk the likelihood of losing the patients.
Example 2: Sometimes dentists buy a culture that doesn’t function. I remember a practice where the previous dentist raised team members’ wages across the board before he left. However, the practice wasn’t doing well financially, so the new dentist inherited a cash-flow problem.
Eventually, the new dentist had to let several team members go. The team members told the new dentist that patients would not come in if they were not there, which of course was not true. All dentists should do research into accounting and payroll practices to avoid being potentially blindsided.
BE A LEADER
Sometimes the decision to buy a dental practice seems like the easy part of a dental practice transition. After the financial transaction has closed, Monday morning arrives and you are the dentist in charge! Now what do you do? Here are some ways to create and maintain an effective culture:
Opportunities are everywhere. All patients are new patients to you, which is a great business proposition because according to Dr. Dick Barnes, the value of a new patient is somewhere between $3,000 and $5,000.
When you buy a practice from another dentist, there is often a lot of undone dentistry on patients. The previous doctor may not have had the latest technology, or perhaps he or she was retiring and didn’t present as much treatment in the months leading up to retirement. Or, the former dentist may have given up on presenting comprehensive dentistry to patients because they usually rejected the treatments. With fresh ideas and a new approach, you may find numerous production opportunities.
Take your time. As the saying goes, “Sometimes you have to slow down to speed up.” If new dentists are too enthusiastic and try to move too quickly, some patients may be resistant. The first year of a new practice should be focused on getting to know patients and establishing relationships of trust.
Some patients will be ready for comprehensive dentistry immediately, but others may be used to a system of supervised neglect. Certain patients are going to resist treatment until you have become “their” dentist, so give them time.
Look at areas for growth. A new dental practice is a great opportunity to analyze growth potential. Look at your skill sets and levels of competency and identify new technologies and procedures that you could add to the practice. Some examples include orthodontic services, implant placements, and sleep dentistry solutions. Learn new skills and be prepared for modifications to make your ship strong and expansive as you sail along. No company ever “shrank” its way to success.
Work together. Dr. Barnes recommends having the previous dentist introduce the new dentist and help with the transition for a brief period of time. Sometimes this isn’t possible. Regardless, it’s important for the new dentist to have open communication with all patients.
Take an interest in your patients. To maintain a successful new practice, greet every patient like they are a new patient. Have an “eye-to-eye and knee-to-knee” conversation and spend some time getting to know them. It doesn’t take long—just a couple of minutes.
In that conversation, praise the previous dentist. Never say, “I just bought this practice from doctor so and so.” Instead, say, “Dr. Smith was very happy to pass on the practice to me.” Patients don’t want to feel like they were sold to somebody.
Keep in mind that six months or a year ago, patients came to “Dr. Smith” and everything was fine. With your training and a new set of eyes, you may find several areas of concern. Start building relationships and having honest conversations with patients to build an environment of trust.
However, keep your expectations realistic. Patients will not sign up for everything that you recommend all at once. Tell patients that the former doctor took notes on their dental history, and that he or she was happy to pass the dental practice on because of your commitment to maintaining the patient’s good oral health, or your plans to restore the patient to good oral health.
Help them help you. In an established practice, the front office and clinical teams already have relationships with patients. It is important for them to support the new dentist as an authority and expert. This can be accomplished through leadership and mentoring. The team should be guided so that they understand your vision and goals for the practice.
Use diplomatic language. Taking over a new practice is an opportunity to make your patients your biggest fans. Once you show patients that you have a compulsive interest in them and their good oral health, they will support you. They will open up to you and soon you will become “their” dentist.
When transitioning a dental practice from one that has been more drill-and-fill oriented to one that offers comprehensive dentistry, it is critical not to disparage the previous dentist. Phrase suggestions positively without questioning the credibility of your former colleague.
Say, “Dr. Smith was concerned about retiring because he loves his patients and the patients loved him. He was glad to know that I’m bringing new technology and new procedures to his patients, so he was happy to pass the practice along to me. Dr. Smith kept detailed notes of all the work he has done, so I have a good idea of where you are.”
Such statements can lead to a discussion about comprehensive dentistry. Tell the patient that you will do a comprehensive exam, but remember—the patients aren’t “yours” yet. It takes time and patience to build that trust.
Confused patients don’t buy. Presenting a lot of dentistry and high treatment costs to your new patients could confuse and alarm them. Confused patients do not accept treatment. Instead of presenting comprehensive treatment all at once, take your time.
For example, say, “The previous doctor mentioned that you are wearing down your teeth. How long have you been noticing that this is happening? At your next appointment, six months from now, we would like to check this again to see how quickly it is progressing.”
Use conditional words so that when the patient returns in six months, he or she is prepared for more comprehensive treatment. Maybe the patient was completely unaware of the problem, but will be motivated to make a change after hearing the diagnosis. Say, “I’m going to keep an eye on certain things that are happening with your teeth. It is important for me to see you in six months because of such areas of concern.”
BELIEVE IN YOURSELF
Dental practice transitions are a process, not a destination. It typically takes about a year and a half for patients and team members to adjust to a new dentist, depending on how many patients are in the practice. Most practices need some time to put new procedures in place and to see improvements.
Purchasing a practice is a big undertaking, but also a rewarding voyage. During the journey you will encounter all kinds of waters, weather, obstacles, and opportunities. Trust your instincts and stay the course! Keep an eye toward the horizon, but adapt to whatever may come. Allow for ingenuity, creative thinking, and risks. Many resources are available to you and your crew. Following these suggestions can help any new dentist weather the storms of transition and begin smooth sailing with a new practice.