There are many ways to look at associates. In my experience, I have found that most owners fail to carefully measure both the pros and the cons of the issue. I have observed many successful associateships as well as some failed ones. From these accounts, I have compiled some of my knowledge to share with readers and encourage you to carefully consider both sides of the equation.
Utilizing the services of an associate can relieve you of extra patient load, which could free up your time for longer vacations, hobbies, family, etc. Associates often allow the practice to offer extended hours (evenings and weekends) which may attract new patients.
Some associates may be specialists qualified to perform treatments that you have been referring out in the past. Because patients prefer to be treated in familiar surroundings, this could help to increase gross revenue.
Assuming that you have extra or sufficient patient load, an associate will generate additional gross income for the practice and some economies of scale (reduced costs) can be realized with supplies, lab, wages, etc.
I have been in many offices where the facility could be better utilized if there were more dentists working more hours. If your existing facility and equipment is not being occupied as much as you wish, or if your present staff can manage more patient flow, an associate may improve upon your efficiencies.
Additional dentists in your practice also provide for clinical support and companionship, and allow for the sharing of ideas for complicated cases. If the relationship is successful, your associate may be a future purchaser for your practice when the time is right for you to relinquish ownership.
Managing associates will add extra management responsibilities to your workload. You will be required to process payments and attend meetings to discuss office policies and marketing ideas. The new associate will require training and supervision until familiar with your procedures and clinical philosophy. Some offices have staff capable of performing this very important step in the integration while others rely solely upon the owner to do it. And you need to be aware of the hidden costs (or those you may not think of right away) of integrating a new dentist into your practice. Among these costs are new signs for your practice, printing of new letterhead, training from outside consultants if used, and legal fees for preparation of the agreement.
Most owners experience an immediate reduction in their own income during the initial phase-in of the associate, as they often give up some patients to get the associate started.
You may be required to perform extra patient management time (non-revenue) to introduce the new dentist, encourage patients to see him/her and to relieve them of any concerns about seeing someone new. Patients may also require extra attention from your staff as well (more non-revenue time) to address their concerns or complaints if there are any personality conflicts.
I have spoken with many staff members who have confided in me that they often have trouble adapting to new dentists in the practice and, on occasion, are confused about whose instructions they should follow, especially when the owner is away.
In the event you wish to sell your practice and the associate is not the purchaser, which is very common, prospective buyers may be intimidated by his or her presence in your practice. Purchasers worry about incompatibility and they reflect this concern by offering a purchase price that is often less than fair market value. Professional appraisers must factor this into the calculation of goodwill; if not, a purchaser may offer a lower price in most cases. As well, the purchaser’s accountant and lawyer will inform him or her of any problematic deals they are familiar with and suggest caution about entering into a purchase where associate dentists may leave and solicit patients away after the owner has closed the sale. So, while an associate may help increase total practice gross and increase the fair market value, you may still find that, in the end, you will sell for the same price as you would without an associate.
Another thing to keep in mind is that while associates usually increase total practice gross, they do not necessarily increase net income. I performed an analysis for several practices and found that most owners net only five to seven per cent of the associate’s gross billing on an annual basis. They then question the logic of taking all the risks associated with associates to earn so little profit. When you factor in the integration costs, it can take several years to recover your investment and, by then, your associate may leave.
As a broker of practices, hundreds of young associates have come to my office over the years and they confess their true intentions with regard to the practice they currently work in. Alternatively, when appraising practices, owners often confide in me their concerns with current associates. This information is rarely mentioned openly but it provides me with rare insight. Many dentists are afraid to share their opinions with their colleagues directly. Advisors, like myself, are considered a neutral party by many and we hear the truth. However, dentists who practice as an associate and dentists who hire associates should enter into frank discussions about their future plans and be honest with each other. This may save the trouble of painful departures between colleagues.
I believe that associates are a valuable addition to dental practices. Be certain to select the right candidate to work with and be aware of the pitfalls if the relationship within the practice fails.
Ontario Dentist – December 1999