Page 22 - GP FALL 2010

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THE PRACTICE GIVE-AWAY!

By Berdj Feredjian, DDS, FAGD and Katherine Feredjian

Unfortunately, the following scenario off that would have been created by your preparing the patients for your eventual
plays out year after year throughout the decrease in clinical time. retirement.
entire dental community. It goes like this:
Enjoying more free time and seeing the Eventually you are sincerely considering
Years ago, you decided it was time to bring practice continue to grow, you were even retirement and the time finally comes to
an associate into your practice. You inter- more convinced that the associate was the talk seriously to the associate about pur-
viewed candidates until you met the perfect addition to the practice. You were chasing your practice. You reveal to the
“ideal” associate for your practice. Of very pleased with his attitude, his work associate what you think a fair price and
course, you didn’t know whether or not habits, his desire to learn, his overall treat- terms should be. At this point in the rela-
“things would work out”, so you both ment of the patients and his great relation- tionship you have a very rude awakening.
decided it would be best to work together ship with the staff and the patients. You
for a while without a formal contract. The became increasingly sure that the associate The associate tells you that he may be
cost of a contract seemed unnecessary at was the right buyer for your practice. In interested in buying your practice, but only
this point and anyway, you are both pro- fact, it was even more than that. You were on his terms and at his price. He goes on to
fessionals, what is there to worry about? out-and-out proud of your ability to select explain that he really would only be buy-
such a great “heir apparent”. ing your practice out of “the goodness of
Everyone really liked this young doctor and his heart” anyway since he does not have
bringing in the new associate immediately For whatever reason (typically because of to buy your practice because of the follow-
served to be a perfect boost to your practice. informal past chats with your associate), one ing reasons:
The associate was quite comfortable with day you decided that the timing was right to
the working arrangement. After all, he did have a discussion with your associate about He already has a relationship with all his
not have to go into debt to get a practice having a formal agreement drawn up that patients and does not have to buy that part
started (like you once did). If the practice would clarify your working relationship. of the practice (you can’t sell the associate
failed to make money, he did not lose any of However, you were surprised to discover his own patient goodwill). These patients
his personal funds (like you could). No risk, that the associate was not enthusiastic about don’t really know you and will follow the
no pressure and no practice management the idea. He told you he felt that everything associate to a new office.
responsibility made this arrangement a per- was running smoothly and he loved it there,
fect situation for the associate. And since so why bother with an expensive contract to He knows that if you should quit practic-
you still owned your practice and you were say what they both knew was destined to ing, many of your patients will transfer to
still “in control”, you were comfortable with happen anyway? He reassured you by the associate if he opens a new office near-
the arrangement as well. telling you that the two of you were on the by. He can simply send a notice to all the
exact same page about him buying the prac- patients of the practice, not just his own
Things could not have been better. You tice when you were ready to sell. You were (don’t be naive - the associate already has
began to take a little more time off without reasonably happy with this verbal commit- a list of all the patients by now).
losing money because of the profits you ment and since everything was running He realizes that it is very unlikely that any-
were making off of the associate’s produc- smoothly, you soon forgot about a written one else will buy your practice because
tion. Your associate was getting busier and contract. After all, why rock the boat? Your they will fear that the associate will move
the practice was steadily growing. New clinical time was down and your income down the street and take most of the
patient flow was increasing. The associate was up; you still “owned” the practice and patients with him (and probably most of
was attracting patients from his generation you were “in control”. the staff as well). The fact is your practice
so younger patients were beginning to has very little, if any value, to anyone
come back into your practice. Your exist- What you did not realize, however, is that other than the associate.
ing patients really liked the associate a lot you may have still own the equipment and
and, for the most part, did not seem to perhaps the building, but your associate He either knows or at least has a good idea
mind that you were not in the practice as was gaining ownership over your practice! that the staff will follow him. They need
much as you used to be. It didn’t bother job security. They know you would like to
you when you realized that you and your The value of a practice is in the relation- retire. They also know that if the associate
staff were referring to your associate as ship between the doctor and the patients, leaves, many patients will also leave.
your partner, even though he really was not not the equipment and facility. When Either your retirement would force them to
a partner and you still “owned” the prac- patients see two doctors working together, seek employment elsewhere. A severe loss
tice and were “in control”. they generally perceive the new doctor as of patients would also suggest layoffs. The
a “partner.” The associate is usually future is uncertain. If the associate leaves,
As more time went by and the associate’s younger than the practice owner is, so they know they would have long-term job
speed improved, you began to take even patients think this new doctor will ulti- security and a constant paycheck.
more time off. You took up golf and also mately take over their treatment when the
began to hunt and fish again. Appearing to current owner retires. This perception is He realizes he is a prime position to “nego-
have unending energy, your associate easi- probably even promoted by the associate tiate” a great deal for himself. He will feel
ly picked up the potential production drop- and perhaps even the staff as a means of that he can set the practice price and terms
continued on page 24
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