Katie Collins, a Practice Integration Advisor with Buckingham Strategic Wealth, helps dentists order their financial lives and reach financial peace of mind so they can better focus on what truly brings them joy.
We come across this topic about once a week. For instance, a client may loosely mention that he or she is thinking about bringing on an associate dentist to the practice. As advisors who work extensively with dentists, we shudder when this subject is broached in a cavalier way. Why? We have seen associate dentists work out so well for a practice. And we have seen the decision go horribly wrong. Practice owners can suffer both financially and emotionally when an associate relationship sours.
As you begin to entertain this question and gauge whether it’s the right path for you and your practice, you should think about it from two different perspectives:
- What am I trying to accomplish by hiring an associate dentist?
- Will my practice support an associate dentist?
These questions will lead you down two different roads, but both should be completely answered before you jump into bringing an associate into your practice. Not having a clear picture of what you can offer an associate and failing to confirm you have the production to support another dentist will cause confusion and frustration for both parties.
Let’s start with the first question. What are you trying to accomplish by hiring an associate? This question is important because it will identify the type of associate you’re looking for. Is there ownership potential for the associate, either as your successor or as a partner? Or are you looking for someone to help grow the practice while you maintain 100% ownership? Are you looking for a full-time or part-time associate? Clarifying the answers to these questions will help you recognize the associate that will meet your goals, and it will also help provide the associate clear expectations right from the start, alleviating future frustration for both parties. For example, if an associate has hopes of owning a practice, he or she won’t be a good fit for you if your eventual goal isn’t to transition ownership.
Unfortunately, having clear expectations from the start won’t guarantee that your first, or even second, associate will work out. But at least there are clear parameters and guidelines to determine if the relationship is working. Practice owners can go through two or three associates before finding the person that fits well with the philosophy of the practice, meshes with the staff, and is loved by patients.
The second major question addresses the financial side of this decision. The size of the practice can help to determine if you actually have enough production to support two dentists. When bringing on an associate, a practice owner’s goal isn’t generally to decrease his or her income. Indeed, the practice owner may actually want to see an increase in income from this move. This is why you need to take a hard look at your practice and establish whether you have enough dentistry to support two dentists. Specifically, you need to understand:
- How many active patients of record you have (typically these are patients that have been seen in the past 18 months)
- How many new patients you are seeing each month
- How far out doctor production is booked
- Whether there are procedures you’re not doing that an associate could pick up
- Whether you have the space to add another producer
- Whether you have staff coverage if the desire is to add hours
This is just the tip of the iceberg, but these questions will help you begin confirming if your practice is big enough, or will become big enough, to justify two dentists. It’s important to have a plan in place to help ensure the associate is productive when they join the practice.
Bringing on an associate can have such a positive impact on the practice and on you. It can help you increase your income, it gives you a built-in confidant, and it can line up your succession plan. Bringing on an associate can also be detrimental to you and your practice. It can decrease the profitability of your practice and cause you emotional stress. It’s important to walk through a thorough due diligence process and take a good look at your goals.
In our next post, my colleague, Tom Bodin, will discuss how you know when it’s time to replace your associate dentist. As always, if there are specific topics you’d like us to tackle in Finance32, please send us an email!