The old saying “breaking up is hard to do” can most certainly apply to dental practices, too. When co-owners of a practice decide to go their separate ways, lots can be done ahead of time to make the transition easier for all those involved. We break down how to prepare for the breakup of a dental practice partnership well before all the cards are on the table.
Why do dental practice partnerships break up?
A dental practice partnership is like a marriage in that it’s not going to work out 100% of the time. Just like any breakup, there are countless reasons that could lead to it ultimately eding. Whether it’s for positive reasons, say a financial gain or retirement, or negative, like divorce or disability to financial loss or a partner losing their license, a smooth separation is possible.
Make sure it’s in writing
Just like it may seem silly to talk about a prenuptial agreement when getting married, the start of any dental practice partnership should begin with a written agreement to prepare for the chance a separation occurs eventually. For example, both partners might not be able to exit the practice at the same time. Although this may seem like an unnecessary step and cost upfront, it will save you a lot of time and money down the road if you have to hire an attorney in the event of a contentious split. A professional partnership agreement will include income draw, vacation and sick days, benefits, delegation of roles, separation of duties and property terms.
Knowing your worth
Having a partnership agreement will also make a practice valuation go much more smoothly when the time comes so the partners can focus on what they want the end goal of the separation to be rather than the small details. With all the proper documentation in place, it can be fully determined which doctor is doing what and the percentage of what they are doing – depending on the terms they have in place – in order to figure out what the practice is worth. After figuring out the purchase price, the partners can determine to whom they want to sell the practice, whether that means taking on an associate (which unfortunately only has about a 20% success rate), buying out the partnership or selling to a dental service organization (DSO). The key is to figure out the best scenario when one dentist is looking to retire and the other wants to stay on to practice but doesn’t want the managerial responsibilities that come along with owning a business.
Here’s what to expect
It’s only natural both partners want to see the dental practice continue to succeed, no matter which route they choose, and will work together toward an amicable breakup; however, in the event of financial loss, both partners should prepare for the worst. If one partner is getting a divorce, there’s a death or personal problem, such as drug use, gambling problems or even embezzlement, it’s best to enlist the help of an impartial dental practice broker that will establish the worth of the business, including goodwill.
Bottom line
Although separations sometimes do become contentious, with so many transition options available, partners should be able to settle separations amicably and easily. Contact the experts at Professional Transition Strategies for more ways to set your dental practice up for success from the beginning.