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4 Questions To Ask Before Hiring an Associate by Jason Smith

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Categories: Practice Management, HR and Accounting; Practice Transitions;
4 Questions to Ask Before Hiring an Associate 

by Jason Smith

Overall employment of dentists is projected to grow 6% from 2021 to 2031,1 largely because of the number of dentists who will transfer to different occupations or retire in the coming years. With an influx of dental practice owners aiming for retirement over the next decade, dentists must prepare an exit plan properly.

Hiring an associate dentist for your practice can be difficult; in fact, just last year, 32.2% of dentists claimed hiring a dentist for their practice was “extremely challenging.”2 Once hired, many of these new associates never become a partner. The primary reason behind this is that many practices fail to devise and implement a good transition strategy. Not enough preparation is accomplished beforehand to ensure the hiring and full transition process go smoothly from the beginning.

At Four Quadrants, we suggest starting this process 10 years before you want to retire, which helps leave all options on the table and allows you to find the right successor. Here are the top four questions to ask yourself before hiring a dental associate.


1. “Can I afford it?”

Bringing on an associate doesn’t automatically improve practice finances or bring in a large influx of patients. If a dental practice doesn’t currently have the funds or the patients to support the hire, the timing isn’t right.

At Four Quadrants, we typically don’t recommend bringing on an associate until collections hit at least $1.8 million, income is around $450,000 and overhead is below 65%. If an owner can’t afford it and brings in an associate anyway, they could negatively affect their own income as a practice owner.

For example, both parties can become frustrated two or three years later in this arrangement and decide to part ways, ultimately wasting valuable transition time.

Another metric to consider is spatial logistics: practice square footage, the number of operatories, current scheduling dynamics and how booked the practice is. If you aren’t booked out beyond one to two weeks, or if your practice isn’t conducive to having two dentists in the practice at the same time, it will be an uphill battle bringing someone in—even if you can afford it.


2. “How will the associate buy in?”

Before adding an associate, triggers should be in place that activate the associate’s transition to a partner, such as the length of time working in the practice, a production goal or a combination of the two.

Ideally, the associate should have worked in the practice for at least 12 to 18 months before transitioning into a partner. It’s recommended you establish an incentive for the associate to buy in, which can come in the form of a significant raise, benefits like workplace flexibility, or bonuses. Setting these incentives will help you understand what will motivate them to become a partner.

The 12-to-18-month time frame gives both sides time to settle into their roles and move past the initial excitement that comes from the joint endeavor. Throughout this time frame, there will be many opportunities to work through any issues that may pop up, such as staffing changes, patient challenges, treatment philosophy differences or more CE opportunities.

When a time frame is established before the transition, it allows both owner and partner to create a harmonious practice, work through any challenges that arise and see the long-term benefits for each side.


3. “How does the associate’s pay change after buy-in?"

Mapping out the associate’s salary increase ahead of buy-in is crucial for success. The increase must be enough to cover the loan payment and more because if not, why should they buy in in the first place?

A big key here is to create an equitable partnership; with the massive six-figure debt today’s dental school graduates incur, a practice owner will not be able to compete with corporate dentistry if they are not offering a stable salary from the start.


4. “How will my stake be treated?”

It is absolutely key to make sure the partnership is equitable— no 51/49 splits. The associate must be treated as an executive from day one.

The end game is for the dental owner to retire and turn over full control to the new partner, so transparency is key here.

By developing ground rules, such as at what price the practice will be sold and at what time, the transition will be set up for success. If done right, all of this planning will help practice staff, patients and revenue make it through the transition cleanly. If not, you’re likely to end up looking for a new associate.


Conclusion

Some say that negotiation brings out the worst in people. But if you’ve saved and planned properly, you’ll be in a much better negotiating position when the time comes to sell your practice. Treat the practice transition as icing on the cake to supplement what you’ve saved and planned for, not the big payday at the end that makes or breaks your retirement.

If you are not on pace to hit your retirement now, it is time to consult your team of advisors. Implementing these ideas in your practice transition makes it so your planning will be well ahead of the game—meaning you can transition on your terms. Keep in mind: This is a transition, not merely a transaction. You’ve worked too hard building your practice to hurry into a poorly designed transition.

References
1. Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook Handbook, Dentists, at bls.gov/ooh/healthcare/dentists.htm.
2. ADA Health Policy Institute, COVID-19 Economic Impact on Dental Practices: Week of May 2021, at ADA.org/HPI.

Author Bio
Author Jason Smith is the founder and CEO of Four Quadrants Advisory, a business consulting, financial planning, accounting and fee-only investment advisory firm that works exclusively with the dental community. Smith created Four Quadrants after dental clients from a previous financial planning career asked him to start a firm that specializes in the financial struggles of dentists; he now focuses on developing both vision and strategy for clients and for Four Quadrants.
Linkedin: @FourQuadrantsAdvisory
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