Years ago, you decided it was time to “take in an associate”. You interviewed a few candidates and before long you met the ideal associate for your practice. Of course, you didn’t know whether or not “things would work out”, so you both decided to work together for a while without a written contract. There is no sense in spending money on a contract until you knew for sure that this was the right candidate. After all, you are both professionals, what is there to worry about?
Everyone liked the ‘young’ dentist and it seemed like a perfect fit. The associate liked the associate arrangement, because he did not have to go into debt to get a practice started (like you did). There was no risk; if the practice failed to make money then he did not lose money (like you could). No risk and no responsibility made it a good deal for the associate.
You owned the practice, you were the boss (but you also had all the responsibility of ownership). But, you were “in control” so you did not complain. Then one day you had a discussion with your associate about having an agreement drawn up that would clarify your working relationship. The associate was not enthusiastic about that idea. He felt that everyone was comfortable, so why bother? Contracts are expensive, so why not save the money and just work together without one? You were both reasonably happy with a verbal commitment and were making money, so you forgot about a written contract.
Before you knew it, you began to refer to your associate as your partner, even though you “owned” the practice. What you did not realise, however, is that you may have owned the equipment and perhaps the office building, but your associate was gaining ownership over your practice.
Like most service driven businesses, the value of a practice is in the relationship between the dentist and the patients, not the equipment and facility. When patients see two dentists working together, they perceive the new dentist as a “partner”. The associate is usually younger than the practice owner, so patients think this new doctor will ultimately take over their treatment when the current owner retires. This perception is probably promoted by the associate and the staff as a means of preparing the patients for your eventual retirement.
So, when it is finally time to talk to the associate about buying your practice, it is very likely to be a rude awakening. You now discover that the associate knows that he does not have to buy your practice because of the following reasons:
1. The associate already has a relationship with all his patients and does not have to buy that part of the practice (you can’t sell the associate his own patient goodwill).
2. If you should quit practicing, many of your patients will transfer to the associate if and when he opens a new office nearby. The associate will send a notice to all the patients of the practice – not just his own (don’t be naive – the associate already has a list of all the patients by now).
3. It’s very likely that no one else will buy your practice because they will fear that the associate will move down the street and take most of the patients with him (and probably most of the staff). After all he, is the smiling happy face of the practice who everyone one loves (which is no surprise seeing as he is in a ‘no risk, no responsibility’ situation.
4. The associate will be in a prime position to “negotiate” a great deal. He will feel that he can set the practice price and terms (which will most likely be much less than the value you had in mind) and you will have no choice.
Now, you must understand the associate’s perspective. The associate will feel that you have made a fortune all these years off of his labour. All the associate’s friends, family and advisers have told him that he should leave you and open a new office, and that you are being selfish and greedy for selling dental practice to associate instead of just handing the practice over to him.
Okay, so it was not a problem as long as you did not have to address buying the practice. As soon as you did, it became a problem. Remember, it’s not a problem, until it becomes a problem, and now you have a real problem.