Doctor selling a practice

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UpstateNY86
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Doctor selling a practice

Post by UpstateNY86 »

My wife works in a dental office. The partners are old, and looks like they are retiring. One approached my wife and told her not to worry about a thing, any sale would involve retaining the employees. Is this the norm? I am freaked out because we just found out she is pregnant with our second child. She said the office is getting audited right now. I assume that’s to assess the value of the practice? Would appreciate any info. Thanks
mac808
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Re: Doctor selling a practice

Post by mac808 »

Unless she has something in writing, there are no guarantees when practices are sold. Besides that, what if the new owners are total jerks and it becomes a toxic work environment? Seems advisable for her to start preparing for a range of "what if" outcomes. Audited financials are part of most business sales so that is a normal process.
Last edited by mac808 on Thu May 03, 2018 7:06 pm, edited 2 times in total.
Topic Author
UpstateNY86
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Re: Doctor selling a practice

Post by UpstateNY86 »

What’s the norm?
mac808
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Re: Doctor selling a practice

Post by mac808 »

I'm more familiar with medical practices than dental practices but there are some similarities. The norm is that good employees are retained but pay and benefits are reduced to help pay off debt used to acquire the practice. That said, I've seen all kinds of outcomes and much depends on the type of purchaser (business savvy individual vs. clueless individual vs. corporate owner). Does she have a non-compete? Do patients like her/could she pull some patients with her if she went to a competing practice? All these are factors. If she doesn't have a non-compete, be prepared for the owners to ask her to sign one, and decide ahead of time what to ask for in return.
Last edited by mac808 on Thu May 03, 2018 7:12 pm, edited 1 time in total.
OnTrack2020
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Re: Doctor selling a practice

Post by OnTrack2020 »

My former dentist recently sold his practice to a new dentist. From what I've seen at my child's appointment and my appointment, it looks like all of the front office staff, hygienists, etc. were retained. From the appearance of things, everything looks like the transition went smoothly.

I'm assuming that if the office is getting audited, that yes they have to put a value on the practice (equipment) and real estate, and make sure all accounts receivables, payables, payroll, taxes, etc. are in order.
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dm200
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Re: Doctor selling a practice

Post by dm200 »

UpstateNY86 wrote: Thu May 03, 2018 6:55 pm My wife works in a dental office. The partners are old, and looks like they are retiring. One approached my wife and told her not to worry about a thing, any sale would involve retaining the employees. Is this the norm? I am freaked out because we just found out she is pregnant with our second child. She said the office is getting audited right now. I assume that’s to assess the value of the practice? Would appreciate any info. Thanks
Although it may (probably does) violate law/regulation, it is probably not unheard of for employers to let pregnant employees go if/when the employer sees a financial obligation of retaining them. I might refrain fro making a pregnancy announcement until absolutely necessary.
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UpstateNY86
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Re: Doctor selling a practice

Post by UpstateNY86 »

The Doc who is selling is a bigwig in the dentist circles so hopefully he finds a great buyer. He’s involved with the ADA and stuff like that. So you think this audit is the partners wanting the value, and not buyers? Thanks
Last edited by UpstateNY86 on Thu May 03, 2018 7:57 pm, edited 1 time in total.
OnTrack2020
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Re: Doctor selling a practice

Post by OnTrack2020 »

UpstateNY86 wrote: Thu May 03, 2018 7:37 pm The Doc who is selling a bigwig in the dentist circles so hopefully he finds a great buyer. He’s involved with the ADA and stuff like that. So you think this audit is the partners wanting the value, and not buyers? Thanks
My guess is the current dentist/s knows how much their business is worth. They know how much equipment they have, real estate, receivables, etc. However, a dentist buying the practice needs to make sure all of financials are what they say they are by going through due diligence. Is the balance sheet in order? Are the receivables accurate, etc. What physical assets am I getting? Have sales tax, payroll taxes, etc. been paid? Are there any unpaid bills, etc? I would never buy a business without having a thorough audit of the business.
staythecourse
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Re: Doctor selling a practice

Post by staythecourse »

You don't have to be a doctor or dentist to figure this on out. If you are buying the practice you are doing it as a business decision. That means the highest single cost of running a health care office is labor cost and the highest on that is salary of the dentist/ doctor. If you want to turn a higher profit right out of the gate the best way to do it is cut salary.

My guess, the will keep her if she is good with patients as they don't want to lose patients. They will cut her salary as low as they can and not lose her. That is all if they are business man. That being said folks in healthcare are not usually the best business man so take that with a grain of salt.

Have you/ wife thought about buying the practice yourself and hire some other dentist to work for your wife?

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle
toofache32
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Re: Doctor selling a practice

Post by toofache32 »

staythecourse wrote: Thu May 03, 2018 8:10 pm Have you/ wife thought about buying the practice yourself and hire some other dentist to work for your wife?

Good luck.
In most states it is illegal for a dental practice to be owned by a non-dentist. This is why corporate chains are coming under scrutiny for "hiring" dentists and creating contracts with the illusion that the dentist has ownership, when in fact, the corporate chain is actually in control.
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Re: Doctor selling a practice

Post by toofache32 »

OnTrack2020 wrote: Thu May 03, 2018 7:54 pm
UpstateNY86 wrote: Thu May 03, 2018 7:37 pm The Doc who is selling a bigwig in the dentist circles so hopefully he finds a great buyer. He’s involved with the ADA and stuff like that. So you think this audit is the partners wanting the value, and not buyers? Thanks
My guess is the current dentist/s knows how much their business is worth. They know how much equipment they have, real estate, receivables, etc. However, a dentist buying the practice needs to make sure all of financials are what they say they are by going through due diligence. Is the balance sheet in order? Are the receivables accurate, etc. What physical assets am I getting? Have sales tax, payroll taxes, etc. been paid? Are there any unpaid bills, etc? I would never buy a business without having a thorough audit of the business.
This is called a practice valuation. The selling dentists think they know what it's worth, but everyone thinks their own baby is beautiful. A willing buyer will need 3rd party verification, and usually the bank providing the loan for the buyer will want to see this due diligence as well.
toofache32
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Re: Doctor selling a practice

Post by toofache32 »

UpstateNY86 wrote: Thu May 03, 2018 7:05 pm What’s the norm?
There is no norm and it usually depends on the recommendations of the buyer/seller agents. Sometimes they are asset sales, and sometimes its a stock sale. Sometimes everyone is "fired" on Friday then "re-hired" on Monday by the new corporate entity. I do think that most dentists retain the staff for a few months to see who will work out and who will not. Usually it's the old-timers in the practice that repeatedly say "well, that's not how Dr. X used to do things" who are let go.
staythecourse
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Re: Doctor selling a practice

Post by staythecourse »

toofache32 wrote: Thu May 03, 2018 9:02 pm
staythecourse wrote: Thu May 03, 2018 8:10 pm Have you/ wife thought about buying the practice yourself and hire some other dentist to work for your wife?

Good luck.
In most states it is illegal for a dental practice to be owned by a non-dentist. This is why corporate chains are coming under scrutiny for "hiring" dentists and creating contracts with the illusion that the dentist has ownership, when in fact, the corporate chain is actually in control.
Wait I thought the WIFE was a dentist, no? Yeah if she is not a dentist that might be different. I know of the law as it pertains to doctors, but makes sense to pertain to dentist as well. It is called the Corporate law of Medicine or something like that. Does anyone know if it pertains to other healthcare fields? Dentist, chiropractors, etc...

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle
Topic Author
UpstateNY86
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Re: Doctor selling a practice

Post by UpstateNY86 »

She is not a dentist.
voodoo72
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Re: Doctor selling a practice

Post by voodoo72 »

UpstateNY86 wrote: Thu May 03, 2018 7:37 pm The Doc who is selling is a bigwig in the dentist circles so hopefully he finds a great buyer. He’s involved with the ADA and stuff like that. So you think this audit is the partners wanting the value, and not buyers? Thanks

Most likely the audit is being done by the potential buyers, it is imperative everything that was presented to the buyers is verified by going thru pt charts etc, buying a dental office involves evaulation of the "goodwill" . If the buyer is smart he will keep the existing staff as they will vouch for the new doc and pts like to see a familiar face. Lastly, make sure your wife understands the new doc is NOT the old Doc, he may things differently but its up to her to adapt to the changes, as long as its nothing weird or illegal of course. New Docs never want to hear " but this is how the old doc did it."
Cruise
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Re: Doctor selling a practice

Post by Cruise »

There is no norm regarding retaining employees. However, a wise purchaser wants to keep the status quo until they assess the landscape. It really depends on what position your wife has--is she in billing and the purchaser wants his/her spouse to perform those functions? If so, your wife is toast after the purchaser feels that they understand the billing system in use or imports their own.
staythecourse
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Re: Doctor selling a practice

Post by staythecourse »

UpstateNY86 wrote: Fri May 04, 2018 4:15 am She is not a dentist.
May bad. Totally misunderstood.

In that case, any buyer will still be looking for the lowest cost option if they are a businessman. So I would think as long as she is in line with the norm. comp. she should be fine. Either way it would be unusual to completely change all the workers as it is bad for moral AND not a good way to keep he old client base loyal.

The bigger issue I would think is not losing her job, but does the roles or responsibilities or culture change. No different then when any new company/ boss comes into the picture.

Good luck.

p.s. Might not be a bad idea to look around at other practices to see if opportunities may be better over there, i..e "when one door closes another may open" mantra.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle
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dm200
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Re: Doctor selling a practice

Post by dm200 »

I have been told that certain office staff in medical/dental practices are just as important in retaining patients as are the dentists and physicians. The more that such staff can be perceived as such, the more likely they will be retained.
KSActuary
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Re: Doctor selling a practice

Post by KSActuary »

Usually the seller may negotiate a stay clause for the other employees for a certain amount of time with similar pay and benefits. Once the time is up, anything can and will happen. This is no different than any other business where staff interact with clients.
Gabe NM
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Re: Doctor selling a practice

Post by Gabe NM »

My wife and I bought a practice 4 years ago so I have intimate knowledge of the thinking of new owner dentists. The single most important thing that is determined is if the staff is a good fit for the new owners. Typically older dentist have a different mind set than younger dentists. That equates to lots of change. Some employees are open to change, others are not. More often than not younger dentists are more open to consulting and newer systems/protocols. I have seen a lot of older practices that really don't focus on the business part. Employees of these older dentists are usually set in their ways and paid more than their actual impact to the practice, so typically there is friction in that regard.

In our experience, we kept the whole team when we bought the dental practice but everyone was on edge. As the changes started, some employees were great with the change management and others were not. Only 4 employees were kept out of the original 11 after 4 years. Those were the ones that understood our vision and their role in the new dental strategy. The employees with the sense of entitlement, low performing, no professionalism, and bad team work were the ones that quit or we fired after giving them the chance to understand where we were taking the practice.

Those 4 are still making what they made before or are making more now, because they perform and are the total package employee. Those are invaluable. The others are all new and fit the vision of the practice. We make 30% now that the older dentist, have a better team, and really enjoy going into work. The patients have increased and we are building a new building to handle the new patient load.

So really, an employee in that situation needs to evaluate the new owners and see if it is a good fit for them as well. Not every practice purchase is like ours. At the end of the day, employees leave leaders, they don't leave jobs. So if the employee is a high performer, great team player they typically don't have anything to worry about. If the employee is over paid and/or doesn't perform well it will not be a good fit. Hopefully the new owner is good leader and has the right consults helping them build a new organization.
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dm200
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Re: Doctor selling a practice

Post by dm200 »

One, not uncommon. situation I have experienced with older dentists is that they tend to not stay up with the latest equipment, techniques, etc. and the practice shrinks.

Our current dentist, though, even though he is over 65, seems to stay up to date and seems to have current equipment, etc.
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Re: Doctor selling a practice

Post by Dottie57 »

dm200 wrote: Fri May 04, 2018 12:35 pm I have been told that certain office staff in medical/dental practices are just as important in retaining patients as are the dentists and physicians. The more that such staff can be perceived as such, the more likely they will be retained.
Patients are generally eith the hygenist. More than they are with dentist. It would be stupid to let current staff go when Dentists are new.
newDDS
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Re: Doctor selling a practice

Post by newDDS »

As a dentist myself, more often than not when practices change hands the buyer tries to keep the office (if well run and turning a profit) relatively stable for at least the first year. It is key to maintain the patient base that an office has, which if a new guy comes in and cleans house the patients likely will remain loyal to the old staff and go elsewhere as well.
ks289
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Re: Doctor selling a practice

Post by ks289 »

The staff of a practice are typically a significant part of the value of a practice, and full retention is not uncommon.

The value of the practice to the buyer from an asset based approach (as opposed to a market approach) can be broken down by tangible (hard assets) and intangible assets (replacement cost for staff). Depending on the position in question, the buyer would likely calculate the replacement cost for the staff members based on pursuit costs, interview costs, training period, and other variables.

It is in the best interest of the buyer to have a turnkey operation and retain the competent staff members who are best able to keep the operations of the practice intact, so they may even be willing to pay the competent staff members slightly above their own preferred pay scale to provide for a seamless transition. On the other hand, the sale of a practice may also result in a loss of employment for those that are determined to not meet the standards of the new owners.
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