Partners in Practice
More young dentists than ever before are interested in practice ownership. It’s not a move that needs to be made alone, and many professionals are forming partnerships to purchase a practice. Those who are considering joint ownership will know of the immense advantages that come with it, but there are a few things to get right to fully reap the benefits.
It begins with your partner
Each successful partnership is unique and by no means easy to establish, but they all have one essential common foundation. Without it, practice management and success become difficult. That is the right partner.
Dentists will have to balance their regular day-to-day relationships in the practice alongside the wider considerations for administrative and financial management. Collaborating with someone you trust and know well is crucial, in addition to someone with similar goals as otherwise a perfectly amicable partnership could soon become acrimonious if visions start to diverge. Do you both strive to use the most sustainable equipment on the market, or place patient care experiences above anything else? Without similar work ethics and priorities, you could be trying to find compromises that actually damage the partnership, and the practice at large.
Alongside agreeing upon what you want to get out of the partnership, you should consider how long you intend it to last. Young dentists that are looking to purchase a practice they can build a career around probably aren’t best suited to collaborate with someone approaching retirement age. The advantages of learning from their experience could be outweighed by the prospect that investment could be cut sooner than would be ideal.
Optimising finances as a partnership
Purchasing as a partnership is advantageous when considering deposits and investing in care, purely due to the larger portion of capital available. This could be helpful when approaching lenders, who will see a partnership as a potentially more reliable investment for themselves.
It is obviously important to run the practice in a financially efficient manner, so thought must be given to how finances are managed between the partners. No two practices are run identically, but a traditional partnership would share all income, expenses and profits equally between members. Expenses would generally include rent, equipment and staff wages. Sometimes in this structure dentists share profits first by paying themselves as associates and then dividing the balance of remaining profits – provided there are some!
Another model is an Expense Sharing Agreement (ESA). A partner’s share of the profits would be based on their earnings in their own surgery, which creates a financial incentive for each individual. The practice benefits from even investment in all areas of the business, but dentists have freedoms on how they run their own clinical work. The drive to work hard is felt in their own pockets.
Partners could alternatively enter a Profit Sharing Agreement, where the division of the net income could be split in any conceivable way. Partners could earn their share based on responsibilities. For example, if one partner worked full time in the surgery and took on administrative duties, and another worked three days a week, with limited pre-agreed roles, the two could come to an arrangement on dividing the profits in a way that reflects the amount of work they take on. An ESA avoids this difficult conversation on who works hardest in surgery, which could be a potential sticking point in a partnership.
The other option is for those who feel that the share of profits is best distributed based on the initial investments made. If one partner pays more than another, they could get a proportionately generous fraction of the profits in a Capital Contribution model.
Putting contracts in writing
It is pivotal to have agreements put into writing from the very start of the partnership and practice ownership processes. Contracts help to establish your clear visions for the practice and its ownership structure. You should always enlist the help of a professional, preferably with experience in dental litigation, to aid in the creation of these documents.
One vital document could be a Partnership Agreement. It provides information on the roles of each partner, as well as the processes that should be undertaken if involving a new professional, or having a partner leave the practice. It should also include non-competition rules for outgoing partners. These guidelines provide stability to all involved and are helpful should a professional relationship be put under pressure. For example, any partner wishing to depart through retirement, health concerns or to explore other business ventures, couldn’t immediately dissolve the agreement, leaving the other dentist in turmoil. Instead, their share would be appropriately valued for a potential new partner to take over.
Purchasing a practice and establishing the grounds for a business partnership are difficult steps to get right, but the expert team at Dental Elite can offer years of experience to help guide and advise you through the process. Dental Elite has delivered superior business services in a personal way for dentists traversing some of the most important decisions in their lives, including steps towards establishing a successful practice.
In the right partnership, owning a practice can allow dentists the freedoms to provide the best possible care to patients. To be successful, it’s essential to feel supported and stable, working alongside a professional who shares common goals.