I'm often recognized at dental meetings, and in some instances doctors comment on the topics chosen for my monthly column. Most readers enjoy the rambling. Many ask where I get the ideas. It's quite simple.
I recently came across an ad for a practice transition meeting. What other business talks about transition? Where did the word transition come from? I know that there's an industry built around the "transitioning," if you will, of dentists and orthodontists selling their practices or adding another practitioner. This is not to minimize the value they add to the equation. If I'm correct, though, most businesses and enterprises talk about sales.
Could this be the problem in the dental profession—that instead of talking about building our practice or business, when it comes to the sale we talk and are conditioned to speak about "transition" instead? The pitch for the meeting, by the way, went something like this, and I've included just some of the bullet points:
- When to start preparing for a transition
How to prepare and profit from your real estate in a transition
How to get top dollar for your practice
Building additional value into your practice to increase your selling price
Preparing your staff and office for a transition
How to plan an effective associate transition
How to protect yourself from
Stark Law violations in a transition.
The standard definition of transition—the process or a period of changing from one state or condition to another—falls short of what it means for those of us in private practice. There's nothing in the dictionary definition that addresses selling a business or reaping profit from a lifetime of hard work, effort and planning.
Yet, when I talk to most practitioners, they believe their practice or business is worth some magical figure that will take them into retirement worry- and stress-free. We've all read the articles and statements that say a good number of dentists and orthodontists are working harder and longer because what they thought was a retirement plan came up short in the end.
Could it be that the way we think about our practice or business is what's holding us back? Why do we "transition" and not sell or go public or private using commonly available business principles and metrics?
This topic reminds me of a young orthodontic graduate who looked to purchase a practice I was involved with. Understand, this is not to impress or brag, but this practice was producing and collecting close to three times the national average per working doctor. The practice started with four team members and slowly grew to more than 30 and was still productive and profitable.
In fact, the practice was so productive that it enabled its selling price to be paid with interest and still provide a reasonable salary to the working orthodontists. This made it difficult for a single entity to purchase this practice under commonly accepted guidelines, much less take care of so many patients.
We consulted with attorneys and accountants and offered a chance to:
- Purchase a portion of the practice
Receive compensation proportional
to the purchase price
Review the business plan to move the needle forward
Clearly spell out the conditions for more share purchases in the future.
If you're following along, this is how one purchases stock of a company. The response from her as well as from many others was, "I want it all. I would never be a part of just a portion of a practice." (In retrospect, either we were clearly ahead of our time or too stupid to take advantage of the widely available money of investors.)
I don't know if it starts in school with the intense personal involvement with our patients, but my perception of reality is: Either you're working in a business you own or you're working in a business that you don't own. And when you wish to not work it anymore, you walk, sell or give the residual away.
I notice a lot of marketing, technique and management classes and continuing education topics are geared at beating the corporate dental providers, with strategies to personalize a practice to gain market share. It seems like the corporations are the boogeymen to everyone who hasn't been able to figure out how to put their practice up for sale and join them. What's not to like? Tons of Wall Street money being thrown around, many times by people who really don't know what makes a practice tick, grow or serve patients? Multiples are used to justify various sales price scenarios. Traditional practice metrics don't apply and we're told that the new normal is what we are witnessing.
I, for one, applaud the efforts of the investor and the seller. Having been a participant in the stock market for more than 30 years and having a father who on his deathbed said you couldn't beat it after working in it for his lifetime, I am impressed. The more you look at the situation, you see private companies forming, going public and then sometimes going private again. This happens again and again. I'm sure it won't be any different in dentistry!
The current buying and selling binge will probably stabilize soon. But for the moment, there's still a large percentage of practices poised to grow owned by only one dentist. The only thing that makes dentistry and orthodontics different from other health businesses is that there's not the kind of insurance money to fund the madness.
So back to the practice sale and purchase. I believe there is a need to adapt to the new reality of practice sale and ownership. Corporate may not be a bad word. Most of us, in fact, have formed a corporation and operate our practice within it.
Why don't we look at our practice like a potential CEO of a major corporation might look at it, and realize that we don't need to own it all to have a meaningful impact or realize a lifetime of success and financial reward? Tim Cook, Mickey Drexler, Bob Iger and others never owned their entire companies while at the helm. There were other owners involved, all reaping the benefits of the business that the CEO was leading. Many working persons could become millionaires at Microsoft, Apple and the like.
It's time for those of us who have not realized this to understand the principles of ownership, business profit and earnings per share so that large, profitable, orthodontic concerns can continue to provide sources of income, smiles and employment for generations to come. It's important to work on the business with systems, procedures and scripts, rather than in the business.
"Having it all" may not be what it's cracked up to be!