A couple of issues ago, I mentioned some personal experiences about the need for financial advisers, a good practice location and, of course, practice consultants. The need for these services was the result of personal practice success, family demands and the desire to plan for the “future.”
Next, I’d like to highlight some appropriate topics that will at one time or another grab your attention—matters related to real estate, associates and, lastly, transition (sale or retirement). With the exception of real estate, which may or may not affect your particular situation, it’s essential to plan from the beginning for the later situations.
Owning real estate can be one of the most expensive and life-changing decisions you may make during your practice career. The decision may propel you forward financially, or it can be like a noose around your neck, strangling you and preventing you and your practice from growing to your full potential.
Many who have “been there, done that” will agree that the value and incorporation of real estate within your practice should be viewed separately from the business or patient care portion. Past thinking included the idea that you should build the practice, move the practice into a building that you own or control, have your practice rent and pay for the building, then sell the practice to a new practitioner who’ll be forced into paying you rent to work in the building.
This concept may still work for the few select areas of the country where a free-standing building in a select location is desirable, but if you look to be where your market is for the future, it may not be practical to build an office there—or, worse yet, if you build now, the future may leave you and your building behind. Demographics and practices change over the years.
When the decision to build your office is usually made, the business is at the peak, and you feel that things will always move up from your current situation. Fact is, within a few years of the decision to build and relocate, new “hot” areas appear, new grads move into town and the area that you thought was great for the future may no longer be.
“Location, location, location” is always in play—it’s just that the location for a profitable orthodontic practice may not be the same as the location for desirable commercial real estate. Moving is tough when you’re established, and sometimes you must relegate to your bad decision—or, worse yet, open a satellite to capture the new market or stave off competition.
Many orthodontists I’ve met over the years have made good amounts of money in real estate. Most, however, have had this real estate outside of their practices. This way, the real estate and the practice are more liquid and available to a wider range of buyers, not to mention easy to dispose of in the case of life-changing events such as a divorce, a split of partnership or health concerns. Generally, it makes life simpler.
I’m sure there are many success stories out there that do not echo my feelings: Feel free to leave a comment under this column online at orthotown.com/magazine.
Many years before we sold our practice in Tucson, my business partner and I would receive dozens of résumés from prospective associates. We’d marvel at their accomplishments, education and qualifications, the hallmarks of doctors who’d earned top-of-the-class status. Highlighted were all the impressive badges of honor and awards earned while they clawed their way to the top.
After looking at the bios of the individuals looking to work for us, sometimes my partner and I felt like we were underqualified for our own practice! Problem was, nowhere in any of the résumés was a statement: “I will work to further the practice utilizing my orthodontic knowledge and licensure and will make suggestions on how we can build a business together.”
I’ve said this to my staff a number of times, and to this day I believe it is still true, but nothing points out the shortcomings of your practice or business plan like adding a second location or adding an associate. I reflect upon Dr. Ron Redmonds’ classic lecture at the AAO annual session in Denver many years ago where—and I summarize here—he said that unless you have a clear path or plan for your associate, an unneeded associate can cost you and your business in the area of a quarter-million dollars in profit.
To effectively utilize an associate, one needs a business plan to incorporate the associate into the practice. Cost involved needs to be thoroughly analyzed. Otherwise, if one only needs some time off, hiring an additional assistant, hygienist or other licensed professional may suit the bill. Training should not be a part of the job and if it is, a cost to the associate should be figured into the compensation package. With debt burdens and higher education speaking for themselves, the need to explain orthodontics to a new associate should not need to be done.
The plan for the business should!
The best decision, in my humble opinion, is to increase the business through expanded hours or locations, employing a system agreed to by the prospective associate so that continuity, simplicity and uniformity of the practice message can be maintained. Unless this rather simple method of adding another orthodontist to the mix is followed and adopted, the associateship is probably doomed to failure. In other words, there is rarely a time for two highly compensated individuals to be in the building at the same time!
Here’s a topic that’s pushed to the back burner for most of a practice’s life. If you’re like the vast majority of practitioners, you work and work and work, waiting for the light to go on telling you that you’re busy enough, your practice can handle another provider or you’re forced into transition due to some health or life event. “Plan early” should be the rule of the day and without this, transition can be frustrating and unprofitable.
Once again, this major practice and life event can reveal weak links in your practice. A transition or sale should be the culmination of years of work getting your business or practice ready for the next person or corporation. A valuation should be made, buyers should be entertained, and the closing should occur. Long, drawn-out transitions have proved to be costly, frustrating and often just delay the inevitable, which sometimes is failure.
So plan for the next generation in the present and make the transition a success, rather than a necessity. Systems are the key to not only achieving a good price but also keeping the patients happy after the sale. There could be nothing worse than having a practice sale go sour with dozens of phone calls, arbitration meetings or legal bills to smooth things out.
In summary, with the exception of venturing into the real estate arena, the key to success in practice is orderly systems and procedures, with emphasis on building the business for growth and sale.