With the largest generation in U.S. history approaching retirement there will be a surplus of dental practices for sale. Corporate dentistry has been approaching Baby Boomers for quite some time now offering to acquire their practice and assist their transition into retirement. This type of growth strategy is not just for reserved for corporate models. I expect the next 30 years to create some tremendous growth opportunities for Gen Xers and Millennials who are interested in growing their practices.
Acquisitions and mergers present a compelling opportunity that should be considered as part of your overall marketing strategy. They are traditionally the fastest and least risky way to grow your current practice. Before getting too far down that road, here are the three most important questions you need to ask:
1. Can You Reproduce the Culture?
Most of the success of a practice purchase or acquisition comes down to leadership. Do you have the ability to reproduce what you’ve already built? Whether you’re adding a location, bringing on associates or just acquiring patient records, here are some questions to ask:
Can you reproduce the same successful culture at another location?
Can you duplicate the same clinical values within other doctors?
Can you maintain the same level of patient care with increased patient flow?
In my experience, people become dentists for different reasons. Some pursue dentistry because they want to be a great clinician and serve mankind. Some fall in love with the science and want to be educators. Some are third generation dentists and consider it a “calling.” Others want to grow a large business and compete with corporate chains. All are right, but one is going to naturally be better at reproducing a successful model.
2. Can You Attract Talent?
Growth is always about expansion — adding more patients, adding more services, adding more clinicians or adding more locations. The more you expand the more you realize there is one factor that is more influential than any other. It’s not marketing or continuing education or technology or even capital. It’s talent.
Your practice’s growth will be disproportionately influenced by the talent you hire. Are you trying to go from a start up to $1M in 3 years? It will require talent. Are you trying to add associates to your current location to max out fixed expenses? The solution is talent. Are you wanting to add a second or third location to create regional market share? The answer is talent.
Can you attract talented team members?
Can you create an environment where talented people are fulfilled?
Are you the type of leader that talented people respect and follow?
What resources do you have to source talent?
Answering this last question is easier when you live near a dental school. Hundreds of students every year graduate from The Ohio State University and many of them would love to stay in central Ohio. Creating a successful, growing practice in that area would almost ensure you’d have a non-stop flow of eager talent.
3. Can You Create a Compelling Compensation Package?
With the rising costs of education and the immense investment around starting a practice, lots of dental students don’t see many options outside of corporate-style dentistry. Those who have married and begun to have children understand the pressure for stability and a dependable paycheck.
The good news is that it’s an owner’s market right now. There are thousands of associates graduating each year looking for a place to go. The other good news is they’d rather work for private practice than a corporate DSO.
The most important question here is whether you can create a compensation model that works to meet your goals.
Do you want associates to stay long term or serve for a set period of time?
Are you offering ownership? Profit sharing?
What does the timeline look like?
Will their salary be set, based off production or a hybrid of both?
Are there bonuses?
There are no right or wrong answers to these questions. Your goals will determine what your compensation model looks like.
There are practices that hire new associates every three years. They are up front about the fact that there is no ownership. They pursue the best talent, pay them a set salary for three years and then help them find another practice to buy. It’s a win-win for both.
There are practices that want associates to stay long term, but will never offer ownership. They’ve developed a compensation package that includes a very compelling base salary as well as bonuses and profit sharing. They want their associates to feel and act like owners. It’s a win-win for both.
There are practices who want to find the right person and start the ownership track quickly. This compensation package depends heavily on production and profits. It’s based around the fact the two owners together pull more weight than they could on their own. It’s a win-win for both.
More than anything, associates want clarity. You can no longer make an offer to just come “work.” You must define your expectations, timelines and compensation structure in order for it to be a good solution for everyone involved.
My prediction is that buying practices will become very popular in the near future as private, regional models race to keep up with national, corporate chains. While it seems like a good solution and low risk way to grow, don’t overstep these three important questions.