dental associateships: what to consider before you accept

Associateship Due DiligenceBy Amber Banks, Consultant

Why Consider an Associateship?• Not ready for practice ownership• Waiting for the right opportunity• Time to improve skills/hand speed• No initial financial risk• Immediate income• Share patient coverage• Learn from the senior dentist

- How to be a clinician and a business owner

Where to Start: Identify your needs• Map out a long-term plan

- Where do you want to live?- Do you want to be an owner?- What kind of patients do you want to see?- What type of dentistry do you want to do?

• Select your “team”- Accountant - Other- Attorney

Your Approach to Due Diligence• Weighing available opportunities with the level

of due diligence you would perform• Fewer opportunities = Less Leverage• Requesting items to perform your due diligence: when is the right time?

Due Diligence: Identify your long-term objective

• What do you want to accomplish out of your Associateship?

• How long do you want to be an Associate?

• What type of compensation do you need to make based on your personal budget? How long will you be okay with making that salary?

Due Diligence: Know the Senior Dentist• Why do they want to bring in an Associate?• When do they plan on retiring?• Are they a dentist you foresee yourself working with long-term?• Do you feel you will be able to learn from him/her?• What is his/her style of patient care and treatment?• Do all of these items match up with you and how you foresee yourself in practice?

Due Diligence: Know the practice

• How does the current team feel about an Associate coming in?• Has the practice had other Associates in the past?

- If yes, what happened?

Understanding the Entire Contract • Contract should be reviewed and negotiated prior to the Associate starting at the practice

• There is no such thing as a “standard” contract- “Entire Agreement”

• Start Date

Due Diligence: The Contract

Employee vs. Independent Contractor- Who determines what you are?- Tax implications – W2 vs. 1099- Legal implications – Employment vs. I/C Contract- Benefits- Expenses to be covered- Paid time off

Due Diligence: The Contract

• How will new patients and recall patients be allocated?• Compensation

- How frequently will you be paid?- Daily base pay- Bonus incentives- % of production vs. collections- Lab Fees

Formula without Lab FeesAssociate Production: $40,000Associate Collections: $38,000Associate Lab Fees: - 0 -Net Collections: $38,000Collection %: 30%Monthly Salary: $11,400

Associate Compensation Formulas

Formula with Lab Fees #1

Associate Production: $40,000Associate Collections: $38,000Associate Lab Fees: (2,600)Net Collections: $35,400Collection %: 35%Monthly Salary: $12,390

Formula with Lab Fees #2Associate Production: $40,000Associate Collections: $38,000Collection %: 35%Net Collections: $13,300Associate Lab Fees: (2,600)Monthly Salary: $10,700

Understand Your Contract

Non-competition/Non-solicitation/Non-disclosure

Duties and Extent of Services

Representations

Understand Your Contract

Liability insurance and indemnification

Allowance for uniforms

Expected work hours

Exclusivity- Are you able to work at another practice while Associating with the current practice?

Understand Your Contract

Expenses to be covered (uniforms, dues, malpractice, licenses, continuing education, etc.)

Term and Termination of Contract

Right-of-first-refusal to purchase the practice

Understand Your Contract: Buy-In Opportunity

Is there a buy-in provision in the contract? Do you want the opportunity to buy-in?

Understand the expectations of both parties- What % will you be buying in? - When will you have the opportunity to

buy-in?

Understand Your Contract: Buy-In Opportunity

Will you be financially ready to buy-in down the road?

Will the senior dentist provide seller financing?

Are you emotionally ready to be a practice owner?

Buy-In Opportunity: Additional Items to Consider

Do you foresee yourself making mutual decisions with this doctor?

Similar treatment philosophies?

How long before you own 100%?

Staff open to the idea of working with a multi-doctor practice?

Understanding the Buy-In ProcessVERY DETAILED!Process to expect...

Value of practiceCash flow projectionsFuture compensation structure – senior Dr. and new Dr.Assignment of patientsHow will profit be split?Discretionary costs – how will this be handled?Structure of buy-in (asset vs. stock sale)

Questions?

Contact: Amber Banks, Consultant amber@verosdental.com

317-452-4580 ext. 762

For more tips visit our blog at:www.verosdental.com/news-blog/