Avoiding the Pitfalls of Dental Partnerships- Mechanics of the Second Transition

The most important reason that partnerships fail – or become severely compromised – is a lack of preparation for the future. We have all heard the adage: “If you fail to plan, then you plan to fail.” A strategy that says “we’ll cross that bridge when we come to it” is simply not acceptable.

The typical dental partnership is generationally based where an older doctor sells a 50% interest to a younger doctor. Not establishing the value of the second half of the transition and the timing of when that transition will occur is potentially a prescription for disaster. In my opinion, the value of the second half should be determined by the same formula that was used to set the value for the initial buy-in. It is also my opinion that there should be a requirement – not a choice – not the right of first refusal – for the younger doctor to purchase the second half.

This requirement is important from the perspective of both the buyer and the seller. If there is no requirement for the younger partner to purchase the second half, the senior partner might have difficulty finding a buyer. Perhaps someone would want to buy, but they don’t want to be partners with the younger doc. They might be interested in purchasing the entire practice. So the senior doctor in that situation would be at a disadvantage. Conversely, the younger doctor would be at a disadvantage if the senior doctor decides to sell to Osama Bin Laden’s brother because he can’t find any other buyer. Now the younger doctor might have to be partners with someone he doesn’t like or respect. So when I am involved in forming the initial partnership, I insist that the younger doctor be REQUIRED to buy the second half.

The younger doctor will then be in total control of his/her destiny. Probably bring in an associate – not a partner – and usually make a lot more money. Future partnership can then become an option if the dynamics are positive.