Acquiring another practice and merging it with yours can have the effect of 10 years of growth if it is handled well. It involves finding a practice in your general vicinity and merging the patient base with yours. This can either be a marvelous "shot in the arm" or a disaster. The quality of the result will be in direct proportion to the amount of planning that is done. Dentists who have their values clarified, have their philosophy in place, have an excellent team and have patients involved in making informed choices seem to do very well with this process.
Practices struggling for clarity of purpose, trying to survive, or trying to reverse negative trends predictably will fare poorly in a growth by acquisition strategy because they create greater chaos and make poor first impressions.
The first step in any transition is to evaluate your own practice. This begins with your personal vision, along with your personal and professional goals. Transition planning becomes much easier once your vision and goals are in place. If a new idea is not congruent with your vision and goals, it will not be successful.
How would the acquisition of a practice impact your practice? To help answer this question, bring your team into the planning process from the beginning. They will have some of the answers and their involvement from the outset is essential. Create a template with the following considerations: As you investigate practice opportunities, measure them against your template to see if they fit.
- Where is this practice located? Example: If your practice is in an area wherethe population has a higher income, you would not want to acquire a practice that serves patients from a low income bracket.
- How far is it from your office? The risk increases dramatically when the distance of the practice is five miles or more from your location.
- What is the practice philosophy? Example: If you have a fee-for-service practice, you would not want to consider a practice that has capitation.
- What type of community reputation does the seller have? Do your homework here. The answers will give clues as to what the team and patients expect from the dentist.
- What type of personality does he/she have?
- Is the clinical quality of the practitioner comparable with yours?
- What does the seller plan to do post-sale? You are not doing this with the intention of having the seller become your associate. You want them to introduce, endorse and depart. However, it may be wise to bring the seller to your suite for a few months if that would help patient retention.
- How many active patients are there in the practice? Do a chart audit. An "active patient" is any person who has come to the office for care in the past 18 months.
- How many patients would predictably by retained? All the steps mentioned here will have an impact on patient retention.
- How do the fees of the practice compare with yours? If there is a huge variance, this can pose a challenge in patient retention. It highlights the basic philosophical differences between your practice and the acquired practice.
- What is the accounts receivable management policy and how does it compare with yours? Remember, the patients have been trained in this area as well. A major philosophical shift here will severely harm patient retention.
- What type of diagnostic process is in place in the practice? How effective is their charting? Do they do comprehensive treatment planning? How do they handle the communication process? Is any portion of it delegated to team members?
- Who are the team members? How long have they been with the practice? Will they be interested in transferring with the practice? What "turf" issues will this raise with your current team? Will there be some who would not fit in with your practice philosophy?
- How will you handle this sudden growth in your current facility? Calculate the impact and take the required grooming steps prior to the acquisition.
If a practice situation does not fit your template, you MUST walk away. Do not be tempted to make it work for you because it works for the seller. When you find a practice that meets the criteria in your template, the next step is to examine the financial aspects of the opportunity. How will merging this practice impact your five-year financial plan? Areas of consideration:
- What is the purchase price? In the case of an acquisition, you would most often be considering patient records only and not equipment. The industry standard for patient records is between $50 and $200 per patient record for those who actually transfer to your office.
- Does the owner expect cash or is he/she willing to finance? If owner-financed, what is the amount of the down payment required? Will you need other forms of financing? If so, what type of collateral will be required?
- What additional overhead expenses will you incur? How will all of this impact your practice budget?
- Will you do your own negotiating or will you bring in a facilitator for this part of the process? You will need legal documentation but want to have all the issues negotiated prior to the involvement of legal counsel.
If you get past this step and all systems are go, the next step is the most crucial part of the process. HOW ARE YOU GOING TO MERGE THE CULTURE? It is extremely important to have a written plan for the total process, as it will be initially disruptive for all involved. A letter of introduction and endorsement from the seller is extremely important. The letter must contain the following:
- The reason the owner is leaving (retirement, illness, relocation, etc.) and a statement that he/she will no longer be providing dental services to patients of record.
- A biographical sketch of the new dentist that includes education, years of practice in the community, family information, etc.
- An expression of thanks and appreciation from the departing dentist to the patients.
- An announcement that patient records will be transferred to the new dentist. They are told they will be contacted as usual for their recare appointments. The letter should include the names of team members that will be transferring to the new location.
- Conclude with a strong endorsement of the new dentist and request that the patients support him/her as their new dental care provider.
Planning must focus on the effect the influx of transferring patients will have on your existing practice. You only have one opportunity to make a quality first impression. You want to make certain the experience provided these patients by you and your team will be an exceptional one. Additional time in the doctor's schedule should be allowed so that the new relationships can be firmly established. You will want to control the number of recare patients that are seen each month so treatment needs and wants can be provided with the shortest possible waiting time. You may wish to save some elective procedure diagnoses until the second recall appointment so that your treatment schedule does not get out of control.
Roles must be clarified for each member fo the newly formed team. It will be complex in cases where the seller might work from your office for a time. He/she might also be available to personally introduce you to patients as they come in for care. We recommend keeping this phase of the relationship as short as possible.
A few weeks following the mailing of the first letter, you may want to mail an announcement of an open house that will introduce the new patients to your office and honor the departing dentist. Even is only a few people attend, you accomplish your objective with this mailing.
Growing by acquisition can be most rewarding when you have done your planning and involved your team in the process. We have clients who have recouped their financial investment within the first year and have increased the practice production very significantly. This process is not the the faint-hearted, but it can be most rewarding and enjoyable. As always, planning is the key. Happy hunting!