McLerran & Associates Dental Practice Brokers Texas Austin Houston

The Art of Negotiation

By Patrick Johnston of McLerran & Associates

As dental practice brokers and transition consultants, we are regularly involved in the negotiation of letters of intent, asset purchase contracts, restrictive covenants, partnership buy-in agreements, associate employment agreements, lease agreements, space sharing agreements, listing agreements, commission agreements, real estate purchase contracts – a fairly long list! Some negotiations go very smoothly, both parties are satisfied, and the particular deal is completed in a timely manner. Other negotiations can be bumpy, with emotions running high, and seemingly no end in sight to the deal being completed.

In advising dentists on how to buy a dental practice, and on how to sell a dental practice, we communicate to them that there are negotiating strategies and behaviors that can be learned and applied to produce positive, long-term results for both parties.

In his classic book on the subject, “The Art of Negotiation”, originally published in 1962, Gordon Wade Rule offers a definition of negotiation:

“Negotiation is a peaceable procedure for reconciling, and/or compromising known differences. It is the antithesis of force and violence. A negotiation will be fruitful or completely meaningless, depending upon the existence of two essential elements . . . good faith and flexibility. Both must be present on both sides of the table – one without the other on either side is a fatal defect.”

Rule’s target audience were diplomats and government procurement personnel, so some of his recommended do’s and don’ts probably do not relate to how to buy a dental practice (like the “do” of sending the other party your documents in both English and their own language). However, some of his recommendations that we feel apply include:

  • Do analyze and understand the type of person with whom you are dealing.
  • Do try to have a sense of humor, but not overly so.
  • Do have a positive attitude that issues can be resolved and worked out between the parties.
  • Do negotiate your issues in a way that any concession you make on your flexible or “give” points will bring you closer to agreement on your less flexible or “must points”
  • Do not make concessions without getting something you want in return.
  • Do not try to drive too hard of a bargain.
  • Do not try to be overly friendly or popular in the negotiating process, but try to foster genuine respect and cordial relations with the other party.
  • Do not treat or talk with the other party as though you are superior to them.

Utilizing proven, successful negotiating skills is especially important in dental practice transitions and sales because of the personal goodwill involved in the transaction. In these situations, the practitioner selling a dental practice usually has built very solid relationships with the stakeholders in the practice – the patients, the staff, the local community, vendors, etc. The buyer who does not convey a respect for those relationships is less likely to have the seller feel that he or she should give their best efforts in transitioning that goodwill after closing. Conversely, the seller that does not show respect for the young, relatively inexperienced, buyer, may be less likely to win concessions from that buyer.

There are many other resources available to improve one’s negotiating skills while learning how to buy a dental practice. By studying and applying the information from those resources, you will be prepared to have a less stressful and, ultimately successful, dental practice transition.


NAPB | National Association of Practice BrokersDENTAL PRACTICE BROKERS

Dental Practice Transitions Selling a Dental Practice
Dental Practice Valuation Dental Practices For Sale

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CTC Associates Dental Practice Brokers CO ID NV UT WY

Can You Afford An Associate?

By Larry Chatterley and Randon Jenson, CTC Associates

The goal of any associate-type arrangement is to create and maintain a mutually rewarding personal and professional relationship between two or more doctors. Unfortunately, many associate arrangements do not address one of the most fundamental elements for a successful relationship, that is, does the dental practice have the capacity to sustain both doctors?

With that in mind, here are some key areas related to the dental practice financial capacity that need to be addressed before entering into an associate arrangement. The key questions are as follows:

  1. How far is the current practice booked out? If the current practice is booked out only a week or two and has holes in the operative schedule, then the practice will likely struggle to fill in the gaps for a new associate. If the practice is seeing 15-20 new patients per month, which usually is just enough to keep one doctor busy, then it’s going to be difficult to keep an associate busy enough for him or her to want to stick around.
  2. Does the dental practice have the sustaining power to subsidize the new doctor to up to $8,000 per month for the first six to twelve months while building the practice?
    If the answer is no, then the practice may not be in the position to bring on another doctor.
  3. Does the dental practice have a lot of debt and/or is the overhead exceeding 65%? Practice debt can polarize the relationship by making it difficult for both parties to meet their financial obligations on a timely basis.
  4. What form of marketing is in place to help increase patient flow? Unless this is addressed and in place before the associate starts, there might be difficulties having a successful associateship.

Most associates are paid a percentage of their respective gross production. In most markets and situations, this percentage for general practitioners is about thirty percent. (Specialty practices/specialist associates are often paid a higher percentage.) It is not uncommon, however, to see a flat wage or salary paid as well, or a variation of the two. In other words, the associate is paid a flat rate per day (i.e. $500) or 30% percentage of production, whichever is higher. This method is particularly effective in situations where it may take the associate several months to “ramp up.”

However, the host doctor should expect to see a consequential decline in income over the short term as he/she subsidizes the associate’s income via the draw. This will last until the associate’s percentage wage is sufficient enough to cover the minimum, at which point the host should expect to begin earning an override on the associate’s production. The question here is if the dental practice is in a financial position to subsidize the associate wages over a 6 to 12 month period. If not, then maybe step back and reassess the situation.

Years ago this was not the case. One could just add another doctor and more new patients would flow through the door. This has not been the case in the more popular and competitive areas of the country for more than a decade.

If you or your practice are experiencing greater patient flow than you can comfortably handle, then you might be good candidate to hire another pair of committed hands to handle the load. If not, and you still want to hire an associate, you must assess the dental practice transition potential and create an effective game plan to increase patients or reduce overhead.


NAPB | National Association of Practice BrokersDENTAL PRACTICE BROKERS

Dental Practice Transitions Selling a Dental Practice
Dental Practice Valuation Dental Practices For Sale

> MORE