Getting Started: What To Expect
By Dr. Kevin J. Klatte
As a new dentist getting started, you will be making many early and important decisions that will affect the advancement of your entire professional career. Getting started on the right foot should therefore be one of the highest priorities as graduation from dental school, or a graduate program, nears.
Whether you specialized or not, one basic decision you will need to make is whether to start a new office from scratch, work as an employee for another dentist in an associateship, or buy into an existing practice, either partially or fully. If the small sampling of those in my graduating class has any statistical validity, then you will most likely choose some combination of these three options.
Starting a new office from scratch is the least likely of the three options, because of the student loan debt that the typical dental graduate has to bear, and because of the limited prospects of a substantial cash flow adequate enough to provide a modest income, let alone service the combined debt load of student loans and the business loans of the office equipment, etc.
Therefore, a new dentist is most likely to either buy into an existing practice or begin as an associate with no ownership stake. Even in the case of the new dentist acquiring an equity position in an existing practice, this individual will often find that a part-time associate position elsewhere provides an important source of additional revenue. Why would this situation be the case? Two scenarios are most common when a new dentist is establishing equity in an existing practice: either the senior doctor is not ready to fully retire and still wants to keep working "part-time" (which really translates into the senior doctor wanting to keep the high-dollar producing procedures to themselves and only will have enough work for the new dentist to amount to a part-time position probably taking some of the lower paying insurance plans), or the senior dentist really is ready to retire, which almost invariably means the practice has slowed down to the point that a new dentist would only have enough of a work load to fill a part-time schedule anyhow.
Therefore, almost all new dentists will work for someone else, in some fashion and in some degree of part-time or full-time measure. But this scenario could easily be a win-win, if both sides manage it properly.
For the new dentist, you should look at the associate position as a continuation of your dental education. Not only will you earn money during this time, but if you chose a successful practice (usually a practice that is busy enough to need another dentist is a successful practice), then you'll learn the systems, procedures and management "know-how" to run your own successful practice someday.
Let's be honest, what we learn in dental school (i.e. taking half of an afternoon session to prep and place an MOD restoration) only prepares us so much for the "real world." Having a senior doctor around to learn more from will benefit you and the senior doctor will most likely benefit financially from your labor and efforts.
I would hope that if the relationship is a good one, an eventual equity position for the new dentist should be a goal for both sides. Sometimes however, the senior doctor will make it quite clear that no near-term or even long-term possibility of an equity share is available. Such honesty should be applauded as false expectations, and most importantly, false starts in the new dentist's career can be devastating.
If the senior doctor is interested in selling a portion or an eventual total buyout of his or her practice but neither side desires to consummate the deal right away without a trial period first, then I would strongly recommend that both parties have the practice's value determined at the time that you, the new dentist, starts. This timing creates a win-win for both parties: the new dentist is now motivated to work hard to build the practice as much as possible from the very first day, knowing that he or she is not making it more expensive to buy-in later, and the senior doctor now has a motivated employee to produce more for the practice.
The ADA provides an excellent resource, a booklet titled "Valuing a Practice: A Guide for Dentists," to help familiarize one with the many factors involved in determining a fair price for an existing practice.
I recommend that you use the services of a consultant specializing in such practice valuations, before drafting any agreements. Besides the non-compete and compensation agreements that should be drafted with the start of any associateship, a practice valuation agreement is a crucial first step for those situations where an equity transfer for the new dentist is a possibility.
Good luck in getting the best start for your own personal, unique career!