The solution to this problem is the same solution to another bigger issue in dentistry:“ How to build a lucrative practice in this market?”
The answer to both lies in practice mergers. The continued growth of a solo practice is becoming more difficult every year. With increased competition, stable or declining population growth, the influx of capitation programs, insurance clinics, advertising retail centers and an unpredictable economy, a general practitioner must be prepared to consider ways of expanding their patient base. Many practitioners make the mistake of joining various low fee programs, spending heavily on marketing, or reducing fees and giving away services to add more patients to their practice. They soon discover that these fee conscious patients will leave the practice as soon as someone else offers them a lower fee or a better deal.
There are numerous reasons for mergers, both financial and non-financial. A practice merger allows you the opportunity to invest in a business that you already know about( as opposed to some limited partnership or other investment scheme that you know absolutely nothing about).
A practice merger immediately increases your market share by instantly providing more fee-for-service patients, more referral sources, more growth and more profits. A practice merger eliminates competitors.
Acquiring the practice obviously removes the seller as a competitor, but acquiring the practice also prevents a more aggressive competitor from acquiring the practice. The transaction is generally fully leveraged( meaning that the purchase price and closing costs are typically financed). You invest ZERO personal capital to reap significant financial benefit.
In many merger transactions, the seller will remain as your associate. They provide passive income, coverage for vacations, CE and sickness. But if the seller does not stay, an associate can be added. If structured properly, your associate could be the“ heir apparent” to acquire your practice when you are ready to sell, or an equity partner as you build a more competitive multi-doctor practice model. There is only one reason not to do a merger … you have to pay more taxes!
In years past, our biggest competitor was each other, and that is why our delivery model is so fragmented. Today the challenge is competing with“ big box” dentistry, which is consolidating dental delivery. We need to learn by example and use practice mergers as the tool to maintain autonomy and keep our practices competitive.
About Dr. Moffa Upon graduation from the University of Pittsburgh School of Dental Medicine in 1980, I cold started Willowbrook Dental Associates in my hometown of Greensburg, Pa. I transitioned my practice in 2002, and continued practicing there as an associate three days a week. Over the past 15 years, we have done 5 mergers in our practice alone.
Through my association in 1995 with PARAGON Dental Practice Transitions, I have worked with a myriad of doctors in transition planning, mergers, stock sales, progressive ownership and estate sales. I bring a very unique and practical approach to the issues that face both buyers and sellers“ having been there, done that.”
I am a lifelong member of the American Dental Association, Pennsylvania Dental Association and the Dental Society of Western Pennsylvania, and am also a member of the Academy of General Dentistry.
JANUARY / FEBRUARY 2018 | PENNSYLVANIA DENTAL JOURNAL 25