Tuesday, October 25, 2011

Be Prepared!

“Be Prepared” is probably the single best piece of advice I could give to practice owners seeking associates or potential buyers for their practices.

I took an informal survey of our recruiting team and compiled a list of eleven real-life situations where practice owners missed out on hiring their top candidates because they were unprepared. We also give three real-life situations where the opportunity to sell a practice was missed because the owner was not prepared. I have included with each example a suggestion for how practice owners can better prepare themselves for such situations.

Landing Your Top Associate Candidate:

Example 1: Time to Interview
Unprepared – After receiving a Dentist candidate’s CV, the Practice Owner, (and Office Manager) took weeks to contact the candidate. The candidate assumed the practice was not interested, so he interviewed and accepted another position.

Prepared – The practice owner personally called the Associate candidate the same day his information was received. They hit it off from the start. A face-to-face meeting was scheduled and the Associate candidate accepted the position in a town he originally had never considered.

Example 2: Sample Contract/Compensation
Unprepared – Practice owner did not have a sample contract when he met with the Associate candidate. He did not have a documented compensation plan either. The Dentist candidate took another less attractive position because she had something in writing.

Prepared – Practice owner had a sample contract and compensation plan ready to give “the right” Associate candidate. He even prepared a one page document demonstrating his commitment to documenting a buy-in and transition plan after a one year trial period. The Dentist candidate accepted his offer on their second face-to-face meeting, before the other practice had prepared a contract.

Example 3: No Timeline
Unprepared – The Practice Owner did not have a firm timeline in mind of when an Associate Dentist candidate could start (part-time or full-time). The Associate candidate accepted another less attractive position that was available immediately.

Prepared – The Practice Owner recognized he could not provide a full schedule immediately but knew the position could grow full-time in six months. Rather than being non-committal, he wrote out a conservative plan demonstrating how the Associate candidate could start two days a week in a month, three days a week in four months and four days a week in six months. The Associate candidate accepted this offer and slowly transitioned out of his current position located one hour away.

Example 4: Wasn’t willing to wait for the best Associate candidate
Unprepared – The Practice Owner was not prepared to spend 3-5 months recruiting and on-boarding a new associate. The best candidates already have jobs. Most have to give 30 to 90 days notice. The practice owner “settled” for an Associate candidate who was available immediately, but had a string of one year Associate positions. In two months, the owner was disappointed with the new Associate and starts the process over again.

Prepared – The Practice Owner was willing to speak with and interview Associate candidates who couldn’t join the practice for 90 to 180 days. Although it was a short-term inconvenience the owner connected with a Dentist who was practicing out of state and wanted to move back to the area to be close to his wife’s family. It took five months to get the new associate but he became part of the community and three years later he bought out the owner.

Example 5: Interview Preparation
Unprepared – The Practice Owner did not prepare for the interview. He came up with questions on the spot and did not ask important questions about clinical skills or clinical philosophy, commitment to buy-in, schedule or availability which caused problems later. He hired an Associate who only stayed a year because she did not agree with some of his clinical philosophies.

Prepared – The Practice Owner took an hour and wrote out all of her questions for a potential Associate candidate. She eliminated three promising prospects because her clinical philosophy and timeline to partnership differed from theirs. After meeting with five different candidates she hired an Associate with a compatible personality, clinical philosophy and long-term goals.

Example 6: Answers to basic questions
Unprepared – The Practice Owner did not prepare to answer important questions that would be asked by the Dentist Candidate such as: Compensation, Hours, Potential for Buy-in, How new patients would be assigned, Schedules, Would more staff be hired, What materials are used, Plans to upgrade equipment… The Associate candidate chose another opportunity because “the practice seemed to have its act together”.

Prepared – The Practice owner took an hour to brain storm all of the questions he would ask if he were a candidate. He spoke with a recruiter to find out what questions she hears frequently. The Associate candidate chose this practice because the owner “really seemed to be on the ball”.

Example 7: Below Market Compensation
Unprepared – The Practice Owner did not research current Associate compensation plans. During an interview with a promising Associate candidate the owner “threw out a figure” that was 30% to 50% less than the candidate could make somewhere else. The call ended shortly thereafter and the Practice Owner was frustrated the candidate didn’t return his calls.

Prepared – The Practice Owner researched current Associate compensation by reading Dental Economics and speaking with an ETS Recruiter. He quickly realized that although he is busy, he was not at the point he could afford a new Associate. For the next six months he worked on improving his recall system, which increased revenue allowing him to start looking.

Example 8: Involving the Staff
Unprepared – The Practice Owner did not prepare his staff that an Associate candidate was coming to interview. The Associate candidate showed up for the interview but sensed the staff was shocked and surprised that the Practice Owner was looking. The Associate Candidate chose another position due to the uncomfortable office environment.

Prepared – The Practice Owner discussed his plans to seek a new Associate Dentist long before he started interviewing. He asked for the staff’s input as to what he should look for in a new Associate and got them excited about what this could mean for them.

Example 9: Budgeting
Unprepared – The Practice Owner did not prepare a budget to see if he could afford a new Associate. The Owner interviewed an Associate candidate. Both parties were very interested. Then the owner realized he needed to add staff, add equipment, add operatories, add patients and transfer some of his patients to the new Associate. After two or three months of putting off the Associate candidate, the candidate found another opportunity.

Prepared – The Practice Owner worked with his CPA to see what he had to do to afford a new Associate. He realized he had to add two operatories and increase his new patient numbers before he could take the leap. It took two years but he found a great Associate who was impressed by the updated office and new marketing plan which added 30 new patients a month.

Example 10: Space Constraints
Unprepared – The Practice Owner did not think about space constraints. Although the practice had healthy cash-flow it only had one additional operatory. The practice continued to operate 8-5 Monday through Friday. Over the course of the two years, the practice added then lost three Associates who couldn’t produce as much as they could elsewhere using just one operatory. The practice lost time and money because of the turnover.

Prepared – The Practice Owner turned the space constraint into a selling feature. He prepared his staff to move to a six day, 11 hour daily schedule. The selling point for the new associate was that he could work from two full operatories and get four days off a week.

Example 11: Sell the Community
Unprepared – The Practice Owner was not prepared to sell the community. He owned a highly successful, long-established practice in a community with a struggling local economy. The public school system was rated poorly. The owner interviewed multiple Associate candidates who seemed very interested in the practice, yet they all turned him down at the last minute.

Prepared – The Practice Owner spent time with each Associate candidate to give them a complete overview of the practice and the long-term opportunity. He also took them around to community to show them the nicer neighborhoods. He also talked with them about the variety of private schools in the community that had outstanding ratings.

Landing Your Top Buyer Candidate:

Example 1: Get an Appraisal
Unprepared – The Practice Owner did not have an independent appraisal of the practice prepared before she started talking to interested parties. She thought she was saving money. Since most buyers need to obtain financing, banks and other lending institutions won’t loan money without an appraisal.

Prepared – The Practice Owner got an independent appraisal of her practice done prior to speaking to any interested parties. She recognized any buyer would need to get their own appraisal, but the appraisal gave both her and prospective buyers a realistic expectation of the selling price. She quickly sold her practice to another Dentist interested in moving to her community.

Example 2: Prepare Historical Numbers and Metrics
Unprepared – The Practice Owner had not prepared the financial information necessary for a potential buyer to make an informed decision.
• Monthly, Weekly, Daily production numbers.
• Mix of procedures. Mix of Fee for Service, Insurance, or Medicaid.
• Hygiene production. Procedures referred. Growth opportunities.
• Number of active patients.
• Number of new patients.
All the owner knew was that he wanted to sell the practice for $500,000. He spoke with a number of potentially interested parties, but could not move ahead because they didn’t have any specific information they could use to make an informed decision.

Prepared – The Practice Owner tracked all of this information monthly. He prepared reports summarizing last year’s production information. A potential buyer realized the Practice Owner was referring out all of his endodontic and many of his pediatric cases. Since the potential buyer realized he could immediately increase production by $150,000 a year, he purchased the practice at the asking price.

Example 3: Don’t Quit Before You Sell
Unprepared – The Practice Owner wanted to retire two years ago, but his retirement funds shrank dramatically. The owner came to work begrudgingly and let the practice atrophy. There were a number of potential buyers. When they looked at the practice they saw it was disorganized and dated. Production had declined and key staff members had left, sensing they did not have a future there. The practice eventually sold but for $350,000 less than it would have sold for three years ago.

Prepared – The Practice Owner recognized he would not be able to retire for three years. Rather than cutting back, he realized that this was the most important three years of his career. He didn’t make major investments in equipment, but he repainted and updated the waiting area and operatories. He landscaped the outside. In addition he worked to grow his practice recognizing that its sale price was determined by the last three years production. He worked with a consultant and gave the staff incentives to increase production. After three years he sold the practice for $350,000 more than it was worth three years previously.

In short, there has never been a better time to become a Dentist!

More than a third of the Dentists in the country are within ten years of retirement. As the stock market slowly continues to grind forward, there are many practice owners, partners, and later-career Associates starting to seriously consider retirement. Practice Management companies are continuing to expand and are offering tremendous career options to early-career Dentists with limited risk.

For a practice owner who may be interested in expanding and adding an Associate or transitioning out of practice, it’s important understand that there are literally thousands of practices vying for the attention of the best Dentist candidates (Associate, Partner, or Buyer). The competition is intense!

With ten years of experience behind us, ETS Dental has seen hundreds of practice owners shocked and disappointed when their top candidates choose another opportunity. In most cases, the practice owners who hire the best Associate candidates or have the most successful practice transitions have one thing in common: they are prepared.

Written by Mark Kennedy, Owner/Managing Director of Executive Talent Search (ETS Dental, ETS Vision, ETS Tech-Ops). To find out more, call ETS Dental at (540) 563-1688 or visit us online at www.etsdental.com.