Entry #24
“I’ll Associate for 3 Years and then BUY-IN!” = BAD Idea
“If you love life, don’t waste time, for time is what life is made up of.” – Bruce Lee
Listen to the Audio Version of this post below. Performed and Recorded by the TALENTED W.T. Robinson, accomplished Stage and Voice Actor who has performed major roles such as Kerchek (Disney’s Tarzan) Mr. (The Color Purple Musical)
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ACT 1:
Go ahead. Shake his hand…..
Older dentists love to pass their practices on to younger dentists….right? They love to sell their life’s work to you so that you can have an amazing and highly profitable start to your young career….right?
Just shake his firmly gripped hand and bask in that charming smile, met with that twinkle in his eye…that twinkle that somehow isn’t ready to quite stop twinkling.
“Work for me for 3 years [insert 2 years, 4 years, 10 years, doesn’t matter] and then the place is yours. I’m ready to slow down and retire,” he says.
You’re a new grad and you’re excited!
No one this wise and experienced has ever made you this type of offer before.
Oh and his practice is in your home town! Right where you wanted to live AND practice!
You always wanted to own your own practice and now you’ve got your big ‘in.’
This guy is going to help you! Yes you! And ONLY you!
Except no.
The 3 years rolls by, and Old Doc realizes that twinkle in his eye still hasn’t flickered out yet, he’s got at least another 3 years left in him!
Oh….you? Yeah, you can keep working for him for another 3 years. After all, he’s paying you 120k. You might even be making 160k by the end of the next 3 years. Be grateful! It will be your turn soon…
You silently stew in your thoughts and wonder when it will be your turn. Good thing you have the govemnment programs to ‘help you’ put off paying off your student loans (PAYE/REPAYE) – because you know the truth is with your $400,000 student debt, if you were actually paying back your debt in a timely manner at a 120k salary….well – you can’t 🙁
Year 6 rolls around. That twinkle in the Old Doc’s eye is finally starting to dim down. He’s ready to go. It’s your turn! Old Doc extends his hand back out to you like he did 6 years ago and says, “Young Doc…it’s your turn. I want you to buy my practice, the practice has grown so much – and it’s all because of the help you’ve given me these pasy years…Sale price is $900,000.”
Your firm grip on Old Doc’s hand loosens, “But old Doc, this practice would have only sold for $500,000 when I started working here. You’ve raised the sale price so much, and its from the value I’ve provided, I don’t know if I can afford to buy a practice for $900,000 right now.”
Not totally faded, there is one last twinkle in Old Doc’s eye, one last smirk, “Why don’t you take some time to think on it then :).”
2 Months Later – Old Doc calls you into his office, “Young Doc, the twinkle in my eye has finally gone out. I’m laying down the handpiece. I’ve recieved an offer for my practice for $1.2 million. This is my last week at the practice.”
You die inside….
ACT 2
Go ahead. Shake his hand…..
Older dentists love to pass their practices on to younger dentists….right? They love to sell their life’s work to you so that you can have an amazing and highly profitable start to your young career….right?
Just shake his firmly gripped hand and bask in that charming smile, met with that twinkle in his eye…that twinkle that somehow isn’t ready to quite stop twinkling.
“Work for me for 3 years [insert 2 years, 4 years, 10 years, doesn’t matter] and then the place is yours. I’m ready to slow down and retire,” he says.
You won’t make that mistake…..you won’t do this deal on a handshake. You want a contract!
“Okay Old Doc,” you say, “I’m in! I LOVE your practice, it’s PERFECT! But I need us to have a contract, a contract that says in 3 years to the date, I take over and become the 100% sole owner of the office.”
Old Doc with his classic eye twinkle, says, “You’re a smart kid! I’ll have my people make us a contract.”
“Not so fast Old Doc! If I work here for 3 years, I’m going to potentially grow this practice to be a lot more valuable. I want to purchase this practice at today’s current market value!” Your handshake grips his firmly.
“I’ve won” you think quitetly to yourself.
But then, he grips yours tighter…you see the twinkle of experience, “That sounds great! If that was possible. But that isn’t fair business to sell a future value on today’s value is it. We’d have to do something fair. Like estimate the natural growth trajectory over 3 years and agree upon that price as the sale value 3 years from now.”
You realize he is right. Only a fool, a common idiot, would agree to sell a business that has grown for the last 3 years at the valuation prior to that growth. Even to someone they like.
And you both sign the contract….
You work 3 years as the ‘Boss in Waiting…’
Old Doc pays you $130k and life is okay. You see some of your classmates already have their name on the door. You hear that some of them have alreaday paid off all of their student loans. But not you….how did they do that? Aren’t you doing the smart thing? Old Doc is helping you out. Old Doc cares about your success. Right?
You’ll be the boss ‘soon’ but you aren’t the boss now. You know it and so do the staff. We will do things Old Docs way for now. Don’t want to rock the boat so early.
As a matter of fact, 2 years and 11 months in, things haven’t changed much. You realize you still don’t really know too much how dental insurance works – ‘the girls up front handle that.’ Old Doc has run this place for 35 years – everyone knows who really calls the shots. Will these staff even stick around when Old Doc retires? Or will they retire too? Will you have to get all new staff? What happens to the good will……
Who cares right? You’re the owner in one month!
But things have changed in the past 3 years. In the past 3 years. 7 new corporate offices have opened up. 3 Years ago this seemed like a great place for a dental office and it was. The high quality private dental offices in town have also expanded and grown. Competition is fierce and the market is saturated. You assumed that with you working alongside Old Doc the value of the practice would go up. But with the change in the market, the production of the office as a whole – actually has not gone up at all….it’s remained stagnant, maybe even dipped a little.
Your logical mind tells you that if you could make the decision today – there is NO WAY you would buy this practice in today’s market. But your heart ignores it. You’ve invested so much of your time here. And besides you signed a contract. You did the ‘right thing’ right?
Your contract has locked you into the practice and eliminated your ability to evalute your purchase with real time data and metrics. Your purchase is based on data from 3 years ago.
The practice is dying… due to the changes in the market. This is just NOT the best place to start your young ownership career. The staff feel it too…and yes, they are all retiring when Old Doc retires. Sorry.
ACT 3
Your parents own the practice. They love you and want you to do well. They give the practice to you for free, or sell it to you at a below market value and allow you to run it as you see fit as they fade into retirement. Your parents know they have a good 3 to 5 years left in them – but they also know you are ready. They pass the keys to you.
You do EXCELLENT. #Win!
ACT 4
Your parents own the practice. They love you and want you to do well. They give the practice to you for free, or sell it to you at a below market value and allow you to run it as you see fit as they fade into retirement. Your parents know they have a good 3 to 5 years left in them. And you aren’t ready yet. “You know it and so do they” they tell you.
You toil away under your parents for 3 to 5…or 7…or 10 years.
You thought you were all grown up because you were a doctor. But Mom and Dad still call the shots. At Thanksgiving Dinner we still all know who the Boss is…..and it is not you. Every time you look at your parents – you know its true. You wanted to own your own practice. Now you just need to wait for permission from Mom and Dad. They will tell you when you are allowed. Go in op 3 and drill teeth now. Mom and Dad said so.
You die inside…
Act 5
Older dentists love to pass their practices on to younger dentists….right? They love to sell their life’s work to you so that you can have an amazing and highly profitable start to your young career….right?
Just shake his firmly gripped hand and bask in that charming smile, met with that twinkle in his eye…that twinkle that somehow isn’t ready to quite stop twinkling.
“Work for me for 3 years [insert 2 years, 4 years, 10 years, doesn’t matter] and then the place is yours. I’m ready to slow down and retire,” he says.
You’re a new grad and you’re excited!
No one this wise and experienced has ever made you this type of offer before.
……you pause….
“Okay Old Doc,” you squeeze his hand firmly, your eye twinkles for the first time, “If we are going to do this, of course we need to have a contract. That’s a given. But – I don’t want to wait around for 3 years. I’m ready to own and start this journey now. If you still have some good years in you as a dentist that’s wonderful! We can come up with a deal where in 6 months, I’ll own the practice. We can have you stay on as an assosciate.”
“Also,” you tell him, “I’ll need previous 3 years financial records of the practice – also 3 years of your personal tax returns.”
Old Doc…loosens his grip, “Hey slow down kid! You’re quite ambitious! I’ll get back to you on that…I’m moreso just ‘putting some feelers out there’!”
His hand lets go….you have some quick phone calls with him here and there, but you realize the deal is dead.
It was never a ‘deal’ it was a farce.
Your eye twinkles….
Kaizen,
–DeAngelo S. Webster, DDS
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