PMA Practice Transitions Logo

What are the considerations to think about when hiring a dental associate?

Dental Associate | PMA Practice Transitions

In this day and age, more dental practice owners are thinking about hiring an associate to join their practice as they transition out of ownership.  An associate may help the dental practice increase the revenues and allow the senior dentist to take more time off. However, before such an endeavor can be undertaken, the senior dentist should realize that hiring an associate and then having them purchase the practice is more complex than just selling the practice. Typically, there is more stress, important details overlooked and the senior dentist may not find the right associate quickly. Detailed planning is necessary before bringing on an associate to one day buy the practice.

Before starting the process of taking on an associate and planning a transition, a practice owner needs to decide what they are trying to accomplish. Does the practice owner want to take more time off? Are they dealing with a short or possibly a long-term health concern, need help with the workload, or is the objective to grow the practice? 

Depending on the objective, the dental practice’s financials should be evaluated to see if there is enough dentistry to support an associate and their compensation.  Some practice owners hire an associate and expect the associate to grow a new practice within their practice, then expect the appraisal to include that growth.  This strategy has failed many times over the years. In order for this type of scenario to be successful, a practice owner must be willing, at least initially, to give up some of their income in order to guarantee the associate has a base income. 

The next step in the process of hiring an associate is the dental practice owner should get an appraisal of the practice in order to avoid frustration and disappointment with the outcome.  All too often we have seen an associate start in a practice with no more than a handshake and no written documentation.  Then when it comes time to purchase the practice, the associate is presented with the price and they suffer “sticker shock” and leave the practice leaving the practice owner to start all over.  

In order to ensure that all parties have the same expectations, the following steps should be taken:

  1. An associate and purchase agreement should be written before the associate is hired.  Having the entire package prepared before searching for an associate will allow the senior dentist to present it to prospective associate candidates during the interview process.
  2. A compensation package that provides earned equity should be developed. Then all parties involved will know what they are getting into and can make an informed decision about whether or not this is a good fit. 
  3. And finally, the parties must agree on a definite timetable and payment terms for the associate to purchase the dental practice.

Are you thinking about bringing on an associate for your dental practice? Is it the right move for your dental practice? Let our dental practice transition experts walk through this decision with you. Our team has over 30 years of experience in the buying and selling process of dental practices with an extensive network of industry experts, accountants, bankers, consultants, and more. Contact us today to get the conversation going.