Welcome to the world of the business of dentistry. Here’s what you need to know if you’re starting out as a dentist and heading down the path of becoming an associate in a dental practice.
For those recent dental school graduates starting their first job and those already employed working for what the schooling was intended, this article will give important information about what to expect. It will also warn those newcomers to the real world of the business side of dentistry what to be careful about before agreeing to become an employee. If employee status has already been achieved, it will pay to read this article to learn about some of the items that it is not too late to discuss with the employer.
If advice was not made available from a dental CPA or other dental financial person, the following lists some points to consider so that you are not stopped from advancing later after gaining valuable work experience.
Once one is producing revenue for the practice for which he or she is working, it gets more difficult to change things. When the employment agreement is signed, there may have been oral promises made about future partnership status. One of the most critical things to understand is that if the promise is not in writing, it does not exist. Many new employees are given verbal understandings that, if things go well, a future partnership opportunity will be ready to be “given” to them. Do not believe it unless the terms and conditions, dates, formula for admittance, and the amount needed to join the partnership are all included in the executed agreement.
The employer may genuinely mean everything that he or she is saying about the partnership position. The owner may be a nice person and treat the employees very well. These are terrific attributes, but giving up something sometimes does not happen because the value of the practice may have grown so much because of the associate’s efforts.
Think about what happens when the newer dentist works hard and has an impact on increasing the value of the practice without a partnership interest or written agreement. The associate is effectively working against himself or herself by building the practice’s worth, but forcing a purchase price to be higher because of his or her efforts when the owner decides the time is right. Making sure a contract is in hand resolves these issues.
How does the employee receive what is due to him or her based on the final interview and the job offer?
The catch 22 of not being able to afford advice but needing it badly when starting out will first be addressed with the job offer. If the offer of the associate position is accepted, it would be good to have a dental financial professional review the employment contract prior to signing. If that person can’t be afforded, a good approach is to attempt to keep the contract term on the short side with mutual agreed upon renewal options.
While the learning curve and compensation increases for the associate, it would be good to hire a dental CPA to review the contract and to offer comments about the points that are included in it. Maybe there will only be minor changes required. The benefits included in the contract should be something that the dental professional financial person can compare with other contracts that he or she has reviewed. Comments would be given for more income security and advancement opportunities that the new associate would not be familiar with since the associate is new to the business side of dentistry. He or she would not know what occurs in the real world of dentistry, which includes its harsh realities.
Once the dental CPA or other dental professional financial person is hired, that advisor can be a good sounding board for future opportunities. Assisting with partnership or solo ownership reviews of any dental practice being looked at for acquisition is another reason to maintain this relationship.
How long should an associate stay with his or her first practice before becoming a partner or going for an acquisition elsewhere?
“Treating someone like you want to be treated,” is an axiom that applies to the dental world as much as anywhere else. If the employer lets the associate learn and provides what he or she promised in the way of compensation, ownership interest, and other points agreed upon, why not stay? If the working conditions are pleasant and the personnel are easy to get along with, the opportunity sounds good to remain. On the other hand, if these conditions are not present, it may be the time to start looking elsewhere.
Learning some administrative functions also is important to the associate, especially if he or she is going to acquire a different practice or an interest in a different dental office. The administrative side of the practice is one of the toughest things to learn since most associates have concentrated on the clinical side of dentistry while in school as well as while working at his or her first job. If it’s not possible to learn part of the administrative side of dentistry, going to study clubs, questioning peers from dental school about their progress, and getting a better idea of what competition is doing will greatly assist the associate.
A long career and one of happiness and financial freedom
The associate should have a long and successful tenure ahead of himself or herself. It is best to learn as much as possible as early in the career as one can so that the time ahead is easier to navigate. Early mistakes are also typically much cheaper than later errors when it comes to financial decisions. As time goes on and earnings increase, the affordability of professional advice becomes much more necessary and easier to pay.
Many newly minted associates have long careers and end up owning multiple practices. Some even think of the new trend in dentistry, the DSO. That, however, is an article for another time.
Bruce Bryen, CPA, CVA is a certified public accountant with more than 45 years of experience and is a part of Baratz & Associates CPAs. He specializes in deferred compensation, such as retirement planning design; income and estate tax planning; determination of the proper organizational business structure; asset protection and structuring loan packages for presentation to financial institutions. He is experienced in providing litigation support services to dentists with Valuation and Expert Witness testimony in matrimonial and partnership dispute cases. He is also a financial writer for several dental journals. You may contact him at 609-502-0691 or at Bryenb@baratzcpa.com.
Your next read: 3 big dental insurance mistakes dental practices make
Note: Photo of “Pondering Bob’s advice” by Digital Sextant is licensed with CC BY-SA 2.0. To view a copy of this license, visit https://creativecommons.org/licenses/by-sa/2.0/