For many, dentistry is a family business. Children grow up helping around the office and eventually work side-by-side with their parents, ultimately taking over. Handing a practice over to an adult child can be exhilarating and rewarding. Unfortunately, it doesn’t always go quite as planned.
Let’s look at a few scenarios where these parent-to-child practice transitions failed. I’ll then offer tips on avoiding some common pitfalls.
Dr. Heath: My son abandoned me — leaving me high and dry
Dr. Heath’s son, Cliff, grew up in the family practice. He stocked supplies, mailed invoices, and answered phones for his allowance. His path was clear: after dental school, he would work in the practice and eventually purchase it from his father.
Dr. Heath nurtured his son’s passion and taught him all the tips and tricks. He planned to retire at 65, by which point Cliff would be seven years out of dental school. And good thing — the physicality of dentistry was wearing on Dr. Heath.
Everything went according to plan. Dr. Cliff joined the practice and was quickly embraced by patients and staff. For six years, the father and son worked together as Dr. Heath slowly scaled back his hours in preparation for retirement.
Just after Dr. Heath turned 64, Dr. Cliff had news: his wife had accepted her dream job. It was 500 miles away, near her family and hometown. They were moving in three weeks. “Don’t worry, Dad! A dental school classmate lives there and already hooked me up with a couple of interviews,” Dr. Cliff said.
Dr. Heath panicked. What was he supposed to do now? Could he find a willing buyer — someone who would appreciate the practice’s quirks and family atmosphere? And what would he tell his patients, who had been seeing Dr. Cliff for the past six years?
Dr. Wilma: The staff treats me like a child
Dr. Wilma grew up in her mom’s dental office. Just like Dr. Cliff above, she spent her summers working in the office and looked forward to working side-by-side with her mother, Dr. Betty.
Five years after Dr. Wilma graduated, Dr. Betty was ready to transition to retirement. She gifted ownership of the practice to her daughter but kept working two days a week.
However, the long-time staff kept deferring to Dr. Betty for everything: questions about patient care, squabbles with suppliers, and staffing issues. Dr. Betty wanted everything to be perfect for her daughter and easily handled all the issues, just as she had done for 35 years.
In addition, staff were very free with their comments in front of patients. “I’ve known Wilma since she was a baby, with the cutest chubby cheeks!” they’d say. One long-time assistant even nagged her for her lunch choices. “Shouldn’t you be eating healthier? You want to keep that youthful figure!”
Dr. Wilma loved the practice, but short of firing everyone and hiring her own staff, she wasn’t sure what to do. She felt that the practice was really still her mom’s and didn’t feel empowered to force long-time staff to change the way they treated her. Ultimately, she told her mother that she wanted to move out of the area to explore city life.
Dr. Betty was devastated — she was looking at having to go back to work full time while finding a buyer for the practice.
How to avoid these pitfalls
These situations are far too common. In fact, we’ve also profiled Drs. Jill and Helen, an aunt-niece pairing who realized too late that they had woefully incompatible work styles.
In every case, problems could have been avoided through a series of straightforward conversations that culminated in written documentation.
In any sort of practice transition, even between family members — especially between family members — both sides should make sure they talk through all the key details of the transition and agree on the terms. They must avoid settling for unvoiced assumptions that may turn out to be incompatible. For example,
- What is the timeline?
- How will the practice be valued? (and it must be valued!)
- How will the office be run? Who will make decisions? Who will set the schedule and pace?
If both sides agree on the timelines and terms, they should go through the typical practice transition process. Document everything.
Work with a lawyer to ensure the terms and repercussions are clear. In Dr. Heath’s case, he could have written something into his son’s associate contract stating that Dr. Cliff would purchase the practice by X date or give adequate notice.
And finally, make sure both sides have some skin in the game. Since Dr. Wilma paid nothing for the practice — her mother made it an incredibly generous gift — the staff didn’t see it as a true transfer of ownership. And since Dr. Wilma hadn’t paid anything, she didn’t feel empowered to stand up to her new staff or really take charge. Conducting a formal practice valuation can help the buyer understand what they are purchasing while giving them a better understanding of their financials. (See more about practice valuations.)
Some senior doctors feel they are doing their debt-laden children a favor by sidestepping the formal practice transition process. The reality is that a financial transition is just as important, as it ensures the buyer is truly invested in the practice. Banks are willing to lend to people with mountains of student debt, provided their credit is in good shape and their personal spending is in check. And if Dr. Wilma had gone through the process, she wouldn’t be thinking of pulling up stakes and moving away — leaving her mother and their patients in a lurch.
Many family practice transitions go smoothly. Even if you go through the process and have a lawyer draft a contract that you never look at again, you’re only out the lawyer fees. And the conversations that helped you develop that contract can go a long way towards building your relationship and seeing each other as professionals, not just family.