Dental businesses are always in a constant state of transition. Of all the ways practices change hands, one of the most common is their entering into dental partnerships.

Dental partnerships take place when a dentist sells partial ownership of a practice. When an interested buyer (usually another dentist) chooses to purchase ownership, that buyer will be a co-owner of the practice, and the control the buying dentist has is commensurate to the proportion of ownership bought.

Partial ownership of a practice, otherwise called interests, can be as small as 10% or over 50%. When buyers purchase more than 50% of interests, they become majority shareholders of a practice.

One thing to note is that while buying into a practice gives the buyer partial ownership, the interest owned extends only to ownership and not typically actual assets. In summary, when you purchase ownership in a practice, you’ll get partial control of it but not necessarily the equipment.

Dental practice buy-ins are among the most common ways practices and clinics transition regarding ownership. However, before you decide whether or not to buy undivided interest, here are some considerations to keep in mind.

The Cons of Entering a Dental Partnership

Despite the many advantages of a dental partnership, here are some things to consider before deciding.

The Lack of Decision-Making Control

Whether you’ve bought a majority share in a practice or just a small part of it, full control is one of the things you’ll have to give up. Because you don’t own 100% of a practice, you’ll have to run every decision by your partners before you take action — even if it will benefit your practice (like a new dental website design).

The worst-case scenario is when you and your partner both own 50%. This can result in problems with decision-making. When problems arise, they can only be solved in one of two ways:

You either abandon your new project or you dissolve the partnership altogether.

Loss of Freedom

When you got into dentistry, you likely entered the industry hoping to become your own boss. This doesn’t happen when you’re in a dental practice partnership as a minority owner.

Naturally, you’ll want to enter a partnership as a majority owner, but it can be very difficult to find another dentist willing to accept a minority share. And if you take on the minority, it’s almost as if you’ve simply bought yourself employment, which isn’t necessary since dentists are in high demand. Why pay to end up with a job you could have gotten for free?

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Challenges Marketing Your Practice to Buyers

When you own less than 50% of a dental practice, how much of it can you market and sell to prospective buyers? The answer is 50% — and most buyers want to purchase full ownership of practices. As a result, capitalizing on your practice (or your share of it) in the future can be challenging, if not impossible.

A Devalued Practice

Buyers of dental practices typically value control in their careers. As a result, there is significantly less demand for a minority ownership stake than a majority interest. This lower demand translates into reduced offers.

We Can Help You Make a Decision

Dental practice transitions and partnerships frequently suffer from conflicts among shareholders, DSOs or private equity investors. This often arises because all parties are bound by the same practice policies and structures, even if certain policies may not suit one or more individuals.

When partnerships fail, the fallout can be both exhausting and costly. That said, there are situations where stable, long-term group practices are necessary and beneficial.

So, should you enter into a dental practice partnership? If you’re still unsure, given the considerations mentioned above, we can help you decide and discuss alternative structures that allow practices to enjoy the advantages of group collaboration while avoiding the common pitfalls of partnerships.

2740 dental practice consulting

2740 dental practice consulting

We also offer user-friendly designs for dental websites, digital marketing, and guidance on how to run your practice. We’re just a call away.

Contact us at 2470 Consulting and discuss how we can position your dental business for success.

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