How your group dental practice is structured will dictate how quickly and easily you increase in value. Ownership structure will determine the effectiveness of your decisions and the kinds of decisions your organization can make based on the goals of everyone involved.
Making the Distinction Between Leadership and Ownership
Being an owner doesn’t necessarily mean being a leader, a manager, or an operational decision-maker. It’s important to sort out where the organization is headed, how decisions are made, and who’s responsible for those decisions.
Determining roles and priorities allows your organization to grow and increase in value while side-stepping some common headaches.
First, What are Your Big Goals?
What is the purpose of building your business? What are the financial and personal benefits you are looking to receive from growing your dental practice?
Right now are you focused on growth? Are your partners interested in growth – including the benefits and challenges involved to realize that growth?
How much risk are you willing to take on to achieve your goals? What about the partners who you are involved with? Would they agree with you or could there be some disagreement?
If there are partners involved, there will need to be some mechanism to effectively make decisions that balance the needs of everyone.
Is the person responsible for making decisions able to effectively act with authority? Do they have an agree-upon method for making decisions and taking action? Creating policies and procedures like this will help keep decisions aligned with the organization’s goals and priorities.
What is the Endgame?
What is the long term plan for the business you're building? If you intend to exit the business, the time to think about your exit strategy is many years before your actual exit. This decision involves all the other partners and investors. It may be far off into the future, but at some point you will want to retire and leave your practice. It's important to plan ahead to make this transfer as smooth as possible for your practice.
If the ownership of your business isn’t designed for this then it might be more difficult than you think. The business might not sell for nearly as much as you might have guessed and it may be difficult to find buyers who want to buy the kind of practice you’ve built.
Matters can be even more complicated depending on the kind of investment funds you’ve taken on. Planning for the future, far in advance, is how you can make sure everything is in place when it comes time to leave the business. The time to think about it is now instead of waiting until it’s too late to do anything about it.
What Do Your Partners Want?
The important thing to keep in mind when working with partners are that it brings certain advantages and disadvantages. Knowing this beforehand can help you plan ahead so the most common bottlenecks are not a deal-breaker for you down the line.
Some of the advantages are the funds made available to establish and grow the business. In this way, there’s less risk and more ability to invest in opportunities for growth.
Partnerships can be tough because it means leadership will need to be delegated. Having one person who is ultimately responsible to make decisions and build consensus with the decisions they make is typically the best way.
One of the best ways we’ve seen is to empower one of the partners to make decisions and compensating this person for the value they bring as a leader. Just because someone is a partner or owner of the business doesn’t necessarily mean they are a leader.
When going into partnerships another main issue comes when there is a difference in work ethic. How will partners be compensated when one works harder than the rest? Deciding this beforehand is how you can prevent being stuck in a business relationship that has gone sour.
Does Your Risk Tolerance Differ From Others?
Owners will have a say in how their investment (the business) performs and how much risk they would like to be exposed to.
Factors such as age, financial situation, health, personal and family responsibilities will dictate how much risk you and your partners are willing to take.
Will you be excited to grow the business, invest aggressively and make things happen? Or would you prefer to “coast” and take a slow and steady path. If there isn’t a decision-making mechanism built into the partnership then the relationship won’t last.
These can be difficult conversations to have after the fact. This is why deciding the long-term plan for the practice is so important.
Moving Forward With Aligned Decisions
Your financial options (and being able to take advantage of those options) depends on the buy-in from everyone involved with the consequences of those decisions. The risk and reward needs of everyone need to be aligned.
This includes compensation for the owner who is tasked with making leadership decisions and properly compensating those owners who have a more active role in the day-to-day operations of the business.
It’s entirely possible to successfully harmonize all of these needs with processes that flow with the work ethic and risk tolerance of everyone involved.
Keep in mind that your risk tolerance will change depending on your personal life and health. These sorts of things can be unpredictable, that’s why having a structure and pre-agreed process is so helpful when things get rocky. On the flip side, it can also allow for effective leadership when there is an abundance of financial resources to confidently reinvest into the business.
Circumstances change but there is always a way to make it work based on changes in your life and in the lives of all the owners.
