Dr. Michael Hersh answers questions about the process he followed in seeking an associate to buy his periodontal practice...

Bridging the Way: 2003 Student Event
SELLER'S PERSPECTIVE

Below is an interview with Dr. Michael Hersh.

Michael Hersh, D.M.D., owned a private periodontal practice for 24 years in California. After selling his practice, he completed his prosthodontic residency at the UCLA/VA Hospital in West Los Angeles. He's currently an assistant professor in advanced periodontics and implants at Loma Linda University, practices periodontics part-time, and has a private business providing expert consulting/witness services for dental malpractice lawsuits.

Why did you seek an associate?

I was seeking an associate who desired to purchase an existing full-time periodontal/implant practice.

What were your initial expectations?

Initially, by placing ads myself, my expectations were that the process of finding a buyer would be rather easy and short lived.

What was your actual experience?

In reality, placing ads, interviewing, showing the office site, and hiring potential buyers several times (myself) proved to be very time consuming. The associates hired either were not truly interested in buying a practice or did not have the funds/credit to do so. Additionally, the process had taken 3-4 years with no positive results toward an actual sale.

Did you meet with a consultant, lawyer or accountant to determine the feasibility before you began the process?

A conference with my accountant who specialized in handling dental practices resulted in the recommendation to close out my corporation pension plan prior to selling the practice. The reason for this was because my existing staff had been in my employment for many years and it was felt that a new buyer would not be in a financial position to continue to fund the plan at the level required. After my broker secured a buyer and the contract was presented, buyer and seller each consulted with their own contract attorney to check documents legality. Seller's accountant provided financial documents needed by my broker, buyer, seller, loan officers, attorneys, etc.

Where did you begin looking for an associate?

Initially, I placed classified ads in the “practice for sale” sections of the AAP Journal of Periodontology (now posted on the AAP's Web site in the classified ads section at http://www.perio.org) and the Journal for the state in which my practice was located.

Did you market the position as an associate with the potential buy-in?

The position was marketed at an associate desiring to purchase a practice.

How did skill and personality of the people you interviewed play into your decision-making process?

Buyer's skill/experience in placing dental implants was important, since a substantial portion of my practice consisted of the placement of implants. Personality was important for the transition period involving the patients and staff members whose employment would continue with the new buyer. In addition, personality was important for the inter-relationship the buyer would have with the referring dentists.

What arrangement was agreed upon as your were transitioning out and the associate was transitions in?

All new patients would be seen by the buyer. The buyer would work full-time beginning the week after the close of sale. As the seller, I would work for 6 months, part-time 2 days per week as an employee of the buyer. I sent letters of notification to all patients of record and dental colleagues in the area.

Please explain your financial compensation arrangement, using real or fictitious figures.

Appraisal was provided by the broker was as follows: After sale price was agreed upon between the seller and buyer, the buyer secured loans for majority of the sale price. This was paid to the buyer on the closing date of sale. A small balance due on the sale price was paid to seller by buyer via promissory note payments monthly for 4 years. Broker's fee was paid by seller. Accounts receivable were billed and collected by buyer and paid to seller.

What resources (i.e., people, publications, groups) did you find most helpful in finding an associate and/or selling your practice?

Advertisements placed by practice sales broker in state and national dental journals and notification to dental schools periodontal graduate residents.

What advice do you have for students who are seeking associate arrangements with a potential buy-in?

Visit with seller and staff, learn about the practice and the patients served. Review the financial records; determine if expected income meets your needs. Review accounts receivable: (total should be 3 months or less, of 1 month production). Review financial collection methods practiced by the office staff, as “cash flow” is important for buyer to establish credit to purchase supplies, etc.

What advice do you have for periodontists practicing who are seeking an associate?

Make sure your office space presents well, that it is clean, updated, and meets state and federal standards of practice. Have well qualified staff members who present well and are amenable to work with the buyer. Include in your sale contract a “covenant not to compete” clause. This will extend a measure of honesty and good will to the buyer.

What is your situation now after selling your practice?

Having completed a 3-year prosthodontic residency after transitioning out of the practice, I am teaching part-time in dental school, working part-time as a periodontist, and have a private business providing expert consulting/witness services for dental malpractice lawsuits.

What other information from this experience would you like to share with students?

Buyer should determine where in the country he/she would like to live. The area should have many general and specialty dentists that will refer to the buyer, as only a few patients come to the practice via the telephone book. The buyer should feel comfortable with the location of the office and the “physical plant” of the office.

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