We have a lot of dentist clients who have downed tools during the Level 3 restrictions. One thing they have in common is that they’re making lemonade out of lemons and getting their practices ‘shipshape’ for when the restrictions are downgraded back to Level 1 or 2.
If this sounds like you, and you’re wondering what you should be thinking about, read on!
Agreements with your dentists
Despite the fact that they should know better, many practice owners do not have proper documents in place with their dentists.
The two agreements you should have in place are Employment Contracts with employee dentists who are paid a salary, and Practice Services Agreements with dentists who come in to use your staff and facilities in exchange for a cut of their fees.
These agreements are important because they clearly define the nature of your relationship – employee versus independent service provider. They also set out who bears the key liabilities, such as professional indemnity insurance, lab fees, CPD costs, and travel/accommodation expenses (for more remote practices or FIFO dentists).
The other thing these agreements can be really useful for is to record the terms of any future restraints you would like to place on your dentists. This might relate to setting up a competing surgery nearby or poaching patients across to a new employer.
If you think you could use some proper agreements with your dentists, give us a call on 1300 654 590.
Agreements with your partners
Another type of documentation that is often sorely lacking in dental practices are agreements between practice owners when the business is conducted through a partnership. The two agreements that we think are essential in these circumstances are a Partnership Agreement and a Buy-Sell Deed.
A Partnership Agreement sets out how you will run your practice. Although it includes a lot of high-level governance requirements, the most important things this document covers are the more practical ones. For example, how will the profits be split? How often will profits be distributed? How much is each partner required to work? What happens if a partner can’t work for a period due to unforeseen circumstances? Who will have access to the bank account? Who can authorise payments? How will you decide whether to take on a new partner?
A Buy-Sell Deed is a document that concentrates on exit scenarios to ensure that you have a plan in place if something comes up to trigger an exit. The document should always cover unexpected exit events such as death, trauma (injury or illness) and total and permanent disablement (TPD). Preferably, the partners take out insurances to “fund” these events so that the remaining partners don’t have to quickly come up with some cash if a partner has to exit unexpectedly.
Buy-Sell Deeds can also extend to other exit events such as retirement, divorce and personal bankruptcy. In those cases, the other partners usually want a clear path to value the partner’s interest and buy them out over time. The document allows you to agree in advance what that process would look like, so there’s no fisticuffs when an exit is actually on the table.
If you need help getting an agreement in place with your partners, call us on 1300 654 590.
Buying or selling a practice
Many dentists who own their own practices are using this downtime to buy or sell a practice. While there is a common formula for business sales or purchases, there are some aspects of dental practices that require extra knowledge and experience.
Restraints on a vendor dentist are crucial to ensure you get what you paid for. These should be carefully worded to achieve the prohibited activities, duration and area of restraint that is required to preserve the goodwill in the practice.
Staff transfers are also critical and are something that can be poorly handled. The sale documentation should provide a mechanism for the purchaser to employ staff they want to keep. Those transferring staff will then need to have their employment entitlements adjusted between vendor and purchaser.
Equipment is another big-ticket item for dental practice transactions. Usually, a fair whack of the purchase price is for the value of the dentist chairs, autoclave and other specialised equipment. You should be able to inspect and test the equipment before purchase. You should also have any manufacturer’s warranties transferred to you and if there’s any equipment that requires special licences to use onsite, you need to factor the timeframe for those licences (and the transferability of existing licences) into the sale agreement.
What to do next?
We work with a lot of dentists, and we’re familiar with your key concerns. We know most of you are time-poor, but that you also value a considered and comprehensive outcome. We can help provide practical tailored solutions to make your life easier while dotting all the i’s and crossing all the t’s.
Call us on 1300 654 590 to have a chat today.
The information contained in this post is current at the date of publishing – 23 April 2020