[The following article was published in Strategies for Success, Dental Economics, October 2004. However, this topic continues to be one of the most frequently asked questions and most crucial decisions for the success of a transition that we thought it worthy of print again. I have updated the article slightly to reflect current changes and/or trends in the industry since 2004.]
One of the most frequently asked questions I receive from dentists selling their practice is, “when should I tell my staff?” Many feel like they’re betraying their staff by keeping the sale a secret. But telling them prematurely can damage morale and practice value. When staff members hear the news, they may worry about job security, changes to their compensation and/or benefits, and several other unknowns and could begin interviewing with other dentists. Because of their relationships with patients, your staff is one of the buyer’s biggest assets to ensure a smooth transition, so it’s important to retain them throughout the transition.
Patient retention could also be at risk. A staff member may tell a patient, family member or friend and from there the rumors could spread, causing some patients to panic and switch dentists when they learn you’re retiring and your successor has not been identified. Lost patients will also affect practice revenues and decrease the value of your practice to potential buyers.
When is the right time?
Prior to notifying the staff, you want to be sure that the sale is going to occur. Once you disclose the fact that you are selling, there is no turning back should the deal not proceed to closing for any reason. Therefore, I advise my clients not to notify the staff until the following have occurred:
1. Both sides have executed an Asset Purchase Agreement with the buyer. (This is also known as a Purchase and Sale Agreement.)
2. Buyer has placed into escrow a sizable, non-refundable deposit should Buyer breach the contract through no wrong doing on Seller’s behalf.
3. Buyer has completed to his/her satisfaction a due diligence review of the practice’s assets, books and accounts. Due diligence is a review or investigation of all practice related assets (charts, appointment books, equipment, etc.) to verify that the financial and practice information provided by Seller are in fact true and accurate.
4. The buyer has received financial commitment from a lender if financing is a condition to the sale.
5. The buyer has entered into a satisfactory lease agreement with the landlord of the space in which the practice is located or, in the alternative, a purchase and sale agreement to purchase the real estate from the owner.
Staff notification could be weeks or days from the closing, depending on how quickly the above-mentioned conditions have been satisfied. However, one tactic I am not a fan of is waiting until the Closing is final prior to making the announcement, as this could lead to tension and starting the buyer off on the wrong foot.
When you do tell them, schedule a meeting when most, if not all, of them are present without the buyer there. Remember, some of your staff may have been with you for years and feel like family members. Most or all of them will feel strong emotions when they hear the news, even if they knew this day was coming, so meet at the end of the day or during a long lunch break. They will have many questions and concerns and we often coach our clients on what to say specifically. This will be the time in which you can provide them with some preliminary information about the acquiring dentist, when the change will take effect and when they can expect to meet the new dentist.
Once you hold this initial meeting, you and the buyer should schedule a meeting with the staff together. This second meeting should come as soon as possible after the first, preferably the same or next day, to calm fears and anxieties. At this meeting the buyer can introduce him/herself, explain his/her philosophies and plans and assure the staff of their continued employment. The buyer should then schedule times to meet with each staff member, one-on-one, to answer specific questions relating to themselves, discuss concerns, or describe any changes to their compensation, hours or benefits if applicable.
Notifying the staff of your decision to sell is never easy, but following the guidelines above will provide you, your staff and the acquiring dentist with a smooth transition.