It
did not go well. My attempt to hire an associate did not go well.
Much
like your office, my office is busy these days—crazy busy on some days. I get
home exhausted and not looking forward to coming back for more the next day. I
need help and some days off.
I
placed an ad online and received several résumés to review. For the most part, they
were very nice résumés from some talented people.
I
set up a few interviews. I liked a couple of the applicants and felt they might
fit into my practice.
However,
this is where it all fell apart. I won’t use absolute numbers since salaries
vary by region. Let’s just say each candidate was asking for several hundred
dollars per day or 25 percent of production—whichever is greater. This is a lot
more than I ever made as an associate. Yes, I know times change, but I also was
competing against a lot fewer dentists for many more available positions. It
certainly is not that way now.
Interestingly
enough, everyone asked for the EXACT same salary. I found that very curious.
I
crunched the numbers. If I paid the applicants what they wanted, they would be
making as much money as me! Yes, I would be paying an associate to come into my
office so that he or she can take home more or less the pay that I make! Of
course, they would have no employee headaches though, like payroll taxes,
property taxes, etc.
My
wife’s suggestion was for me to just sell the practice and find work as an
associate. She figures she’d have a husband who is much less stressed, but
bringing home the same salary.
Funny
how that suggestion has remained stuck in my head.
As
I crunched the numbers even further, I realized something else. Let’s assume
overhead at 75 percent, a number that is generally used. Of course it varies,
but let’s use that for our discussion. If I pay the associate 25 percent, my
total overhead now becomes 100 percent. How much is left for me? What financial
incentive do I have to bring them into the practice?
It
would make no business sense for me to hire any of them. You often hear new
graduates say they can’t find any positions. It’s a shame.
If
you’ve recently hired an associate, how did you make it work? Or do you? Is my
math wrong?
Andy
Alas, DDS
12 comments:
Andy, if you get this figured out, let me know. I'm not sure what the new grads are being told about potential income, but i'm pretty sure it is exaggerated. I have seen ads from some of the corporate practices offering starting salaries and benefits which I would like to make even after 38 years in practice. I joke about my retirement plan being a "toes up position" out the door.
Don't get me started. I brought in an associate. I was not super busy but my partner just retired and I thought she would pick up the slack and create his own patients.
I brought in an associate that seemed perfect for the job. I paid her a per diem and/or 35% of production.
I made it clear that she was going to have to get out there and make a name for herself.
Well after 6 months I continued to find her in the back office on Facebook. I would talk about what I was doing on my side. No interest to come over and learn. No interest in being mentored.
She eventually left and bought a dying practice.
So now she has her own practice, very few skills and a million dollars in debt.
Oh, well I guess now she has motivation to get off Facebook.
Andy,
I did the associate routine for years. The pay off is in having time off and the hygiene patient income. Not much else.
Found that raising my fees (we do not participate in any plans or delta but you can cut them if appropriate)can weed out some folks and so there is less patients without losing income.
Hope that helps.
Enjoy the Journey,
Bob
Interesting. It definitely varies by region but in Illinois, 25 % of production would be considered too less.
Associates generally get a guaranteed base and at least 30% of production and 35% to 40 % of collection whichever is higher.
It would be interesting to read others opinions as well.
Why is overhead 75%?
How would an associate add 25% to overhead without adding any increased income? Is that part a joke?
Try looking at overhead a different way: you say your overhead is 75%, but that should be composed of both fixed and variable expenses. A fixed expense would be something like rent, that is the same no matter how much dentistry you do. A variable expense is something like dental supplies or lab - that increases as you do more dentistry. When you look at the numbers this way, you will see that although bringing on an associate will increase the total overhead dollar number, it will actually decrease the total overhead percentage.
And of course, the associate isn't paid a percentage of the total practice collections, only a percentage of what he/she brings into the practice. Since I assume you will also be doing dentistry, and you probably have hygiene as well, that number will be nowhere near 25% of the total office collections.
We hired our first associate about 4 years ago (now we have 2). It was scary for me because it is a big salary to pay. But the numbers do make sense. As long as you have the patients to keep them busy, associates make money for the practice - and if you structure the compensation as a percentage of what they do, you really can't lose money.
Talk to your CPA about the numbers - you should be able to make it work. Good luck!
You know, I love this article - and it really shows the attitude of the candidates coming into the workforce these days - in any profession! I have noticed younger family members of mine NOT taking jobs because they are waiting for the BIG money jobs, rather than understanding that taking the lower paying entry level jobs is the best way to get to the bigger money! They are going to waste time (and in turn some $$) looking for a practice that is going to pay them some astronomical number. Anyway, thanks for the great article, I've been enjoying the posts! I'm adding your RSS feed to my Rebelmouse account!
I'm not sure your associate candidates are waiting for the "big money jobs." Perhaps they are just trying to limit their risk. Having a salary guarantee, from their perspective, ensures that their employer will be serious about putting them to work. My first associateship had no guarantee and my well-intentioned boss only allowed me $45,000 in production over the course of 9 months (I was paid 30% of collections). Meanwhile, he was double booking emergencies for himself and wondering why I was unhappy. If I had a guarantee, I bet I would have seen some of those emergencies. Sadly, I have heard many similar stories from my peers.
I understand it is pretty standard to get paid on collections, or adjusted production. Just because a candidate comes to the table with certain requests, doesn't mean you have to meet them in order to have a good working relationship. I don't know where they all came up with their salary requests, but most candidates just want to get a paycheck of some sort. In my current associateship, we did a draw such that I got paid something, but I had to "pay" it back. A good new dentist will understand that you have to limit your risk too.
Not many new dentists want to work for a corporate style office. Most of us want to work for a great dentist who can teach and mentor us to be great too. We assume if a dentist is looking for an associate, that dentist has it all figured out and will provide a good working environment and paying patients to work on.
It is a great thing that you have worked the math, because you have to know these things before you hire someone. If you can't afford to hire an associate, you shouldn't. If you want a good associate, that associate's compensation should be competitive with the other opportunities in your area. Also, a good associate should understand that he/she will not be making the big money right out of the gate.
Maybe you should consider a part-time associate at first, for just a day or two a week. Don't be afraid to be picky. This is not unlike dating; your first date may not end up being "the one."
I hope that the AGD can provide more support for dentists considering providing an associateship and those dentists looking to be an associate. These things are stressful and difficult and a webinar series or something like that from the AGD could be very helpful.
I hear your frustration, but as a recently graduated dentist, I can tell you its very tough from our perspective also. I believe 25-30% of adjusted production is a fair amount. Assuming the average overhead is actually 65% (not 75%), then the owner is roughly making 10% of the associate's production. Add in the profit from hygiene, then the benefits of being a practice owner are more obvious.
Of course, if the practice is running at 75% overhead and there's no hygiene program in place, then 25% as an associate does not make sense and it seems like the owner does not have the capacity to add on an associate (without a replacement of income).
According to my accountants (who are dental CPAs), the going rate for experienced associates is 35% of gross production & the practice pays the lab bills. It's around 40% if the associate pays the lab bill. Minimum daily rates are $600-700; a lot of practices do a draw on future earnings for this.
I'm not sure what new graduates are getting, but with all due respect--25% of adjusted production doesn't even sound fair unless there are other benefits like health insurance, 401k, paid vacation, etc.
Assuming your office is big enough so that you are working at the same time as your associate, the overhead on the associate's production is less than yours. Your overhead has already paid for all the fixed costs (rent, phone lines, electricity, internet etc). For the associate, besides their salary and lab bill, there is a bit of cost for materials and the cost of an additional staff member as an assistant. you have to dig into the numbers a bit more to find out your breakeven point, but its not as high as you may think.
Andy, two years have now gone by. Did you sell your practice? Are you now working as an Associate? Are you less stressed?
I sold my practice to reduce my stress and stayed on as a full time Associate. It has not worked out very well. The guy who bought my practice has undone all that I built over the last 25 years and now I have been asked to leave...the practice has lost 50% of the patients and when I leave will shrink drastically even more.
Just wondering how you have dealt with all of this.
warm regards,
Larry Stanleigh
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