One of the more common conversations that we get into with practice buyers surrounds the potential post-sale role of the vendor. Many vendors aren’t looking to retire right away; they would just like to give up the burdens of ownership. Should they be offered to stay on in an employee or contractor capacity?

What are the potential advantages of having the seller of a practice stay on in a practice post-sale?

There is often an element of patient attrition when a long-standing dentist leaves their practice. A patient might feel loyal to the dentist, rather than the practice, and could look elsewhere when their dentist leaves. If the seller is able to stay on (even in a reduced capacity), it shows some continuity in the patients’ eyes. Even if the seller is staying on in a limited capacity, and many of the patients are handed over to the new dentist, there is something about having their old dentist's name on the wall that makes them feel like they are going to the same practice they’ve always gone to.

1. The seller can introduce the buyer more effectively to major referrers.
2. The seller can be a great source of information about the practice’s history and previous issues regarding the building, suppliers, patients and staff. 
3. If the seller still wants to work post-sale, it is in the buyer’s interest that they do so in their practice, rather than somewhere else, as there is a good chance that some of the seller’s loyal patients would follow the seller when they left. 
4. The seller's family will stay with the practice as long as he is there. If he retires, they are more likely to see the seller's mate than the buyer of the practice, and this isn't a great endorsement for the purchaser. 

What are the potential disadvantages of having the seller stay on in the practice post-sale?

1. Many long-standing practice owners will have an emotional investment in their practice and how it is run. They may find it difficult to allow changes to be made that they disagree with.
2. Becoming an employee can be a difficult adjustment for a practice owner – there is a risk that they might not be comfortable taking directions from the new owner.  
3. Long-standing team members may find it difficult to adjust to the new hierarchy - seeing their old boss taking direction from someone could create tension in the practice. If there is a difference of opinion between the old owner and the new, it is likely they will take the side of the old owner that they worked with for longer.
4. The old owner may find it difficult to hand over their patients when the time comes for them to leave.

It’s all in the setup...

While there could be significant disadvantages to having the seller stay on, these can be eliminated if time and effort are dedicated to setting up expectations on both sides. If this is done properly, there is no reason why having the seller stay on cannot be a success for the buyer and the practice. It will depend upon:

1. There being enough work for both of you. The extent to which the seller should be asked to stay on must be balanced against the practice having enough patients to keep them both busy.
2. The seller having an employment/contractor agreement with the buyer that includes a post-employment restriction of trade. Make sure that this is separate from the restriction of trade clause that is in the purchase/sale agreement. If the seller stays on and works for you for a few years, the restriction of trade should begin from when they cease working in your practice – not from when the sale took place.
3. The buyer and seller having a clear understanding of how their relationship and roles will work going forward.
4. A reasonable notice period - if the selling dentist is planning on phasing out, or only working in the practice for a limited time, a plan should exist for the necessary notice period and the handover of patients.
5. The seller having an understanding of the boundaries of their new role. While their input will be valued and sought after, the final say on practice issues now lies with someone else.
6. The setup of clear expectations with team members.

While keeping the seller on will not work in every situation, when it does work, there are huge benefits for all concerned - the buyer, the seller, the staff and the patients. It’s worth exploring whether this is something that could work for your practice.

To read more articles on the Subject of "Seller: Types of Sale" please click the following articles:

• The Delayed Internal Sale: Exit Plan...or ticking time bomb?
• Merger
• Partnership Exit-Planning: Selling a House that comes with a Marriage
• Internal sale – Who owns the goodwill?