legal matters
Till Success Do You Part
Why some partnerships succeed, and others fail
by Joseph L. McGregor
The best business partnerships are often those where the dentists can simply file their partnership agreement away
and get to work, essentially forgetting the agreement was ever created in the first place. Most partners want to believe
that their new endeavor has just the right mix of personalities and business acumen to thrive in their market.
Unfortunately, the hard truth is that many partnerships simply do not succeed. This is exactly why partnership agreements are so important.
One of the first partnerships I helped organize was between two
best friends. When I sat them down to memorialize some of the
important “rules” of the partnership, both dentists balked. They
felt it was unnecessary in their situation. After all, not only were
they best friends, but their wives were best friends too, and the
dental practice they were acquiring was already producing cash
hand-over-fist.
And yet, within a year, these two dentists could not stand to be in
the same town together. (Literally. One tried to file a restraining
order against the other to keep him away from their practice.)
The next month I established another partnership, this time with
two dentists who had only known each other for a little over a week.
All they knew about each other is that they were both interested in
acquiring the same practice. Regardless, we worked out a very specific partnership agreement to establish the rules of the partnership, including what, exactly, each partner would contribute to the
endeavor, how each would be paid, and under what circumstances
the partnership would dissolve if it ever came to that.
Eleven practices later, they are still going strong.
When it comes to dental-related partnerships one thing is for certain: they are on the rise. They vary widely in purpose and structure. Some dental partners are simply joining forces to work
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together in the same office, while others are forming with the
anticipation that the partners will work in separate offices. Still
others are forming where one dentist works in the office and the
other does not work at all. And finally, more and more partnerships are forming where neither dentists work, but rather, staff
their offices with associates.
Reasons for the uptick in partnership creation are simple: a partnership can expand financing options, allow a practice to offer
expanded hours of operation, create the possibility of staffing the
office with dentists of complementary specialties or skill sets, and
lower per-dentist overhead. Often one partner happens to be an
excellent clinician, while the other has the business acumen.
Finally, some dentists are just uninterested in the concept of ownership without the support of a partner, usually a long-time friend
or colleague.
All of these benefits are real and meaningful but partnerships can,
and often do, backfire.
The biggest cause of partnership deterioration occurs when partners simply never draft a partnership agreement to begin with.
Often these partnerships attempt to operate on certain verbal
understandings between the partners (the “handshake” deal) that
they ultimately (and seemingly inevitably) come to interpret dif-