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In the age of private equity takeovers, a Victorian dentist is bucking the trend by choosing to share ownership of her practice with her employees. By Tracey Porter
It took falling into a pit of despair to force Dr Monica O’Malley to make some tough decisions.
Having spent three decades in dentistry, during which she had worked or volunteered across almost all aspects of public and private dentistry, the Your New Dentist (YND) practice owner found herself increasingly despondent.
Dr O’Malley’s efforts to run a successful small business while turning a healthy profit, all the while keeping her employees happy, had all but destroyed her. In 2017, the Mooroolbark dentist decided to do something about it.
“Quite apart from the grumblings of my own personal disillusionments starting to come to the surface, I was feeling professionally very frustrated,” she says. Having tired of the adversarial relationships within many practices that fuelled high rates of poor mental health and paralysed innovation and impact, Dr O’Malley says she came to realise that the answer lay in unlearning everything that she thought was “true or possible” in business.
A new way
Having invested significant time researching alternative business models, Dr O’Malley stumbled upon the concept of conscious business practices, a journey of discovery that subsequently led her to investigate alternative methods of business practice, including as she puts it, the ‘Holy Grail’ of employee ownership.
Promoted as a different way to conceive of work, Dr O’Malley opted to take advantage of recent downsizing within her own practices by relinquishing the traditional ‘top-down’ ownership model in favour of an Employee Ownership Trust (EOT). In doing so, YND is believed to be the first private dental practice in the country to adopt this progressive model—one whereby YND holds all the company’s unallocated shares in a discretionary trust for the benefit of employees, effectively making all team members co-owners, co-collaborators and beneficiaries.
Employees at YND’s two locations who are part of the EOT receive payments from the trust based on their contribution to the business. Governance of the company and EOT is overseen by the YND board whose actions are bound by the YND constitution and whose make-up includes employee and independent representation.
The reliability and retention of a dentist over a long time period is far less without ownership. Depending upon the location that the practice is in, the replacement of an unreliable or exiting dentist can be difficult. Dentist business owners are tied financially to the practice so ongoing trading is more assured.
Simon Palmer, managing director, Practice Sale Search
Dr O’Malley says while the process was easy for her to wrap her head around, it was infinitely more challenging to convince her team of its merit.
“Philosophically and culturally what I was proposing to the team was a challenge to some. This model requires a much greater level of commitment to the job and a much greater level of personal responsibility, accountability and maturity.”
There were also other issues, she says. While well-established in the UK, legally no-one had ever tried this model in Australia, making it necessary to locate a legal representative prepared to create all the documentation from scratch.
Dr O’Malley says because there are currently no specific laws for employee-owned businesses in Australia, there ended up being 15 separate steps in the legal process alone, causing a six-month blowout in the time required to roll out the new ownership structure.
Despite this, Dr O’Malley is adamant that the pros of EOT ownership far outweigh the cons, arguing the model self-selects those who are truly committed to the job on a vocational, and not just financial, level.
“The entire team now has the opportunity to be supported and learn more about the business and how their actions have an impact across the entire business. There are much higher levels of personal responsibility and accountability, increased business resilience, improved employee engagement and improved mental health and wellness,” she says.
Overseas experience
A report by peak body Employee Ownership Association UK (EOUK) released last year, found that since the introduction of the EOT in 2014, employee ownership has grown by 90 per cent.
Philosophically and culturally what I was proposing to the team was a challenge to some. This model requires a much greater level of commitment to the job and a much greater level of personal responsibility, accountability and maturity.
Dr Monica O’Malley, practice owner, Your New Dentist
Driven largely by what EOUK says are businesses attracted by the supportive tax incentives, increased employee engagement and succession arrangements, the number of employee-owned companies in the UK increased by 37 per cent in 2023.
Alternatives to the EOT business model include traditional share scheme models, franchise models and corporate entity buy-ins.
Practice Sale Search managing director Simon Palmer, who has 20 years’ experience in dental recruitment and practice sales, says that traditionally dental practices are typically bought by dentists or corporate aggregators.
He says on occasion he will help oversee the sale of a practice to a non-dentist, such as an OHT or hygienist, but notes this is very rare. “We almost never see practices bought or sold by non-clinician employees (practice managers, dental nurses, etc), and to be honest I’ve never heard of a successful franchise model in the dental industry nor an EOT ownership.”
Palmer says the real challenge with selling to non-clinical staff is the financing. While Dr O’Malley claims she has been well supported by loan and finance company Medfin, Palmer says this isn’t always the case—particularly for those who are not doctors.
He says experience has taught him that banks are “far less enthusiastic” about lending money to non-dentists for the purposes of buying a dental practice because its success is usually dependent upon the presence of a dentist.
“The reliability and retention of a dentist over a long time period is far less without ownership. Depending upon the location that the practice is in, the replacement of an unreliable or exiting dentist can be difficult. Dentist business owners are tied financially to the practice so ongoing trading is more assured.”
While Dr O’Malley’s own experience has been positive, she concedes “this model will not suit everyone. You must be prepared to institute massive culture change and you as the business leader must drive that change. You need to be prepared to let people go who are not in alignment. If you are content to simply ‘just turn up and do your job’ and that’s it, this is not the model for you.”
