25 May How can PARAGON’s Dual Representation Philosophy benefit me?
The acquisition of a dental practice will be one of the most profitable and rewarding experiences of your life and professional career. You should know, however, that purchasing a practice is a very complex process that unfolds over several months and is not simply a matter of finding a practice in the classifieds; negotiating a “good deal”; and, living happily ever after.
Purchasing a dental practice is not like buying a new car or a piece of real estate. In a very real way you will be acquiring a whole set of new relationships with people who do not know you and who may not trust you as either their new dentist or their new boss. You will not be able to see or touch most of what you are paying for until long after the ink is dry on your contracts.
If this sounds a bit scary, it should. The dream of owning your own practice can quickly become your worst nightmare if it is not handled properly. There are innumerable ways to foul things up and many of your colleagues out there are on the cutting edge of finding new ways to foul this process up each and every day.
At PARAGON we call the process of acquiring a dental practice a practice transition… a word that stresses a sense of both time and change. The word transition further highlights the fact that we are dealing with a process, not an event. Since 1988, we have dedicated ourselves to understanding what really takes place during a practice transition, and how to make the process better, smoother, and far more profitable for our clients. Our experience in thousands of dental practice transitions across the country has allowed us to develop and refine a truly superior method of transitioning dental practices. Once you understand this unique process, we think you’ll agree.
We call this process Dual Representation. Our track record with dual representation is impeccable. We have a virtual 100% closure ratio on all transitions that go to contract. Yet, amazingly, there are still those who maintain that it is impossible to represent the interests of two opposing parties in a transaction. What matters most is that the two sides achieve their long-term objectives. We have found that Dual Representation allows this to happen in a powerful way.
Of course, skeptics maintain that unilateral representation has worked very well in real estate and other brokered transactions for many years. To that we simply say that purchasing a dental practice is not at all like purchasing a chunk of land. When a buyer and seller sit down to hammer out a real estate transaction they can posture and cajole and play real hardball. After all, the property itself has no life of its own and will be the same whether the purchaser is a “White Knight” or “Attila the Hun.” The two sides certainly do not have to live together in the house after the sale. They don’t even have to like each other after the sale.
This is not the case with a dental practice. Damage done during arduous negotiation eventually comes home to roost. Staff members are usually the first to pick up on it. Later it makes its way to the patients, who begin to leave for unexplained reasons. Sometimes the seller himself lets the word out. Other times it is a single remark to a staff member at a stressful moment that takes on a life of its own and makes its way back to the patients. Either way, the paradox remains, the more a deal is negotiated… the more everyone loses.
Dual Representation dictates that we develop and maintain an advisor relationship with both the buyer and seller in every transaction. For the seller, this means that we take the time to understand the seller’s goals and objectives and that we not allow those goals and objectives to be compromised. After all, it is the seller that has a lifetime of toil and effort at stake. For the buyer, this means that we develop a keen awareness of the buyer’s goals and aspirations and that we do everything in our power to assist in accomplishing those goals and aspirations. After all, it is the buyer who will put his future on the line to acquire a practice. Dual Representation also means that we take great care to make sure that the two clients in a transaction have compatible goals and objectives. This concept is totally foreign to the typical brokered transactions where virtually any warm body is a candidate to buy. Whenever we work toward a transition with our clients, the question is always, “Are the needs and goals of these two individuals sufficiently compatible to allow a true Win/Win transaction, or will someone need to compromise their objectives in order to get a deal done?”
Whereas Dual Representation may appear on the surface to be a serious conflict of interest, it is in reality a mechanism for bringing integrity and discipline to the sale process. As an intermediary expert with fiduciary responsibilities extending to both parties, we must make sure that the transactions we put together are absolutely appropriate and fair to all concerned. We must be prepared to recommend that a deal be passed rather than forced, because with Dual Representation, we live or die by the success of the transaction.
Dual Representation forces us to be long-term goal oriented about our business and to only facilitate equitable transactions. Brokers, on the other hand, can walk away with their fee and always blame the buyer or the seller, thus disclaiming any personal responsibility for fouling things up if the transition does not go well.
In his best-selling book, Seven Habits of Highly Effective People, Dr. Stephen Covey describes the true nature of a Win/Win transaction as the only viable option in business deals. The alternatives of Lose/Win, Win/Lose, and Lose/Lose, are all unacceptable in the long run because they will all eventually lead to undesirable results. As Dr. Covey so aptly states, “There’s no way to achieve Win/Win ends with Win/Lose or Lose/Win means.” This is precisely what the traditional methods of unilateral representation in practice sales have in common.
It is critical to understand that we are not dealing in a zero-sum game where the pie is only so big with the reality that for one side to receive, the other side has to give. In a properly handled transaction, no one party has to gain at the other’s expense. In fact, just the opposite is true. If both parties become sensitive to the needs of the other, and if they can clearly see that the realization of their individual goals and objectives are intertwined, then the synergy that results can propel the practice and the doctors to a far greater degree of success than they ever dreamed possible. That is why at PARAGON, it is “Win/Win” or it is NO deal!
There is something else you should know if you are about to buy a dental practice. The only thing that really matters is… it is not how much you pay for the practice, but rather what you receive for the money invested. PARAGON had a client who passed up an opportunity to acquire a wonderful practice grossing $400,000 per year in the best part of town. The buyer was also contacted by a practice broker who offered the buyer a great deal on another practice grossing about the same amount as our opportunity. The broker’s great deal was priced $100,000 less, so the buyer passed on our practice and bought the cheaper practice the broker had offered. PARAGON later sold the original practice for its full value. Three years later the buyer who got the “great deal “ from the broker approached us at a dental convention and told us of his experience. The past three years had been a living nightmare and financial survival was truly day to day. What he thought was a “great deal” was in reality a carefully disguised disaster. On the other hand, our client who purchased the original practice for $100,000 more was now earning well into mid six figures with no concern at all for his financial future. The bottom line is that it is not what you pay for a practice, but what you end up with that truly matters… and what you end up with is largely a function of the process you use to acquire your practice.
If you remember nothing else from this article, please remember that everyone deserves to win. You merely have to decide that you want the transaction to be fair for all… and it happens! A “Win/Win” transaction is all that is acceptable to PARAGON and we know dual representation accomplishes this goal.