17 Jun Dual Representation
At PARAGON we call the process of selling or buying 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. We have also focused on how to make the process better, smoother and far more profitable for our clients. Our experience in hundreds upon hundreds of practice sales across the country has allowed us to develop and refine a truly superior method of transitioning professional practices. Once you understand this unique process, we think you’ll agree.
We call this process Dual Representation. Our track record 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 of this nature. What matters most is that the two sides achieve their long-term goals and objectives. We have found that Dual Representation allows this to happen in an extremely powerful way.
Of course, skeptics maintain that unilateral representation has worked very well in real estate and other such brokered transactions for many years. To that we simply say that purchasing a dental practice is not at all like purchasing real estate. 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 is closed. They don’t even have to like each other. Surely, no tenant will leave because the landlord didn’t get a fair shake. 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 one of the doctors even 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 means that we develop and maintain a professional client / consultant relationship with both the buyer and seller in every transaction. For the seller, this means that we take the time to understand his or her objectives and that we not allow those 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 his or her goals and aspirations and that we do everything in our power to make sure those goals and aspirations are satisfied. After all, it is the buyer who will put his future on the line to acquire the practice. It also means that we take great care to make sure that the two clients in every transaction have compatible goals and objectives. This concept is totally foreign to brokered transactions where virtually any warm body is a suitable candidate to buy. Whenever we work toward a transition with our clients, the question is always, “Are the needs and objectives of these two individuals sufficiently compatible to allow a true Win/Win transaction, or will someone need to compromise their goals and objectives in order to get a deal done?”
While Dual Representation may appear on the surface to be a conflict of interest, it is in reality a mechanism for bringing integrity and discipline to the transition process. We must be prepared to recommend that a practice opportunity or a buyer be passed on because, with Dual Representation, our reputation is totally dependent on the success of the transaction. Dual Representation forces PARAGON to be long-term goal oriented and to ONLY facilitate equitable transactions. Brokers, on the other hand, can walk away with their fee in hand and always blame the buyer or the seller, thus disclaiming any 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 term 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 get, the other side has to give. 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!
A “Win/Win” transaction means that a fair price for your practice is established in direct relation to the buyer receiving a fair return on his or her investment and a reasonable annual cash flow potential in proportion to the risk of the investment. This is where PARAGON’s Dual Representation philosophy is so important. It may initially seem unorthodox to represent both the buyer and the seller, but if you really think about it… dual representation is completely logical.
It is virtually impossible to negotiate fair! The pure nature of negotiation means that someone must lose (and typically it is the seller who takes the loss; who ever heard of a buyer wanting to negotiate the price higher). We say virtually impossible because you may somehow luck out on a fair outcome through negotiations, but it would be simply that… pure LUCK! However, fair can be pre-determined based on a logical foundation designed to produce a fair outcome for both the seller and the buyer. Dual Representation eliminates having to artificially set a high price to allow enough room for the buyer to negotiate that price down to what he or she feels is fair.
PARAGON’s approach to each practice valuation actually involves looking at the practice opportunity from the buyer’s bottom line first and then flowing back up to the practice production and collection and then to the practice fair market value. This is probably quite reverse of the way you may be thinking. However, using this approach, PARAGON arrives at a fair price supported by statistical data to show a buyer how that price was determined! We then dual represent to make sure the fair outcome is realized. Dual Representation has made it possible for PARAGON to close virtually all practices we list with absolutely no need for negotiation.
Pricing “to sell at a fair price for the seller and buyer” rather than pricing “to negotiate” is logical. Most of our practice listings are sold to the very first buyer who looks at the opportunity. Why? Because the opportunity is structured fairly on the front-end based on sound logic and proper documentation. We also have the necessary support tools. The comprehensive financial analysis we develop for each of our buyers reveals everything as to how we established both the price and the transition structure to be fair for the seller and buyer.
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 will be! A Win/Win transaction is all that is acceptable to PARAGON and we know Dual Representation accomplishes this goal.