The dental industry is awash with pirates and robbers presenting glamorous gifts to unsuspecting dentists.
For some reason, dentists make easy prey for charlatans and shysters.
And here is why….
No matter how bad the economy is going, nobody, and I repeat NOBODY out there in the community cares if a dentist is doing it tough.
When was the last time you saw a hard luck story on A Current Affair about a dentist?
Nobody cares if a dentist has been ripped off.
Why would they?
Here’s how I know…
About twenty-two years ago, I was introduced to a property developer selling thirty soon to be completed apartments in a suburb of Sydney.
The apartment block was located close to rail and bus, and right opposite a major shopping center.
It was also about 100m walk away from a large suburban park and it was adjacent to the nearby café district.
What could possibly go wrong?
I purchased one of the apartments prior to completion for $295000.00, which seemed a reasonable price at the time. Over the following five years, I endured tenant after tenant after tenant, and problem after problem after problem…it was a landlord’s nightmare.
After five years, I contacted the managing realtor to set up a meeting about the possibility of selling the apartment.
When we met, the agent, let’s call him Nick, said to me:
“David, there are thirty units in this block and already I’ve onsold sixteen of them, and only one vendor has sold for more than they paid.”
“This block is what you call a second-tier development. The developer that you bought this apartment from is known for buying up incomplete developments, adding a significant mark-up to the apartments, and then on-selling them to busy professionals like dentists, who don’t have time to do all their due diligence.”
“Do the math David. Thirty units on-sold with a mark-up of $35000.00? It’s a healthy profit?”
But who’s going to complain? Who’s going to go to the media?”
No dentist is going to go on television and say that they were ripped off because they were too busy to do their homework?”
The New Pariahs
It was once said to me that dentists have the word “Sucker” indelibly tattooed across their foreheads.
Sadly, this tattoo is invisible to the dentists and their colleagues, but it is like a neon sign to pariahs and charlatans looking to make an easy buck.
Enter from stage left: The Dental Roll-Up…..
As a business model, what could be easier than offering a dentist a large chunk of money for his dental practice?
And then getting that dentist to work on in that dental practice on contract paying the new owner a pre-determined profit for each and every year of the contract?
And if you’re a smart operator, you’ll get your legal team to make the agreement a thousand pages thick.
And you’ll get your lawyer to put the sale price on the first page, and then bury the employment agreement and annual profit goal deep into the back end of those one thousand pages.
So let’s put it in plain English:
The roll-up entity knocks on your door and offers you, say $2.5M for your dental practice.
So now they have your attention….
But half a million of the sale price is in shares of the roll up company.
Still, you think, $2M is a lot more than what you could get selling the practice to another dentist….
And you get to work on in the practice you just sold….
The roll-up guys set you an annual profit target of $600K per year to hit for them.
You know that will be easy, after all, there are no equipment leases to pay any more as those are all being settled in the sale….
You’ll do this easy.
After all, your dental practice last year collected just under $3M in annual billings…
Fast forward five years.
You sold your practice five years ago and you have $2M.
And over the five years, you’ve repaid the roll-up company five lots of $600K?
Which is $3000000.00
And they now have your practice….
So if you hadn’t sold your practice to them, you’d be a million dollars better off, and you’d still have your practice?
Am I missing something here?
And what if you stay on with them after five years?
In the situation above, every subsequent year that you stay on you give the purchaser of your practice another $600K, just for the privilege of working on in what used to be your dental practice….
The agreement will probably include a claw-back clause, where, if you don’t return the total said annual profit goal to the new owner, you will need to dip into your own pocket to come up with the shortfall…
Doesn’t that sound like the icing on the cake?
But there are other benefits of selling….
Of course, now that you have sold the practice that you used to own, you can become an employee of the new owner, and receive the statutory entitlements of being an employee, such as sick leave, parental leave, annual leave, and long service entitlements.
After all, you’re working for the roll-up company now, aren’t you?
They own the practice?
And the equipment?
And the patients?
And you’re working primarily for them aren’t you?
Or are you?
I sold that apartment after five years for $347500.00 and became only the second owner in that development to get their money back… after taxes that represented an annual yield of 1.6% for each of the five years…pretty poor effort that….
But nobody cares, remember…
The names, places and stories in this article are purely fictional. Any similarity to any person, or entity, living or dead, or dying, is purely coincidental, or paranoia.
Make sure you subscribe to my monthly Dental Water Cooler Podcast Series…. “The Ultimate Patient Experience”
Click on this link for all details
My next public speaking presentation showing Dentists how to grow their Dental practices will be in Sydney on November 9-10 and in Melbourne on November 12-13 with Dr Christopher Phelps, Dr Nathan Jeal, Mr Alex Lalovic and Mr Tiger Safarov.
You can order your copy here: Click Link To Order
The Ultimate Patient Experience is a simple to build complete Customer Service system in itself that I developed that allowed me to create an extraordinary dental office in an ordinary Sydney suburb. If you’d like to know more, ask me about my free special report.
Email me at firstname.lastname@example.org