The devil in disguise!

Aug. 1, 1998
I recently received two newsletters in the mail. Both had a couple of articles in them that really bothered me. One was a promotional newsletter published by a good friend of mine. The lead article was titled, "Why You Should Sell Your Practice to a Dental Practice Management Company." The other was an article titled, "Dental Practice Management Companies, an Exciting Alternative." It was in my own Connecticut State Dental Association Journal. Allow me to get right to the point: Who are they k

Mike Maroon, DDS

I recently received two newsletters in the mail. Both had a couple of articles in them that really bothered me. One was a promotional newsletter published by a good friend of mine. The lead article was titled, "Why You Should Sell Your Practice to a Dental Practice Management Company." The other was an article titled, "Dental Practice Management Companies, an Exciting Alternative." It was in my own Connecticut State Dental Association Journal. Allow me to get right to the point: Who are they kidding?!!!

Why would dentists in their right mind want to give up control of their dental practice? The answer is simple and can be broken down into a couple of components.

First, these individuals are not in their right mind. Most of these doctors have been "sold" a bill of goods. A picture is painted to make dental consolidation appear inviting. Here is a typical scenario.

Scenario 1

You sell the practice for a dollar amount to be paid partly in cash and stock and/or stock options. Usually, the cash amount is somewhere between 20 and 40 percent of the net worth of the practice. For this, the Dental Practice Management Company (DPMC) frees you from the management of your business. The DPMC plays on your emotions by telling you that you don`t need to worry about the day-to-day operations of the practice. You are free to focus on patient care or spend time doing more leisurely activities like fishing and golf.

Your dental team members become employees of the DPMC. You remain on as an independent contractor and get paid a salary for your efforts. Here`s the real kicker - the DPMC retains control of the accounts receivable! Most dental practices in this country have receivables equal to 1 1/2 months of their gross production. When you really think about it, the amount of cash that you receive upfront is "covered" for the DPMC by your own accounts receivable. Let`s take a look at the math for an average dental practice:

* $350,000 yearly gross

* $140,000 yearly net (as-suming 60 percent overhead)

* $43,750 accounts receivable (1 1/2 months gross)

* $28,000 (20 percent of yearly net) or $56,000 (40 percent of yearly net) cash payment for practices purchased by the DPMC

* Selling doctor makes: $12,250 plus stock options ($15,750).

Even if you get the DPMC to give you a 40 percent cash payment for your practice, you have $56,000 in cash, but you have sold out your entire practice, equipment, supplies, team members and, most importantly, your soul! From a financial standpoint, this type of scenario just doesn`t make sense or cents!

Scenario 2

The second scenario may be more favorable. This happens when a DPMC needs to establish a name in your marketplace and you are one of the first practices to "sell out." You have more leverage in this situation and can negotiate a better deal for yourself. However, you still give up control and take a big risk by allowing someone else to control your destiny.

So why do you think this is happening at such a rapid rate in dentistry? The answer is money! DPMCs are extremely appealing because it sounds so good. You can sell your practice to a big company and get some money right away. You also have the potential to make a big profit when the company goes public.

Let`s just play out this scenario. Suppose everything goes well in "Wally`s World" and everything goes as the DPMC says. You get your money, the practice does O.K. and makes a profit, you don`t have the operational hassles, and you go into work each day and just do dentistry. In my mind, I`m thinking of Dana Carvey from "Saturday Night Live" and his character, The Church Lady, who always said, "Isn`t that special!"

Suppose things really go your way and the company does decide to go public. Let`s say the stock even does well in its initial public offering. Heck, while we`re on "Fantasy Island," let`s say you even make a killing on the stock! What are you going to do then? Stop working? Retire at an early age? Move to Maui? Start another business? What ... what ... what ... what is it McHale ... what? (flashback from the old television show, "McHale`s Navy"). Will you stay on in the company and be proud to be part of the corporation? Maybe you`ll even get to sing a special corporate fight song at the national stockholders meetings! Give me a break!!! Hey, gang ... wake up ... DPMCs are the devil in disguise!

I`m just like you. I can`t even begin to tell you how many times I`ve heard someone say, "I wish I could just do the dentistry and forget about all the other baloney that goes along with running a business!`` It`s time to put all of this in the proper perspective.

You are living in the United States of America - the greatest country on earth! Every day since this country was founded, hundreds of thousands of people have put their lives in jeopardy for the opportunity that we have ... the opportunity to be in control of our own destiny.

Talking with people

When I travel around the country conducting seminars, I like to talk with many of the people that I come in contact with. Some are cab drivers, others are hotel workers (bellhops, valets, housekeeping staff, etc.). Most of them were not "Born in the USA!" When I talk to them, I usually ask, "Why did you come to this country?" The response always is the same: "America is the land of opportunity!" I will say, "What do you mean? I know a lot of people who say there is no more opportunity in America." They usually will become excited and say, "Oh no, you are mistaken. America has tremendous opportunity! In my country, we cannot do half the things we can do here. There is so much opportunity to make money here. If you work hard, you get rewarded. In my country, it doesn`t matter how hard you work. You only can make so much money or the government takes it away from you. This country has tremendous opportunity. It`s fantastic!"

This is the point in the conversation when I usually ask them, "How many jobs do you have?" Most of them have two and some even have three jobs ... and they`re happy to have them! They all are striving for one thing: "Some day, I want to own my own business!!!"

Dreams of ownership

Did you hear that? "Some day, I want to own my own business!" These people are working their tails off just to have the opportunity that you already have! If you own your own business, you already are successful. You are in control of your own destiny. You already have more than most of the other people in this world. You see, no matter how bad it seems, when you own your own business, you are given a tremendous opportunity. It is a special gift. It`s what this country stands for - freedom! You do have a choice. You can choose to accept the opportunity, make the most of it, and thrive on the challenge. Or you can choose to squander the opportunity, complain about all the bad things that are happening to you, and become a victim. It`s all up to you. But don`t expect a DPMC to be your savior. That`s not what they`re all about!

DPMCs are in business to make money for the principals of the company and maybe - if they`re lucky - the stockholders. The principals will make money no matter what happens to the corporation. They really don`t care about you ... well, actually they do, up to a certain point. As long as you "produce," you will be their friend. If you ever have a bad month, you soon will find out how "friendly" they can be.

Oh sure, you will be promised that their organization is not like all the others. They`ll say you will have control over your own practice. Just focus on the dentistry and they`ll take care of everything else. Yeah, right! Would you run your business this way? "Oh sure, Bill, I`ve just hired you as a dentist. You can do whatever you want, no problem. Get whatever materials, equipment, and supplies you need. As long as you provide outstanding patient care, it really doesn`t matter. You are your own boss!"

DPMC owns your soul

All I can think of right now is the scene from the movie "Back to the Future," when one of the characters said, "Hello ... McFly! Is anybody in there?" Here`s the real deal: When you sign your name to the contract, the DPMC owns you, no matter what management tells you!

You will have financial objectives that must be met or you will not get paid. You will not be able to purchase any new materials without asking someone`s permission. (Do you remember what it was like to be a teenager?) You will not be able to purchase any new equipment without asking someone`s permission. You will not be able to take a day off without asking someone`s permission. You will not be able to take a continuing education course without someone`s permission. You will not be able to do anything without someone`s permission. (Think back to dental school ... remember how you had to get everything "signed off" before you could proceed?) No matter how the practice does, you are on a salary and unless you have it written into your contract, you will not share in the profits above and beyond your salary. You better go out and hire Michael Jordan`s agent to negotiate a great deal for you. Otherwise, there will be no incentive for you to work harder. Why would you do it? To get the stock price up for the company? You really are living in la-la land if you think this is going to work out in your favor. No one ever said that running your own business was easy.

Current trends in business

If you look at the current trends in the USA, you will see that "home-based businesses" are growing exponentially. Most people who are involved in corporate America are fed up with all the baloney and are looking to get out of the corporate rat race by chasing a dream of owning their own business.

Most of these businesses are based on "referral" or "network" marketing. When most dentists hear about this type of business, they are quick to judge with statements like "A pyramid scheme," or "It`s not professional." Hey, wake up doc! We all know that the best type of patient is a word-of-mouth referral. What do you think that is called? Let me give you the answer ... network marketing!

You already have your own network marketing business and you are at the top of the pyramid! No one can take that position away from you unless you give it up. That is what you are doing by signing up with a DPMC. Before you sell out, make sure you understand all of your options.

One big CE course

Life is an ongoing, continuing education course. Sometimes, all you learn is how not to do things, but at least you learn. To succeed in life, you need to have a passion for what you are doing. Can you really say that you would have a passion for a DPMC ?

If you are confused about the current climate of operating a small business in America, it`s O.K. Many small-business owners experience doubts every day. That is why it is important to share your experience and concerns with others. Find a mentor and copy that individual`s success. Don`t be afraid to look outside of dentistry for the answers.

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