Bad Broker Behavior: unbalanced representation
Imagine a teeter totter with two 100 pound boys on either side. They are having fun going up and down, up and down. It is easy to have fun because of their balance (both of them exert the same gravitational force), and their own leg muscles provide the fun.
Now imagine two different boys, one is 100 pounds and the other is 5,000 pounds. The heavier boy has all the advantage. There is not much the lighter boy can do to have fun. He is at the mercy of the greater gravitational pull of the heavier boy. If fact, the heavier boy will not have much fun either.
You think the mismatched boy story doesn’t happen? There are about 140,000 in the US dentists that can tell you that is happens all the time, at least as an analogy.
The boys, in the real mismatch are dentists wanting to carry out a transition. The lighter boy is a new dentist, and the heavier boy is a senior dentist. The gravitational mismatch is provided by representational force. The senior dentist has employed a broker that charges 10% of the selling price, and the new dentist has agreed to a dual representation with either the same broker or employed a different broker. The new dentist has paid $2,000 for his representation, and the senior dentist will sell his practice for a million dollars, creating a fee of $100,000… a 50-1 ratio, hence the 5,000 pound force to the 100 pound force.
In real estate, there are often two brokers, one for the buyer, one for the seller. Almost always, they split the commission that the seller pays 50/50, creating equal representation. This balances the scales and means that both buyer and seller have brokers that will fight for their clients’ good because both brokers stand to make the same amount of money from the sale.
In dentistry, there is no such 50/50 split. The only way to create equal representation is to skip the dental practice broker altogether. All the broker does is evaluate the practice (another Bad Broker Behavior), market the practice, match buyers to the practice, and create the contracts to affect the transition. This is not oral surgery we are talking about here. The tasks are not hard, but because the brokers know the steps and the dentists don’t, the brokers have an advantage, and continue this process that allows transition representation to have a 50 to 1 ratio imbalance.
You can’t blame any one broker. This representation mismatch has been built into dentistry by decades of brokers following the habits that their predecessors built. Dentists can and should transition with equal representation, and the best way to do that is to not use a broker at all. The buyer and seller represent themselves. The transition tasks, once understood, can easily be accomplished by both buyers and sellers.
Social media is driving our society towards trust and openness. Fundamental attitudes are shifting. If both the buyer and seller embrace this new ethos and are open and trustworthy, then balanced self representation dental practice transitions can be fun.
p.s. I thought I had posted this already… sorry for two posts in one day, but this post was supposed to be published at the same time my YouTube Bad Broker Behavior video with similar content when out.
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1 comment
Mahlon Fraleigh, DDS
September 2, 2011 at 7:58 pm (UTC -6)
I was one of those 140K+ young dentists that got taken to the cleaners in 1985 just after I had finished my GPR at Charity Hospital in NO, LA. A broker in Littleton, CO named “Sharp” (I’m not making this up) representing a seller,and ultimately, me the buyer, had me buy a 5 yr old practice that supposedly had over 1100 “active” patients.
Of course, in the contract, he had a “hold harmless” clause to protect himself.
After the closing, and the seller had moved back to TX, my staff and I discovered that there were in fact only 386 legitimate “active ” patients. There were hundreds of “patients” who the seller had recruited over the previous year with Pennysaver mailer coupons offering an exam, xrays and a cleaning for $50. Trouble was that he posted to each of these so called active patients’ ledgers (remember, this was before any dental software) an outstanding account receivable of $60, the difference between his actual fee and the coupon. Boy, did we get hundreds of nasty phone calls the week after our initial billing went out!
In addition to that fiasco, we discovered that the seller had not mailed out a tenth of the letters of introduction that he was supposed to. He was supposed to have stayed in the office for a two month “transition”, but on opening the office the 1st Monday morning after the closing, we discovered that this guy had come in over the weekend and done a bridge prep/impression on a patient (the way we found this out was that he was too lazy to even clean the impression material off the instrument tray he had used!). I didn’t confront him that day, but went by the lab later
and found out that he had dropped an impression and an Rx off. From this I was able to find out from the patient, that the seller Dr S___h had told the patient over the weekend that he would do the bridge if the patient would pay him the 50% his insurance would pay and he, Dr S__h would have the insurance benefit check sent directly to the patient! All of this was to be accomplished on the sly without our finding out about it! When I confronted Dr S__h about this, he went into a red faced rage, threatened to sue me for defamation of character and stomped out. Needless to say I called a locksmith.
That next Monday, we started getting dozens of calls from the congregation of Dr S__h’s evangelical congregation asking for their dental records because I was an “un-Christian *^%#@!
Cut to the chase, Dr S__h returned to TX where he was from. My attorney did an asset discovery on the guy and found out that he had little assets to even go after! Soon after all this, the Front Range (Denver area) went into a deep recession/depression (remember the Savings and Loan fiasco? – Denver was at the epicenter) and I ultimately wound up having to declare Chapter 7. One hell of a way to start off your professional career. I has left a bitter taste in my mouth even after all these years. No doctor would consider hiring me as an associate for years afterwards because of my credit report. I finally had to take a job as a civilian contract dentist that paid only $50K and after self employment taxes by the IRS and the state, I was taking home a whopping $41K a year.