" Selling is not a pushy, winner-takes-all, macho act. It is an empathy-led, process-driven, and knowledge-intensive discipline. Because, in the end, people buy from people."
Marcus "The Profit" Lemonis (45) is a well know entrepreneur. I watch "The Profit" regularly to learn how he values business. The Profits' investment strategy always involves what he calls "The 3 P's" - People, Product, Process. The belief that you need to have the right people creating the right product using an efficient and profitable process....I would like to add another "P" to how I strategically invest - "POTENTIAL".
The Thinker
Why does our profession only allow marketing that would have the public believe all dentists are the same?
If all "burgers" taste the same, then the only marketing you need to do is open up a clean facility in the most opportune locations.
Is this in the best interest of the public?
The people who buy clinics and evaluate clinics might tell you the same. A business here or there that flips the same burgers should get the same multiple of earnings. These evaluations look at numbers only. Numbers are important, but if that's how entrepreneurs and investors ALWAYS regarded "opportunity" - this world would never progress. We would forever be backwards looking and only letting "crazy people" take the risk and then buy them with the hope that it just stays the same.
I think we are evolving. It may be my "crazy" opinion that not all dentists are the same and that plays an important part of understanding my valuations. Cash flow, gross income and EBITDA multiples should not be the only determining factors in valuations. I have seen GREAT earnings in clinics that are dying. I have seen HUGE POTENTIAL in clinics that have not yet realized their full earnings...
Learn to recognize this if you want to be sitting in the Dragon/Shark chairs. Multiples of profit and gross income of a business are important....so is infrastructure. People. Process. Product.....but I would challenge you to add a fourth Principal....POTENTIAL.
Too often I evaluate clinics with great EBITDA that have not invested. The earnings may be a sign of an INDIVIDUAL OWNER that is about to retire that has found their own niche. Creating a fantastic "paper" with "EBITDA" along with their accountant because they simply want to sell and take care of themselves.
Not easily reproducible (which CAN be good and is WHY DSO exist).
The TEAM (people) built around the business are experienced...and replacing them in the current environment will be next to impossible. The PROCESS worked for the past - taking impressions. Developing Xrays. Hand filing. Full mouth series xrays and no panoramic. Endo / Crown / Extract everything eventually.... The relationships with the patients is long established and this neighborhood is well developed (and no longer growing).
If you want to BUY this business - you better ONLY look at EBITDA and then get some guarantees from the current owner that the profit will remain after you purchase. Let them take the risk out of the formula with the terms of the sale. A type of "reverse mortgage" sale!
Alternatively, you may have an established business that has recently spent "earnings" on team. Hiring desirable, educated and talented people that recognize the changes that are driving the newest consumers. The investments in infrastructure will provide the services that the public is demanding. Recognizing opportunity in techniques that are reproducible, teachable. Opening locations to "brand" their style. Amazon type of investment - constant improvement. Recognizing ways to improve and become more efficient. Providing services demanded by their customers, and teaching customers to expect more.
Why things change - entrepreneurs teach us.
Someone out there has taken the time to EDUCATE the public on what they actually didn't know they wanted. It happens all the time. Before you know it, you are making calls on a wireless device to the other side of the world, using the same device to get a prepaid, competitive ride from the middle of nowhere to the middle of nowhere else.
Entrepreneurs are the reason the world keeps moving forward. They DO NOT look at past results - because the idea they had didn't exist! They see opportunity in the ways they already do business, but find ways to improve the process. Investing and building out an infrastructure to support the future - not the past.
In our business, it was a PATIENT that invented Invisible Aligners! This patient recognized an opportunity and then created a $12B a year market. Teaching CUSTOMERS about an alternate way to get results...think about how retail has changed because of customers demand.
The continual improvement of a business is POTENTIAL! If the right People create the right Product using an efficent Process....you can create a lot of Profit with that Potential!
The Dental office of tomorrow. Today. Recongizing POTENTIAL
It's important to buy a business with good "numbers". More important is a practice evaluation. Determining if you can reproduce those numbers.
Understanding the team, and if they will be involved in recreating the past success. Are they open to a new owner, constant improvement, learning?
If I was buying a restaurant - I better know how and why the customers come to this location. What they expect and how to continue to improve on the idea. Can I afford to take this business over and stay in business with the current cash flow and profit - or will I need to re-invest and completely rebuild?
What is the customer base like? Are they willing to adopt a new provider, new techniques and procedures? Will they accept the new concepts on treatment and healthcare? Can I teach them this and succeed?
You can almost always tell how the business will go in the future by the investments that were made. Whether they involved the team, and consistently invested in the infrastructure and constant improvement.
It's my belief that the dental office of tomorrow will incorporate digital dentistry. A combination of software and imaging with 3D printers....some incredible potential lies within the healthcare industry....
Digital technology isn't new...but the myriad of materials and ground breaking techniques are! Being able to print prosthetics "on demand" that are STRONGER and more RELIABLE than ever before....
The current technology already offers an "ROI" - and there is already a large adoption. It's the future of healthcare!
