1 March 2023

Snake Oil Salesmen, Marketing Consultants, Dental Rainmakers and Accountants Lacking Business Knowledge 

I gained my first dental clients in 1987 and many more over the next 33 years. But first I will reintroduce myself. 

Background

After a couple of invaluable years working for Shell, I enjoyed a 20-year career as an army officer, having graduated from a punishing 12-month course at the Officer Cadet School, Portsea (long since absorbed into Royal Military College, Duntroon). On leaving the army I spent two years as Human Resources Director of the Victorian Attorney Generals Department.

I gained a Batchelor of Arts degree and a Masters of Business Administration (MBA), both of them through part time studies while fully employed. These degrees contained substantial financial, accounting, business strategy, economics and economic history electives. 

The Critical Importance of Reliable Data

In 1987 I resigned from my government position to enter the private sector and underwent a rapid learning curve examining dental, veterinary and medical practice owners’ financials to determine optimum strategies. It became apparent that in order to provide financial advice, it was essential to understand clients’ practice businesses. That meant having reliable benchmarking models so I could determine whether the new client had a practice which was providing an optimum return compared to others in the same professional group. Inevitably this led to concentration on two professions—dental and veterinary practice owners, including those buying practices. Along the way I began valuing practices which enhanced data collection, being careful to ascertain the accuracy of data in order to stop emerging data bases being distorted. Dental data base collection was restricted to completed accounts where employed/contracted dental treatment providers were separated from non-professional salaries, mainly chairside assistants, receptionists and part time bookkeepers. At that time no reliable dental or veterinary practice performance data bases existed.

This Also Applied to Financial Advice

A financial adviser cannot give proper investment advice without knowing whether the client should invest further capital into their practice which ultimately is, for almost all dentists, the source from which their wealth originates. That in turn pointed to the need to give effective business advice. 

Marketing Advice 

A substantial array of those selling business advice services to dentists—particularly marketing consultants—have scant knowledge of dental practice businesses, and are instead blindly selling one size fits all businesses marketing solutions, often for heavy fees not justified by the benefit.

Too often the advice overlooks the fundamental characteristic that dental practices are relationship businesses. Overwhelmingly, successful dentists receive the lion’s share of new patients from the personal referral of existing patients of their friends, relatives, and workmates. Having an attractive website is important for newly referred patients to check the practice location, telephone number, how to make appointments and onsite parking. However dental audience surveys have revealed that these websites are not the primary source of most new patients. They are the primary source of very few new patients.

When checking a dentist’s financials for the first time, I periodically came across substantial marketing expenses/business coaching fees. Yet overwhelmingly in such cases their practice financials showed that their DEBDIT (dental earnings before depreciation interest and tax) percentage was significantly below data base performance. Subsequent discussion revealed that the marketing consultant/business coach had not lived up to expectations. Often advice involved heavy expenditure on social media but the dentists found that most of their new patients were still due to personal referral of existing patients. For more on DEBDIT go to my book Financial Success for Dentists. See below.

Advising dentists to present their practice attractively, having an effective receptionist and concentrating on the chairside dentist to patient relationship are the vital factors. Those dentists who spent money on having the exterior appearance of their practice maintained, interior decorators update the décor of their waiting room, spend money on improving personal presentation to patients and obviously develop their clinical skills reap far greater rewards than those who spend large sums on business coaches or marketing consultants. 

Vital Practice Measure

Understanding their practice DEBDIT percentage relationship to that of their dental peers was vital. Champion athletes have their performance timed as a catalyst toward improvement. DEBDIT is the key dental measure. 

Measuring The Chairside Relationship 

The key measure is the ability of dentists to convert initial appointments to follow on treatment appointments. Experienced dental practice owners measure the effectiveness of assistant dentists by their conversion rates. High patient conversion rates lead to high personal referral rates over time and identify practice builders. Sustained low conversion rates identify practice destroyers. Successful practices cannot retain practice destroyers.

Dental Rainmakers 

Successful dentists who attract many more patient referrals than they can treat personally and who are able to divert surplus patients to assistant dentists are dental rainmakers. Those dentists who are able to improve their conversion and personal referral rates under the guidance of a dental rainmaker are fortunate if they can purchase an associateship in the practice and replicate the successful model. In due course they usually plan on buying out the original rainmaker with a careful orchestrated exit strategy. This enables the former principal to have a gradual withdrawal from the practice working for, say, initially 3 days per week, reducing to five days per fortnight then to two days per week and eventually gracefully departing from practice. Patient goodwill passes to the (by now) sole practice owner who develop their own assistant dentists. Far sighted dentists who can replicate a role model rainmaker long term have financially rewarding and professionally satisfying careers. Their practice goodwill payment is usually the best financial investment that they ever make.

The Worst Sources of Bad Dental Practice Business Advice 

In my long experience the two sources of the worst advice to dental practice and potential practice owners are:

1.     Accountants without a substantial dental client list, and

2.     Marketing consultants also without a deep dental client list.

There are a relatively few accountants with a deep knowledge of the types of business that they advise; the vast majority mistake the ability to complete tax returns with relevant business knowledge. I have come across many dentists who had received poor advice from accountants often costing them vast amount of foregone wealth creation over a long dental career. By the time that they identified their long-term practice and financial shortcomings, the accountants who had initially set them down poor pathways had retired, never having been challenged to account for the adverse outcomes of their sub-standard advice.

Over many years I was approached by lawyers asking me to value a diverse variety of businesses. I refused to value all but dental and veterinary practices because they were the two groups of businesses of which I had a substantial data base and extensive experience of advising. I ran into a variety of individuals terming themselves forensic accountants. When faced with an argument with one on the other side of a dispute about practice value I invariably found that their knowledge of dental or veterinary practice was scant to non-existent.

Misleading Accounting Signage

Do not mistake accounting signage proclaiming that they provide business advice as well as accounting and tax advice for competence in the former. The accounting practice which has a large number of diverse business clients and does lots of personal tax returns but has no critical mass of any type of business is not equipped to give a dentist sound business advice. But a vast number pretend that they can. A dentist consulting an accountant for the first time about buying a dental practice must establish the accountant’s knowledge. This is best be done by being armed with questions to which the dentist already knows the answers.

What most accountants do is prepare last financial year’s tax returns, largely done by plugging numbers into an accounting program.

Be wary when consulting an accounting group where the rainmaker who largely built the business is long retired. The remaining partners may not have the dental or business knowledge you require. The partners may have compartmentalized their clients in such a way that very little relevant business knowledge passes between them.

Accounting Advice Leading Assistant Dentists Toward a Financial Cliff 

A dentist who I shall call Brown employed a couple of assistant dentists who over several years had expressed interest in buying the practice. Eventually Brown had the practice valued and the valuation was consistent with the recent market for dental practices. The assistant dentists, who I shall call Smith and Jones took accounting advice, and that accountant who should have known better told them that the practice was worth much less. Brown rejected their figure as being ridiculous. Smith and Jones then covertly set out to establish a practice nearby, renting a vacant commercial premises in a nearby shopping strip. Brown has since sold his practice and his practice premises and agreed to work for the new owners for one year. Meanwhile Smith and Jones are grappling with dental fit out, equipment, the myriad of unforeseen matters and extra expenses associated with fit out. Inevitably it will prove to be very expensive. Brown’s practice new owners retain his vast personal goodwill, control the practice name, telephone number, email address, practice website; importantly the practice has substantial attached parking. While Smith and Jones are trying to establish a practice, Brown’s practice continues with barely a noticeable change in patient numbers. Observation of similar circumstances indicates that while Smith and Jones will attract some patients that they had previously treated, the majority will continue to make appointments by ringing Brown’s practice and Brown’s receptionist will book them to another dentist. Parking availability at Brown’s will also prove to be an influential factor. It will prove to be a slow and financially challenging period for Smith and Jones, whose startup will not have sufficient patients to pay their bills let alone themselves for a considerable time. They have been very badly advised by an accountant. As they realize that Brown’s practice has been sold but continues to draw in and treat most of the patients that they had previously treated they will realize that they have made a strategic mistake. The accountant whose advice led them toward their strategic mistake won’t be accountable for the outcome. 

Snake Oil Sales 

There are a few practice consultants with the depth of experience and ability to get the right message to dentists. Far too many marketing consultants are simply a 21st century version of snake oil salesmen. In the Wild West there were vendors of medical potions which they promised would cure all manner of ailments. They drove their wagon into town and entertained the population with wondrous tales of the cures brought on by their wonder potion. Having put on a show and sold as much as they could they hitched up their horses to their wagon and rolled onto the next town. By the time that people found that the potion was useless they were far away. They became known as ‘Snake Oil Salesmen’. The modern snake oil salesmen promise wonderful practice expansion if only the dentist sign an expensive contract and agree to a range of social media exposures. Most fail their clients. After a time they find that the majority of their new clients are referred by existing clients and most of their marketing expense has been wasted. Overwhelmingly the most successful dentists I dealt with over 33 years have not spent huge sums on marketing consultants but they did have well presented practices, high level interpersonal patient relationship skills and an array of clinical skills.

A Tale of Two Dentists in the Same Country Town 

I dealt with the two dental practice owners in a particular town. One was addicted to marketing consultants, signing for one year then multi year programs and his financials showed the substantial cost. The other practice owner simply concentrated on the basics and ignored marketing consultants. Year after year the latter dentist’s practice substantially outperformed that of the dentist addicted to marketing consultants.

Read How a Snake Oil Salesman Led a Dentist Toward Financial Disaster

For an entertaining read on the outcomes of a snake oil marketing consultant to a dentist, go to grahammiddleton.com. Under Dental Articles, read “When associateships break down into legal conflict.” The essential facts are true but names and some identifiers were removed to preserve individual identities.

Financial Success for Dentists 

Financial Success for Dentists: Rules for How to Approach Your Dental Career sets out the key strategies which make dentists successful. It is specifically written for those dentists and dental specialists owning their own practices and for those aspiring to own practices. Among the topics included:

·      Understand key practice valuation criteria.

·      Learn how some dentists inadvertently reduce the value of their practice by $500,000

·      Avoid long term errors when purchasing your practice.

There are many accountants, financial advisers, marketing consultants, web site designers and practice advisers who give advice from their particular disciplinary experience, but very few have the wider breadth of experience to define for their clients the key rules to follow to optimize their practice and their long-term financial outcomes. An otherwise competent financial adviser may have little understanding of what makes one practice much more successful than another. Many accountants have detailed knowledge of the taxation rules but cannot identify if a dental client has broached invisible barriers to practice growth or a threat to practice goodwill value.

I spent 33 years examining dental practice financial outcomes and reviewing the key strategies and decisions which separated successful Australian dental practices and practice owners from the less successful and this led to relevant conclusions and advice to dental practice owners.  

A complete and comprehensive career guide for mature and aspiring dentists.

Based on real life situations and a lifetime of dealing with dental practice ownership outcomes this book is worthy of Text Book status for every dental teaching school.

—Merv Saultry, Founder Dental Innovations Network

To Obtain a Copy: 

·      Go to the Delany Foundation website at http://www.delanyfoundation.org.au

·      Click on the Donations tab and make a donation of minimum $60. This is easiest by Mastercard or Visa.

·      Email graham.george.middleton@gmail.com confirming that your donation has been made, as well as your name and mail address

·      A copy of the book will be mailed directly to you

All production costs and mail costs are met by me personally, so all money donated goes to the Delany Foundation which contributes toward the running of schools in Ghana, Kenya and Papua New Guinea. Naturally donations above $60 are welcome.

The donation to obtain this publication will be the most cost-effective practice advice most dentists will ever receive.

Please Pass On 

If you like these newsletters, please pass them on to colleagues. Past newsletters and articles in Australasian Dental magazine on business issues are at grahammiddleton.com. I can be contacted directly at graham.george.middleton@gmail.com

Independence And Disclosure

I am not a representative of any accounting practice, financial planning firm, business or marketing consultancy. I spent 33 years as a business and financial adviser to mainly dental, medical and veterinary specialist and general practitioners. Since I retired as a director of a financial services group, of which I had been a founder, on 30 June 2020, I am no longer licensed as an investment adviser. Readers should treat the above as general advice and take professional advice as required.

General Advice 

I sold my interest in a financial services and accounting group on 30 June 2020 and have no intention of starting another financial services business. I own, via my family superannuation fund and investment portfolio, some of the stocks mentioned in this newsletter. My website is now available at grahammiddleton.com.

Those who find my newsletters of value to them are asked to consider making a donation to the Delany Foundation, a registered charity which assists schools in Papua New Guinea, Ghana and Kenya. Delany Foundation c/- Holy Cross College, 517 Victoria Road Ryde NSW 2112.

Best wishes to all readers

Graham Middleton