Numbers Don’t Lie….Or Do They?
Three men on a road trip decide to grab a cheap hotel for the night. The price of the room is $30.00. In the morning, they each pitch in $10.00 ($10.00 X 3 = $30.00) and begin to leave. The manager stops them and explains that he over charged them. The price of the room was supposed to be $25.00 dollars, so he handed them back 5, one-dollar bills. ($25.00+$5.00 = $30.00) Each man took back $1.00 and gave the manager $2.00 as a tip for his honesty ($3.00 + $2.00 = $5.00)
So, with a dollar back, each man has now paid $9.00 towards the room, but here’s where it gets odd. If each man paid $9.00, that’s $27.00 dollars ($9.00 X 3 = $27.00). Adding in the $2.00 tip, that only equals $29.00 ($9.00 X 3 = $27.00 + 2 = $29.00).
What happened to the missing dollar?
Now, obviously we’re having a little fun here and it’s pretty easy to solve the riddle after a bit, but I’m sure a few of you found yourselves scratching your head.
Buying and selling a practice in today’s world is both easier and harder than ever. Information is simultaneously easier to access and easier to manipulate.
If you’ve ever done any fundamental analysis of a company, what you’ll learn is they’re trying to tell a story with the numbers. That story is going to be biased almost 100% of the time. Redundancy and independent reports are crucial.
The biggest hurdle that dentists need to overcome, is the fact that they’re very intelligent. I know this sounds odd, but the gift of intellect can fool us into overestimating our ability to understand complex material.
Don’t think you can be fooled? Remember Enron? The top CFA’s, CPA’s, mutual funds, hedge funds and advisors all got taken and it wasn’t for a lack of due diligence. Now, obviously, this was a criminal matter, but it’s not far from what we see happen in practice sales every day. This is especially true when it comes to the percentage of patients participating in insurance or Medicare programs.
If it seems too good to be true, it is. As they say, trust but verify. If possible, interview the team at a prospective office. Interview them alone or with your third party representative. You’ll be amazed at what they’ll tell you.
Take the time and spend the money to look at any and all numbers. Even if they simply confirm the original numbers, you’ll sleep soundly knowing you’ve made the right investment.