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(This is a blog about selling a dental practice, but the metaphor applies across the whole of life).

If there is one thing that being a part-time, one-time, reluctant property developer and investor has taught me, it is a model by which, rich people get richer.

This model I will call the magic 5%.

In truth the magic 5% is 5-6% but 5% is the lower end of the safety zone.

Rich people want investments that return at 5% and they will screw things down and tighten as much as they can, the contract or the arrangement, to get .1%, .2%, .3% more than us.

The likes of you and I do not appreciate this, because we don’t have enough money for 5% to make the difference.

Let me give you an example.

If you find your self the lucky recipient of a £1000 gift, you could find an investment to put this in to return 5% a year.

In one year you would have £1050 and the second year you would have not much more than £1100.

Over two years you have earned £100 and for most people that is not a life changing amount of money (less than a months normal subscription to Sky T.V these days).

Imagine you had a hundred million pounds and then do the math.

If you’re lucky enough to have a hundred million pounds and to put it into investments that have a minimum return of 5% and to leave it, then you can see what happens over time.

This is, in effect what happens when a corporate buys a dental practice, but we are blinded by the first few years.

The model we have at the present time, is that the corporate has a lump of money which they are ready to spend, might be a pension fund, might be a huge health care company (BUPA), might be a private investor.

The private investor puts up the £3,000,000 to buy a very well to do fantastic dental practice, but locks the high grossing, high turnover principle in as a 45% associate on a turn over target.

The corporate walks into the practice and going about shaving costs in all sorts of ways, knowing that the one individual that is able to maintain the turnover is locked in with handcuffs to make sure the turnover is maintained.

Pretty much all of the time and due to the sweat and tears of the principle who has sold the practice, threw the earn-out period, the corporate gets their initial investment back (plus about 5%).

At the end of that phase the clever principle now decides that they are going to move a long and stick two fingers up at the corporate and teach them a lesson, but in truth, they “do not give a s***”.

They now have the asset and the ability to put someone else in. they will of course earn less turnover, but the model will still allow them to make at least 5% profit on the asset that they now have, which has already been paid for.

Regularly now I have conversations with principles who have sold their practices and to say, "I am going to stick it right up the corporate after my earn-out and watch what happens to them."

What actually happens to them is that they couldn’t give a s***.

We remain emotionally attached to the businesses that we built; they are utterly unattached.

We have created a very clever accounting model to buy an asset, re-cook the cost of buying it in a very short period of time and set-up a long term 5% model.

They are they rich and they will get richer.

We will be heartbroken as we watch them deconstruct our asset that we built with our own hands with such love, care and effort, but we sold it and we took the money and we ran.

Perhaps you might want to explore the other option, which is to build a business that you don’t have to sell.

If you’re one of the people who are now interested in this, why not consider coming on the business course next year, to meet other like-minded people who will help you build that business.

There is another way.

Blog Post Number - 2191