Episode 111 - Buying into a Practice and Bringing on a Partner: The Real Estate (Seller & Buyer)
In the eighth episode of this season of The Dental Amigos, Rob and Paul discuss how the ownership of real estate can affect the relationship between business partners.
First, the Amigos discuss the importance of shared decisions in a partnership, which sometimes can go awry if partners do not have an equal share in the ownership of the real estate. Then, Rob and Paul confer about forming partnerships in start-up dentistries, and discuss why it may not be a good idea to do so due to real estate ownership considerations and other factors.
Listeners who want to reach Paul can do so at Paul@DentalNachos.com and those who want to reach Rob can do so at Rob@RMontgomery-Law.com.
See the full transcription:
Welcome to the dental amigos podcast with Dr. Paul Goodman and attorney Rob Montgomery, taking you behind the scenes of the dental business world. All the things you didn't learn in dental school, but wish you had. Rob is not a dentist and Paul is not a lawyer. But since Rob is a lawyer, we need to tell you that this podcast is for informational purposes only and shouldn't be considered legal advice. listening to this podcast does not and will not create an attorney client relationship. As is always the case, you should formally consult with legal counsel before proceeding with any legal matter. Learn more about the dental amigos at WWW dot the dental amigos.com. And now here are the dental amigos.
Rob Montgomery 0:39
Hello, everyone. I'm Rob Montgomery. And I'm joined as always by the head Nacho himself, Dr. Paul, good to be here chatting, Rob, it's good to see you, Paul, and welcome everyone to another episode of the dental amigos. Here we are the season three finale, the cliffhangers
Paul Goodman 0:55
dug into a lot of good toppings here
Rob Montgomery 0:57
we have. And there's always more underneath the toppings and inside the chips like hiding their great metaphor. Yeah, we can just keep going with that, right? It's never gets old, at least people are listening or like you're still talking about that stuff. So there's a few sort of topics that are sort of out there that we haven't covered. So we're going to kind of do like an overall wrap. But we're also going to talk about sort of how real estate can factor in to a partnership where you're talking about buy ins or bringing on a partner. And then also startup partnerships, do they work? Don't they work? When do they work? When don't they work? So let's just dive right in Paul, you know, the real estate I find in so many ways, in so many transactions in the dental world kind of gets short shrift, you know, whether you're talking about selling a practice to a DSO. And all the discussion is about the purchase price of the assets. And it's like whether there's going to be a lease, you know, lease gonna pay and how like for how long? What's the rent. Similarly, when we see someone who's joining a practice as a partner, again, bringing somebody on as a partner, the scenario where one of the partners owns the real estate, or maybe, maybe we have a situation, we have two existing partners with an associate who's now going to join the practice as a partner. So those people that own the practice, also own the real estate. Now they're bringing this person in, are they cutting them in on the real estate as well? And
Paul Goodman 2:30
I think what I'll kind of jump in and say, Yeah, we're talking about this buying into a practice, you know, you either you've been at the practice and you're buying in, or you're coming in from outside the world and buying in, I think most of the time, our listeners are thinking it's somebody who's been at the practice, most of the time, not all the time, we've talked about these, I'll actually ask you, is there any good reasons why the the dentist is selling? What's a 50% of their dental business to their new partner? Right? Why wouldn't they sell 50% of the real estate?
Rob Montgomery 3:01
You want to know, like, a good reason, or the reason they sometimes
Paul Goodman 3:05
good reason and dentist reason? Yeah,
Rob Montgomery 3:07
unfortunately, that's not always the same thing. You know, the good reason, there's really no good reason not to bring them in, you know, I feel like, you know, if the plan here is to transition, the practice and transition ownership, you know, a key component of that is, is the is the real estate, now, they may want to hold on to it, because they think that from an investment standpoint, over the long term, it's going to be an asset for them that will appreciate and they're going to make money off of it. You know, there's, there's a couple of there's a couple things here, we're going to be coming back to here, right. But you know, I look at it too, they you know, who's going to buy this real estate from you, right, and if it's not the person who's buying the practice, and that's this is the conversation we have in the transition world. But same thing in the partnership world, if you own this real estate, you're going to send the practice and you're going to sell some of the practice and ultimately all the practice to somebody who's going to buy the real estate if they if that person doesn't.
Paul Goodman 4:05
And I think you know, I say a lot. Sometimes my own wife gets on it, but I don't like people ever feel left out. Right. So I just think this is the ultimate, you're making people feel left out, right, you're making your partner feel left out, like, you know, you have a building, that's $500,000 you were, first of all, just for our listeners, but most of the time, and I probably would say you would probably say over 90% The practice is far higher purchase price than the building right? Yep. Usually. So like, you know, we're talking about our practice. Now. There's two dentists, let's just say this practice is being sold for a million dollars. Right, right. And then the building is $300,000. Right? You're letting someone purchase $500,000 of this dental practice you've built with your blood sweat and tears, right and then you're saying but you can't purchase $150,000 worth building because they think now they're going to be I don't know if I'm saying the word right real estate magnate, Cancun or is it tycoon time? You know,
Rob Montgomery 4:56
I have to maintain the castle. I cannot give up the castle. All right,
Paul Goodman 5:00
you know, so I think that it makes it's just not a good start to the true partnership. Yeah, I think you know, and I also think that, you know, I'm, I'm not as knowledgeable about you as real estate, but my own brother and I own a building. And it's like, there's not all just money making do it. There's also some stress making some cost making. Yeah, so just be in it together. You know, we recently had to redo a big outdoor project, and you know, there's not gonna be much rental income left over this year, but this was the year that just had to be done. Right. And then I also feel like it always must create weirdness about what is the year you're gonna buy it? Right. You know, like, is it the year when they have to do a big project the first time you buy? And so it feels like a quarter of the year after? Right? Yeah, it just feels like it makes sense. You know, if our listeners listening to do both at the same time with the same equal partnership?
Rob Montgomery 5:47
Yeah, I agree. And I think to me, the the kind of the biggest problem, Paul is like, if you own the real estate, you own the practice, he kind of have this, like, left pocket, right pocket thing, you know, it doesn't really, whatever really works from a tax standpoint, how to structure right, the rent, who's responsible for the expenses, making improvements to the office, like he said, you know, is that the real estate entity or the practice entity? And, you know, if you're, if you are the only one that owns it, then it doesn't matter whether it's left pocket or right pocket, you know, it's your, your pockets, right? If you have a partner on the right pocket, but no partner in the left pocket, it starts to matter, right, what's in the left pocket and what's in the right pocket? And so, you know, with anything else, you know, when we talk about, what are the sort of the pain points that lead to partnership disputes, it's usually money, right? Yeah. And so this is one of these, you know, inequitable situations, when it comes to money between the, the rent and the real estate, and who's paying what and who's, who's responsible it maintenance. So, as you said, it is oftentimes it can be with an asset that's worth significantly less than the practice, you're
Paul Goodman 7:01
making a big deal. That's the thing that's not as big of a deal. And I think, Rob, you know, just in, in my running through this demo world, you can probably give me more details. But like, there's a mount that set for rent, which has flexibility to it. And then if you're the partner who's not on the owning the building team, you're going to create some resentment, right, as the people or the personnel in the building is gonna be resentful when you want to charge the exact fair market. Right. Like be on the same team. Right, right. It's like, you know, if you say, I've been rents $5,000, and you say, but we can also charge six, the person who's not getting any, the rental income is not gonna be like, six is cool with me, right? You know, because these are resentful. It's like, well, let's keep with the nacho theme for the finale. These are like toppings that cause resentment, you know, resentment topics. So why would you want to do that? And I think the only question I'll ask you is, do you seen in these deals? Is there ever a time, for whatever reason, the buyer can't get a loan for the real estate?
Rob Montgomery 7:57
Yeah, there could be a time and you know, and, but sometimes they can get better financing for that. It's, you know, sometimes it might be an opportunity to refinance, whatever the debt is on the real estate and bring the partner on. And you the, the current owner, may actually make out better by by doing that. But I think the key is, you know, when you go back to what I said a few minutes ago, you know, why do some dentists want to hold on to the real estate because they want to make money off of it? Well, so now, what we're talking about is making money off for your partner, which, you know, we've talked about this a few times in this season, you know, most partnerships, or any relationships, you know, dental practice partnerships, attorney client relationships, marriages, like where there's a winner and a loser. That's generally not a good thing, you know, and not sustainable, long term
Paul Goodman 8:49
years thing. And it's one of my most famous videos on how to talk about dental insurance, and I've repurposed on your phrases. I want to make sure I'm getting it right from you say, you want to make sure the landlord doesn't have a seat at the table and you sell your practice. Right, right. You want to make sure that you create a lease agreement where you have control, right, and it's always resonated. I always say when our patients say, why did you drop our spoiled gwoc PPO? I said, I don't want your dental insurance, have a seat at the table when make my best decisions about your teeth, right? And the same thing happens here because life happens and business life happens. And even if you're great partners inside of the practice, it just seems to be a messy plate of nachos to try to unwind that later.
Rob Montgomery 9:25
Yeah. And why do that? And again, the practice that here we are, you know, hey, you're making a million bucks a year. I'm making a million bucks a year. We're really killing it. And now we've got this dispute over the $400,000 real estate, right, who can that has the ability to unhinge the whole thing for what no good reason,
Paul Goodman 9:43
and I'll share too it's just a tale from the Poland, Jeff world, you know, things happen inside of the building that are just confusing whether they're a Tenant or Landlord, you know, expense or issue right who call and it's a lot easier that we're both on the same plate of an Only nachos or or making money notches in the building. Right? Yeah, if we if we went down and one of the there was a leak in the roof, right midday of patients, and I didn't own the building, and Jeff did, I'd be like, well, this is your problem, right? Sorry, do I pay rent here? Yeah, you can't sell your patients, right. You could, you know, or you know, or it's like, you know, I bet you there's a lot of mismanage expectations between tenants and landlords in general, whether it's the building word now, whether it's a but like, or you might as the person who doesn't own the building have these unreasonable expectations of your landlord, or what they should be doing. So why create conflict?
Rob Montgomery 10:32
Yeah. Oh, for sure. Well, and I love it. And it's kind of takes us back to the relationship metaphor. It's a metaphor, I mean, ships, our relationships. I mean, it's like, hey, you know what, something's broken in the house. Sorry, Mary, not my problem. When is that the appropriate thing to say, Paul, you know, and same thing, as you said, like, wow, the roof, we've got an issue with the roof or there's some problem with the plumbing or something's broken, or something needs to be maintained, or we have our landscaper quit or whatever, like, sorry, not my problem. Like, that's not it's not the foundation for a successful partnership. And
Paul Goodman 11:11
what I hope to, you know, point out from the dentist's side is the lawyer side throughout this whole season, is that shared decision making is the core of good partnerships, right? Yeah, being doesn't mean you have to be agree on every decision, but you have to make shared decisions and move forward. And let sometimes people have little wins on their decisions, and you have little wins on yours. That's how real relationships work. Right? And if you're just not, truly you're two different people inside the practice, if one person is the tenant, one person is the landlord, right? I mean, you're wearing different hats. Totally.
Rob Montgomery 11:40
Yeah, and that just, exactly, that creates this sort of, sort of us versus them thing, which is, which is not good. Now, from a buyer standpoint, you know, somebody coming into the partnership, what I frequently hear when, and this is part of my initial conversation, are you buying into the you're buying the practice? Who owns the real estate, the dentist's does? Are you also buying into the real estate? I don't think I want to because it's too risky to do that now. Or I want to wait and see, you know, this whole, like, kind of wait and see I've kind of people have heard us say this, but we're gonna say it again, after you've bought this practice, or bought half of this practice, and you've borrowed this money of a 10 year loan, there is no probationary period, and that you can't give it back right. Well, as you like to say,
Paul Goodman 12:26
right, use is not returnable, and all sorts of it's kind of like, there's certain things and this is why having a great team like yours, and good dental focus accountants, it's like, imagine if you had 20 rooms in a house and you had someone come and paint him. He said, we're going to paint 18 rooms now. And then two later, it's going to be so much more expensive to paint those two rooms later. So whether it is the legal fees, the accounting fees, think just get it all done at once, right? Yeah, two and a half years from now, you're gonna say, Okay, today's the day, we're gonna do this, right? It just, it's a, a opportunity for problems right on both sides later.
Rob Montgomery 12:58
Well, I mean, that's just it, like, how's that process initiated two years from now, at the time of your choosing? Like, do you say like, now I want to buy in, or maybe that person doesn't want to sell it? And here's the other thing, too, like, when you're going through this partnership, discussion, negotiation, the documents, like you know, it's sometimes it's a little tense, it's not entirely agency intense, it can be uncomfortable, even when it goes well, because you're having this business negotiation, even among friends. And people that get along. It's like, yeah, most people that are working together are happy when that's done, right. So like, we just kind of went through that whole thing with the practice. And now next year, right, we're gonna do it again. This time, it's for the real estate,
Paul Goodman 13:40
I'm sure every single mean, I am sure every single valuation of a real estate purchase has to do with how your grandmother thought, how handsome you were right? Like the owners like, this thing's worth more than someone goes, here's like an appraisal of how handsome your grandson really is. Yeah, very different. You are assuming just get it done in a way where you have these big picture discussions about two prices, price about the practice and a price about the real estate. And then I think, you know, the more then you can just move forward with momentum on all the things you have to do. Yeah, listen, there's plenty to deal with later. Yeah, yeah, I'm partners with someone. It's between the team, the buying things, the checking on things, dealing with things, there's plenty of things to deal with that this is just to be set and move forward.
Rob Montgomery 14:27
Yeah. So again, so we're sort of advocating for it happening at once. There are circumstances where it doesn't make sense, you know, but I feel like I always encourage my clients really on both sides to explore it right?
Paul Goodman 14:41
Maybe Maybe you made me think of something maybe this has happened because you so many deals, some dentists have gotten some really good buildings that have more than a dental practice in them right. And now that there's maybe like, a lot going on with this real estate purchase. Yeah, maybe the person buying in doesn't want to be involved that maybe there's a good happy ending there. Yeah, that's a different I got six tenants and I Got a store here? And he just happens to be here, you know, different thing.
Rob Montgomery 15:03
It's a different beast. That's not the usual. not the norm. Yeah. But like in that situation. Yeah, that may not make sense. Maybe it does. Maybe it doesn't. But yeah, I mean, it's not one size fits all, which is why, you know, we're wanting to take a step back and say, We're not saying you always have to do this. But it should be something that's considered, I think, all the time. And maybe you consider it in the context, the situation that you just talked about, and say, it doesn't really work now. But I think it's an important thing for both sides to defend anything. All
Paul Goodman 15:34
right, for me, we shift gears is, um, there's also a lot of cool opportunities happening in dentistry, where maybe, you know, you're partnering at the age of 35, and you want to buy a new building later and sell your existing building. And there's these entrepreneurial opportunities. If you're just on the on the same, you just you're on the same level playing field with the purchase price, you know, we maybe we kind of will talk about this, the, you know, it's like, why I believe that your percentage should be the same as your partner, right? Three partners, three 3%, when they say, Hey, you can buy 15% of the practice, right? We've talked about 15%, of what right when they make decisions, but if you're 5050 on the building and the practice, maybe you do something cool, and buy a whole new space together and move your practice into it.
Rob Montgomery 16:14
Well, that and that's a great, great point, Paul, and let's just, I don't know, let's connect the dots, it should be obvious at this point, what I'm about to say, which is, how does that play out? If one partner owns the real estate and the other doesn't, and it's time to move the practice, right? Like, we really need to move the practice, we I don't really want to because you know, it's gonna cost a lot or, you know, I am happy here because I'm thinking I'm gonna retire in 10 years. And if we move the practice, and we have to build out something new, or is, is it really am I going to get the value of that? It just, again, it puts you on different pages with this person. And, and then in this, the more that that's the case, the greater likelihood there is for a problem. And we've said this a few times throughout the season. And since this is the final episode, let me say it again, you don't want partnership problems, they are to be avoided at all at all costs. And if you can set the table in a way that minimizes the likelihood of having a partnership dispute, then by all means, do that. And no, it is not a good thing.
Paul Goodman 17:17
And these are also just like, you know, there's I've been a big fan of Gary Vee, and he's he was like, you know, there's no alternative universe. It's just the one you you live in now. Right? So it's like, maybe you think you're in a park or somebody but they make a big deal about the real estate and you don't partner with them. And you have another opportunity down the road. Right? These are just good opportunities to see how compatible you are. You don't even judgment, right. But if somebody doesn't want to split their $280,000 condo in Middlesex, New Jersey with you, it may be a sign of future problems later.
Rob Montgomery 17:44
Yeah, yeah. Right. I mean, it's a sharing, right, where it's sort of like, you're not all in like, I would like to marry you. And we will be, we will operate as though we are a married couple on Thursdays, Fridays, and Saturdays, Sunday, Monday, Tuesday, Wednesday, I've got sort of other plans. But those three days every week, like it's just like, yeah, we're sort of in on some of the non the other. And I think, again, we keep saying we're going to move on. But one other thing I do want people to think about especially is somebody that's the partner coming in, there is something to be said, even with the lease and all the real the documents being done properly. The person that owns the castle, own right, that castle, right, and you may have the key to the castle until they change the locks on the castle. Now, that's not really legal in most states to be able to do that. But you get the idea. If something doesn't work out well in the practice partnership, and there's one partner that owns the real estate, that partner has significant leverage in that sort of practice breakup. Without even going down the rabbit hole of how that is, you just trust me on that. It's that is the pursuit position of strength in that dispute. And so as somebody that's coming in, be careful about that.
Paul Goodman 19:03
Basically, good point with this real estate. This is it just kind of continues throughout the theme of every episode we've ever done of this BOD podcast is get the right people on your team to help you make the right decisions for you. People who do this every day, right? If you were going to call someone in to pitch the ninth inning of the Philadelphia Phillies, you weren't going to call in this pitcher who just plays on the weekends they have these specialized people who helped with these things. And that's why building that team to protect you is important.
Rob Montgomery 19:30
Now, I think you know, with the real estate ball I think over the years now have I kind of made it a sexier subject for you. Right initially used to roll your eyes. I was just gonna say you know what we're bringing Brian Madden on. He's got 20 real estate, so
Paul Goodman 19:45
you can't have a dental office about the office part. Right? Yeah, no. Dental
Rob Montgomery 19:49
true, you know, unless you want to drive around and like you know, the dental van which we're seeing more, not a lot still. I mean, it's not it's not taking over that business model but you What's the real estate's important? It does matter. And thank you for props on that, you know, with without an office, you can't have a dental. Real estate is important. Yeah. Can we move on? Yeah. All right, we've covered it. Okay. So, partnerships in startups. You know, we see it, we help people do it. It always gives me a little bit of pause,
Paul Goodman 20:27
I want to share a word note, because I want to bring you back to 1969 When my dad graduated from dental school, and, you know, he was going to do a start up practice. This is like the olden days, right. He was he he said to me, whenever he was I wanted, he always wanted to have a partner. Right. So that really did have an impact on me his partnership was except successful one I liked, they can cover on vacation for each other. But he goes, I was going to start up a practice my friend from dental school, but then we looked at each other. We said, Neither of us know anything. And they didn't do it. It was a smart idea. Yeah, you know, there's air force. And I'm not saying that in a startup partnership, you may have two associates that have been associates for six years. So they might be very competent clinically, you know, my dad, time wasn't competent, clinically, or business wise, they had nothing going for him. But you know, a startup partnership. I'm just saying, from a dental perspective, you're likely looking at two people who have never owned a business before to again, go into business period. Yes. New sentence. Now they're owning a business together for the first time. Yes. So this brings to me a high wire act of being on the same page.
Rob Montgomery 21:32
Yeah. And there's a lot that can can go wrong, obviously. And, and what that page is, I think sometimes people don't really even realize what that is so frequently, in all partnerships in startups are no different. People that generally want to be partners together, people that are friends, right, you know, you don't want to have partner with somebody that you don't like, right? So usually starts with Hey, we're, we're dental school friends. And now we want to do this together. And we're on the same page with just about everything. Oh, and then you start to have conversation, you know, well, just talking about the partnership details, you know, what happens if one of you is no longer able to practice? What happens if one of you dies? What happens with if one of you cut your hours back? What if you know there's a disability of sorts? Or what happens if you disagree on different things? And it's like, Well, we haven't talked about that. We haven't talked about that. I'm
Paul Goodman 22:29
sorry, I think you do what you do. Robin, I can't miss miss this time for jokers. They're not reading the right book to be on the same page. Yeah, the brighter they come and say, we're on the same page for this blue book over here. You guys want to know, yeah, this blue book is very different than the book, we have to be on the same page with
Rob Montgomery 22:43
Paul, the blue book shouldn't even be called a book. It's like a pamphlet on philosophy. Because what the yes, we like we have the same, we'd like to do the same kind of work. We like working together, we like we've decided on the color of the paint and the name of the practice. And with a sign in the logo, I'm gonna ask you to remember those things matter. Because the grand scheme of things
Paul Goodman 23:07
I would like to set you up because I asked this about the reasons for the real estate. Simon Sinek, what's your i What is the Y that you hear most often when they come and say, Hey, Rob, and the team of people helped me we are two people, you know, Bob guaca, Sally saw. So we want to be partners? What is their why I'm actually totally curious. Startup partners, by the way to
Rob Montgomery 23:27
partners, I think they are under the mistaken impression that it's less risky, if there's two people doing it. And I frankly see it completely differently. I think that it's riskier, for a number of reasons. I mean, one is, you know, sort of the partnership issues, you have to be on the same page with the partnership things. But look, from an economic standpoint, he there's one thing to move the needle to to keep one doc happy. Now you got to move the needle twice as far, you know, for for two dogs to be happy. Sometimes it can be more challenging to get financing, because this is also you're looking at having to be able to generate enough money to feed to write to houses. And so that that can make it more of more of a challenge to but like I mean, it's not like two against one, you know, like, Hey, we're gonna, we're gonna wrestle and it's better if we have two of us against that other guy, Paul, you know, like, it doesn't work that way. You know, it's exactly. And so there are nuances to that, that that can make it trickier. And I also feel like when it comes to the startup, like it's so much about your personal vision, right? Like, what do you what is the vision for your practice? That is just so personal to each individual and each situation that I find it hard to believe that you really can have somebody else that's completely On the page that you're on, when it comes to the division for,
Paul Goodman 25:04
for your product, there's a lot of you know, we I think I've said in the past don't mess up your ones decisions, right, you know, and there's a lot of one's decisions with buying with a starting up a practice, right, there's just a lot of, you're making some of these decisions once and some of them might be, you know, I'm a dentist, some of my be about the chairs that you pick, right, that, you know, can probably be more emotionally influenced than you might think, as a lawyer, Rob Right, which of chairs you pick to so many different decisions that set this practice on the road to success or stress? Or what is that I could see that it can be very hard to be on the same page with all that.
Rob Montgomery 25:39
Yeah, yeah. And as we were talking about, you know, a few minutes ago, in the context of the real estate, when you are not on the same page, and you know, somebody is benefiting or it's working out better for somebody or somebody's kind of getting their way more than the other person. Yeah, that becomes problematic.
Paul Goodman 25:58
And even if you think back to having children, like, there's, there's an influence, it tends to be the mother, but it doesn't have to always be the mother, but they're like, spending more time with that startup human being. And it's like, if each parent was spending the exact same amount of time, I think the it's challenging to have that influence on them. And one leader having the influence on this is likely, in easier messages to the team that you have to hire. Right? Yeah. And I also am assuming Robin, you do this, like, now they both need other jobs during this time. Absolutely. Which shows which also just throws a complicated monkey wrench into so many things, which is can be as simple as my associate job and want me I'm off on Monday, you have to do the Mondays. Mine on let me on Tuesdays, you know, because when
Rob Montgomery 26:44
do you quit? Right? You know, like, like, I It's time, you know, hey, we're pretty busy here. Now, Paul, time for you to come over. Yeah, but I got this other good gig right now on Tuesdays and Thursdays are making a lot of money, you know? Yeah. But we kind of need you over here, Paul, you know, and, and like, again, as we talked about in a lot of different contexts. And this this issue, there's not, that doesn't mean that I'm bad for suggesting that, or you're the bad guy for wanting to work Tuesday and Thursday, your associates shift, because you're making a lot of money. It's just, you know, that what works for me doesn't work for you necessarily. And, and it's it's their legitimate, you know, desires and concerns that each of us have. It just it's something that we're not doing together.
Paul Goodman 27:29
And I would like to ask, because we've talked about this before being an attorney, most people don't call you up and say, Hey, Rob, I just wanna let you know, that asset purchase agreement you did for me in 2012, things are going really well for me, right? So yeah, you probably over you get more problem calls. But in the where are they now? Whether you see him at a C course or things, ones that have gone? Well, for this? What do they look like right one where you say, hey, those two people, they did a startup five years ago, and now their practices support? And both of them maybe there are no stories like that. But I'm just curious, are there any examples of when this goes? Right? What was back at this in the early stages? Of factor?
Rob Montgomery 28:05
Yeah, it's hard to say it's a good question. It's hard to say. And I, to your point, people don't come to us to tell us that, you know, guess what, it's successful. And, and I think a lot of times, we don't hear too, when things are sort of a little problematic, right? Because, like people, maybe they're trying to work things out, or they realize that, let's face it, you are in this together, you know, when that when the bank lends that money to both of you, you're both personally guaranteed this and you're doing the startup, it's hard to get a bank to release one of the guarantees. So you may find yourself in this situation, if you're breaking up, that you have to go and refinance the loan. Well, good luck refinancing a startup loan two years after your startup, right? Because there's not enough revenue and profit and income in that practice yet, and there's still a pretty big debt. And now you're asking for one of the people that was on the loan to be released as part of the separation. So it could very well be that some of these people realize that they can't really uncouple, so to speak. So. But I mean, I think that there needs to be in any partnership. And I think it's even more important as we talk about it in a startup partnership, there needs to be a good reason. There needs to be some sort of business synergy as to why two people are together, you know, that, you know, maybe an ortho pedo like we like the fact that we can provide
Paul Goodman 29:28
well, your backers I think specialist, there's opportunities for specialists do this in a way that's more friction free than general dentists, I can share a few reasons why I think is that there's two Endodontist practicing they're doing kind of the same procedures all the time the systems set up for the same procedures. They're fairly lucrative procedures. So then one endodontist, practice producing 1.5 million has plenty for two people to share. Yeah, you know, general dentist, I don't know if I can compare this alone the same way. But if you had a you had a divorce attorney in here next to you know, a real estate attorney As a dental focus attorney, you'd be your, you'd be making a lot of different decisions on your clients and general dentist, the philosophy of how you treat patients as a general dentist is very varied. specialists have much more of a cohesive way of treating people. So there's there's some, there's just more of a streamlined approach, I do see to periodontist, to endodontists to oral surgeons. And also sometimes some of these areas, I mean, ideal practices awesome resource and sponsor what I do, they would no more but like I also think sometimes there's areas where there's more need for specialists, so they're the practice and get ramped up faster.
Rob Montgomery 30:35
Yeah. Yeah, that's an interesting point. Yeah. And for sure, you know, that you're you're looking at kind of making, you know, the donuts, right, so the same type of donut saying, Yeah, this will make a lot of glazed doughnuts, and we make them really well, you know, yeah, you want cream filled donuts dive, you know, stop the machine and go back and do something.
Paul Goodman 30:55
I think what's interesting about this is and it just made me think what we say that is, if you do a start a partnership, you're going to be seeing each other's patients, let's just say one person's covering it. So I don't know how you guys do when you pass clients back and forth to each other. I know, you try to do them with cohesiveness. But some people you have to get oriented to where they are. So I think for a general dental startup, patients can also get confused. Because you have to, you have to look at what that looks like. Right? Is it? Is it two people playing the role of one dentist? Yeah, and then who are the patients saying, so it's not? I hope that our listeners think maybe me? Are you being overly negative just trying to be really realistic about what this looks like? Yeah,
Rob Montgomery 31:31
well, it's it, you know, realistic, but then that's what we just want people to ask the right questions, or think about the right things, you know, like, an A, you and I in this capacity, we're both advisors. So you're, you're you are obviously a practicing artist. So you're a decision maker, but like, when we're counseling people and trying to help people, you know, we tell them some things to think about, we don't decide for them. And, you know, I think that ultimately, you know, you have to go into this knowing that, you know, there's going to be a fair amount of, of give and take and, and be committed to making this work.
Paul Goodman 32:09
I think also, it's just like, there's what's the line between optimism and delusion? Kobita? What's everything pessimism and realism? Right? Yeah, sometimes I'll type something back on Facebook, and they provide me so negative, I mean, negative and being realistic. And they're also saying, why being so, you know, delusional. I'm just trying to be optimistic. And I think the startup partnerships come with those words coming into play, right? Yeah. Is it optimistic to think the two of you from dental school, we're going to do a startup and grow to a 1.5 million or practice? Or is that totally delusional? Right, that that's going to happen? And I think, you know, we've talked about this in past episodes, startups that fail to launch can be very painful for everybody involved. Very different than acquisitions. In my experience.
Rob Montgomery 32:46
Oh, yeah. Well, I mean, you're selling something with nothing right now with no patients, essentially, at that point. And we've been involved in those situations where people would become disabled or have problems where, you know, here it is, I built this practice on I owe this money, and now I can't see patients there. That's brutal. Yeah, you know, and it's not good. And luckily, we've been able to navigate that in a way that it wasn't, you know, a complete catastrophe,
Paul Goodman 33:12
I look for the drop nachos of of these, how you deal with deal with these drop nachos? If they did happen, because they happen to people, you see these stories. And I think also, it's just, you know, it's kind of a good point for this season. It's like, it's very hard to sell a dental practice a good one. I think people think it's much easier to sell dental practice than this, but you need to, you need a dentist or DSO to buy it. Right. And it's a complex sale, right? Different than a house. And if you think of the startup partnership, you know, like Google, Paul, I don't really like my practice anymore. I want to sell it. I go, Well, why would someone else want to buy it? Right? Yeah, right. Basically, I live in the house. Hey, Rob, my roof leaks. It's a terrible house. It's drafty. Do you want to live in it now? Yeah. So I think it's just an important point that, that we talked about what happens at the breakup? Right. And for startup partnerships, I think that could be an even more complicated breakup.
Rob Montgomery 34:00
Oh, it totally is. It totally is. And, you know, you're both personally guaranteeing the loan, you're both personally guaranteeing the lease. But, you know, I think, you know, just back to what we were saying a few minutes ago that, you know, just there needs to be a compelling reason to do it. And it can't be that because we're friends, you know, and, and whether it's a startup or any partnership, I will tell you, the best way to ruin a friendship is a bad business partnership, you know, and so friends or relatives for that matter, you know, so
Paul Goodman 34:27
I also share that I've the experience you have being a dental partner, I wouldn't call it a friendship, right? Like you say, sometimes Rob, you could buy any piece of real estate so don't be hung up on buying the real estate. If you can't buy the real estate for your practice. Go invest in real estate elsewhere right. Now over here. It's like, go play golf on the weekends because and keep your friendship going that way. Yeah. Right. Because like I'm just telling you to check in hygiene dealers have like my brother and I, I'm very fortunate to be his partner. But like when we went into work just on Monday, it's like, everyone goes to their corners and starts battling right At the end of the day, we drive home and yes, it's nice, right? It's a nice moment. And there's I'm very grateful for it. And, you know, we get to work on stuff together, but it's not like it's not a friendship strengthener in the way they think it's a friendship test tester. And it's not what I mean. Like what you want to do for fun today, best friend, Rob, what's run a dental practice? And have nachos? It sounds like so much more fun. Right?
Rob Montgomery 35:23
That's great. Yeah, good stuff. Well, you know, I think, hopefully, in the season, we've been able to peel back the curtain, give people some some things to think about, you know, and again, we're not telling you the, there's one way to do it, and there's a way not to do it. And so it's every situation is different. But, you know, it's important to know what your options are, and kind of go into these things. Eyes wide open partnerships, as we're saying can be a tricky thing. It's tricky to navigate. And they're very tricky to unwind, and sometimes not sometimes not impossible to unwind. And so you really need to take, go through all the steps, work with the right team, do the right due diligence, and be realistic with yourself to that, you know, is this really, the you're doing this for the right reasons, and that it's a good situation for both people. And you know, I will say Just overall, you know, as I've said a couple times today, and other times during the season, there shouldn't be a winner and a loser right in a in a partnership. And if there is probably destined to fail, I think
Paul Goodman 36:28
it's a great, great wrap up point. We've delivered a lot of value get get the team that you need to succeed, ask the right questions. Maybe you can come up with a compatibility test for a partner's route that can be that can be your contribution. Answer these questions at the end, we will give you a yay or nay No way. Or it might work out. So that's what we're looking for.
Rob Montgomery 36:45
That's it. That's the successful partnership checklist. Well, we'll put that on the on the project list. file. So thanks, everybody, for for listening. Paul. Thanks for coming in. It's always find the chat with you. And I've enjoyed the season. And folks, if you enjoy this podcast, please go and give us a good review on Apple or Google or wherever you're listening to us because that makes us feel good
for sure. Thanks for listening to another great podcast with the dental amigos. And don't forget to tune in next time to have the dental business demystified. If you're looking for more information about today's podcast, you can find it on the dental amigos.com If you're looking for Paul, you can find Paul at Dr. Paul goodman.com. And if you're looking for Rob You can find him at your dental lawyer.com This podcast has been sponsored by Orange Line Media Group. Helping dentists and other professionals create content people love find out how we can help you take your business to the next level at WWW dot Orange Line mg.com. Till next time