Episode 115 - Buying a Practice - Due Diligence: Financial, Operational and Legal
In this episode of The Dental Amigos, Rob and Paul help listeners understand how to conduct due diligence when buying a dental practice. The Amigos know that due diligence can seem daunting to buyers and that it may be difficult for buyers to know where to start. With this in mind, Rob and Paul break due diligence down into three main categories: financial, operational, and legal. Using these three categories, The Amigos explain what to look out for during each stage of due diligence, identify who buyers need on their team and discuss when buyers should on-board these key players.
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 episode transcript below:
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.thedentalamigos.com. And now, here are the Dental Amigos. Hello, everyone and welcome to another episode of the dental amigos Podcast.
Rob Montgomery 0:43
I'm Rob Montgomery. I'm joined as always by the head Nacho himself, Dr. Paul Goodman. Great to be talking. Rob. It's good to have you, Paul. And here we are season four, talking about acquiring a dental practice. So we're talking about really more buyer driven issues. Today's episode is going to be the exciting topic of due diligence need to reframe that word, because it's such an important thing, but it's got kind of a bland rice, we got to think of a new new word for due diligence as we go along. I gotta tell you, I don't think it's bland. Well, you're an attorney. Like torch you like briefs? Right? It's exciting. Yeah, due diligence. Right? It just depends how you say, you know, say it off. Do you deal with the right tone with due diligence? Yeah, follow that when when I hear the word due diligence, it is some of the exciting deals going on. Right. But it also means that we're still not really quite
Paul Goodman 1:36
It sounds a bit like homework to me. That's why I don't think I like it. Okay, I'm gonna go do your homework. Right. You know, I don't know, we I don't know if I'll think of something about the podcast, because it is such a critical part. It's kind of the, you know, the big make or break it to the whole totally. Yeah, I mean, again, like I said, it's exciting that things are moving to that point. But it's also shows us that we're still on somewhat, you know, precarious ground here. And that, you know, the buyer is still working through things we haven't learned everything that you know, is to be learned about the seller's practice. So you know, what goes on behind door number two, you know, you don't find out until you actually get in there. And as you've said, in previous episodes, walk around the practice, you're looking at the practice, getting to know the seller, getting a better handle of what this, this practice is all about what the vision is, like what the people are like. So you know, but today, I think I want to break down the due diligence world into three main categories that we'll talk about. So we'll talk about financial due diligence, operational due diligence, and legal due diligence, guess who says I'm the dentist on the podcast that you are, this is the part that's coming after the LOI. Most of the time this, you have signed an NDA, you've worked out an LOI letter of intent
that we talked about in the last episode. And now you're saying, this is where the seller really opens things up for you to analyze in these three categories?
Rob Montgomery 3:06
Yes, now with the caveat that, as we've said in the previous episode, sometimes if we have the luxury of time, and it's not in a competitive situation, where there are other potential buyers, where you have to kind of get in front of the line, submit your loi, in this situation, sometimes you might do the due diligence, before you submit the offer. Yeah, you know, which is might be nice, because now you know, everything there is about the practice. And when you say, here's what I'm willing to pay for this, you've already done all the all the research, but you know, I would say that, that is the minority of times that you have,
Paul Goodman 3:41
you know, we you and I are, are like the podcasts that amigos have played different roles on these teams, you know, and I talked about this basketball team and the broker plays a role, you know, in our client base, you know, this, we're working for the seller, not a dual rep broker. And we're working with the buyer and I will share with you authentically, that sometimes being too free with allowing the buyer to dig into details before a letter of intent has cost me many hours of my life. I'm sure I'm discussing why May of 2020 had fewer profits than April of 2020. This buyer has not talked to a bank yet. And that's just for everyone's sanity for the success of the deal. So I agree with you. And then but say and usually signing a letter of intent shows a seriousness to the process. Yeah,
Rob Montgomery 4:27
now, but when you just said really kind of brings up another topic that is, you know, there are people that are selling practices without a broker, in which case the whole order of operations, you know, who knows what's going to happen there, how long it goes on? What happens first what you know, is there was there even an NDA, have people started looking at things before there is an NDA or an LOI, you know, all bets are off with that. And, you know, sometimes we get involved at different times in different stages of those sorts of deals.
Paul Goodman 4:59
I think there's So the right time for it to me is somebody who's bought practices and looks at practices. There's only so much information you can process at one segment of time, you know, so you process the NDA part talking to them, you process that away part. If you start looking at bank statements from two and a half years ago, before you see the practice, I sometimes just think it throws the whole, your whole mind off and how this works. I also will share authentically, as someone who's made errors in purchasing practice before I met you, you don't even know what you're looking at some of the time, right? So, you know, it's kind of like, I was like, Hey, Rob, here's the bonding instructions for a veneer on a tooth. You know, it's, it's, it can be like that to a to a dentist. It's like, you start looking at even accounts receivable and things like that. So I think this is usually my hope is when we talk about this, that this is going step in step with a team that you've hired for like a dental focus accountant. Yeah, not just you trying to figure it out yourself.
Rob Montgomery 5:51
Yeah. Oh, absolutely. I mean, you don't know what you're looking for. And like, again, you know, it's one transaction, you want to learn the hard way, right, something that you're never gonna do potentially the second time, you know, it's not like, you learned how to change the oil in the car, and you're gonna do that the rest of your life, right? You have to people even change, right?
Paul Goodman 6:09
I don't know if there's a guest, I don't like to drive the car, let alone charge. You change the oil. You
Rob Montgomery 6:14
think I've seen you behind the wheel?
Paul Goodman 6:17
The day that we drive in a new world 38
A year you'll be
calling people driving me is too much dead time. I think you know, we've outlined financial, operational legal, I think financial is the good one to start with. And maybe I'll ask you this, because yeah, there is just a, I don't know if the right word is reconciliation. But what is the part? And I know you don't do this exactly as the attorney but just basically, where you're making sure that financial information is accurate, right? Like, is this the time where you're just evaluating the accuracy of what you've been given?
Rob Montgomery 6:54
Yeah, pretty much? Well, some of you haven't been given some things you're trying to confirm, you know, so generally, you know, with a starting point with this is, if the deal has been managed, and the table has been set in sort of the normal, proper way, there's been a practice valuation that's been done. That's sort of been thrown out there as here's the number. And here's how we arrived at this number. And then it's on the buyer to kick the tires. Yeah. Now, to look at that valuation. And I think it's important for people to realize I I'm not a big fan of getting your own independent response evaluation, I don't see a whole lot of benefit to that. Well, what good is it that you just paid somebody just do the same thing? It's gonna be different, right? Like, you don't really care about that. What you want is somebody to evaluate the valuation and say, you know, is this number within the range? Again, I say range? Because if it's the valuation says, $697,000, you know, that somewhat, there's some wiggle room that you don't want somebody to come back and say, Nope, 691 91 I guess it away, I also spend it how could you possibly try to do I try
Paul Goodman 8:06
to use this as example for the some of the financial due diligence, it, it helps you understand how the money moves to the practice. So understand, say, it's like if someone said, I eat 2000 calories a day, but I 1900 At breakfast, and 50 the other two meals you go, that is an unusual way to consume food. Right. And I think is that someone buying it? This could be stuff with the team wages? You know, it could be a marketing expense. I mean, I've done with Bob SEPAC, founder UBA we've done the million dollar practice that made no profit. Right, right. And it's, there's sometimes you see a consulting fee. What's that for? And why are they doing it? Right? Because you're basically going to take over these expenses, right? I thought that you think you're going to just go in and transform the expenses on day one. There's people attached to these expenses sometimes. So it does drive me nuts when someone goes, I know the staff wages are high, but I'm going to reduce them when I get there. Yeah, how you're just gonna make everybody upset with you. Yeah, the people that you count on, right to live your life. And Joe trust in the patients. You're going to irritate the first set. You just
paid a million dollars for this asset where everybody that works in that place. Yeah, the 15 people hate you. Yeah. Let's now Now let's start.
Interesting. Also, I'll share someone who's, who has multiple practice, even like these vendor relationships. It doesn't mean you can't change but you're going to probably keep a lot of them the same just as they're moving through the practice. You know, some dentists say, Oh, they pay a big supply company 7% I'm immediately going to order everything off. Net 32 You're probably not you're going to try to get your there's it's so overwhelming to take over a practice. I only describe it as when they put a child in your home with no instructions, right? You go to the hospitals to people. You can't leave with three people. They don't give you any instructions, right? But everybody comes to help you take care of your child. Not many people want to sign up for babysitting your dental practice, right? So I want to just share as the dentist here, I guess financials that you're going to keep alive Are these relationships the same financially? So you either gotta live with him or not doesn't mean he can't transform over time doesn't mean you can look for the best deal and cotton rolls, right? I'm just sharing that when you get it takes time.
Yeah, overtime is the key, the key phrase there, you know, and I think it's important that to your point, you're working with somebody that is familiar, very familiar with the dental industry that can look at those numbers and say, that's out of line, that's high, that's a problem to identify these problems. So really, what you're looking at, again, you're not doing your own valuation, but your team is evaluating that valuation seeing if it's if it makes sense. And then importantly, off of that, is, you know, what is the cash flow projected cash flow of the practice, which I think is more important than evaluation in a buy in or a practice acquisition? And what I mean by that when we say cash flow is how much can you expect to make after you have paid the bank and produced and been a dentist in that practice as this practice owner, and sometimes just because, as you said, a practice grosses a million dollars doesn't mean that this is going to be something that you are walking away and assume that
$1,000 One thing I can share into this, just assume you're going to do the same thing as the seller. You know, these, you haven't worked one minute in this practice. So to have this there's this from Seinfeld cockeyed optimist, this optimism, but really delusion that you're going to step in and do things so much differently immediately. And now there's going to be more production and less expense. It's a relationship based business, you know, like we say, dental offices or people places, not pizza places, right. So it's like, I just think that part of the financial part is have your team really show you this was gonna feel like they own this practice. Yeah.
Hey, and that's a great point, too. Let's talk about that for a second. We've talked about this in different ways, in different episodes in different seasons. But you know, understand that, you know, it's like for you as a practice owner, same with me. Like, there's a lot of things if you were just starting from scratch, you would do right, you know, but like, it's not that easy to make changes, right. And it's not wasn't easy for the seller to change those things. And now, it's going to potentially be even more challenging for you, as the new owner, the buyer to make those changes. So you can't just assume it's not like, you know, HDTV that we came in, we cleared everything out, we put in a new kitchen, we flipped in and whoo, look, I got right, not that easy.
previous episodes, if you feel this way, your startup might be more for you just there's just like, there's like, I always say, say, you know, it's not exactly, there's no other, you know, I was like when people buy these homes, right? And they like do so much work, they have to live in another home while they're doing work on their home. Right. But there's no other practice to live in. While you're doing that, right. So I think, you know, if it's not your mindset, it's just responsible to say maybe a startup is as we get back on track with this, but like, if you want to make these massive financial changes, it is not the right acquisition for you.
Yeah, well, I don't think it's I don't think that you're straying off topic. I think it's, I think this is the really the something that's fundamental to the whole due diligence process, and what this is about, you are looking to see if this is something that you want, right. And so if you are looking at things that have overhead problems, you know, or, you know, inflated staff salaries or, you know, bad collections bad a are like those types of things. Like that's not potentially the practice to buy, that's when you maybe say, it might be better for me to do something else, buy another practice, do a startup and things are not checking out.
I know, Rob, you know where you'll end up. But I don't think you're gonna purchase a dental practice in your life, am I saying you can as a non dentist, I will share for one value, but of sellers is with this team wages thing and the financial due diligence, if you think you're going to sell your practice in the near future, stop giving raises, start giving bonuses, because once you raise someone, you cannot unraised them. But once you give a bonus, that is something that is just thought of differently. And I do think that sellers will buy themselves out of problems because sellers have no debt they might have paid off their house. They say what does it matter if I give my office manager 10,000 more dollars? For if you're going to sell your practice soon? That can be I know this mainly for buyers. It's just I've seen that be a problem.
Yeah. Yeah, that's a great point. Very good point. So you know, sort of, there's probably the line plugged probably blurs a little bit between the financial and the operational due diligence. So operational due diligence will be our next topic. So what type of things should buyers be looking at when they're looking at the I'm calling it operational? Because I'm a lawyer. But I mean, some of this is clinical too. So it's really what's going on with the operation, the management, the clinical care, the actual running of the dental practice, what should people be thinking?
I mean, it's a really great point. Well, first, it's how many patients do they process a day so what happens is when you're excited by practice, you don't ask enough good questions that are going to impact your sanity and morale. So you think, Oh, this dentist had 1.5 million I can do this. I can also do fillings. I can also do crowns. I can also implants. But look at that schedule that dentrix, the open Dental, the practice management software, and just take a good look at what like I don't remember the show. The game Tetris. Right, right, of how many blocks, I don't know how attorneys schedule calls each day. And I do have a Google Calendar nachos, but I know my dentrix schedule, when I walk in there, I see how many blocks and there's a person attached to each block and how many rooms are they running? So how many patients do they process to get through the day because many times a seller what 55 years old, six years old, has awesome patient relationships has dialed in all their systems. And you just have to say, is this going to be too many patients for me to process in a day? The other factor I'm gonna say is the booked out factor is how far is the practice booked out? I really believe more of the better for the transition. Because there's very charismatic dentist, you know, maybe I'm a charismatic dentist with case acceptance. And if I don't have someone in three weeks, I know can get someone in three weeks, I know somebody's going to come in. I know, a 72 year old is going to break a tooth. I know they're going to need an implant. And I know that I've known them for 15 years. So while I might not freak out, if my schedule is not booked out for three weeks, if you're going to take over the practice, I think you do want to see the schedule booked out as far in advance as possible for your planning it also there is such thing as too far booked out. Right, right. Because we're solving problems. I mean, you're solving problems too. If I if I refer to a nacho dentist and say, Hey, Robin, you an asset purchase agreement, you say I can fit them in in May this is January may be a sound cool that you're so busy. But like I don't know if that doesn't help this customer, right? Yeah. So I would say this booked out factor of like, four to six weeks is a comfortable feeling for transition. If they're if they're booked out for a week. It's a red flag that kind of helps you give some context of the booked out fact. Yeah,
no, totally, totally. That makes sense. What other things are you looking at?
I mean, then the other thing is, what's interesting about this, and I really don't know how to I was talking about some of the Sohio. Like, when can the it's kind of frustrating that the buyer can't kind of see the practice run during the game. I do think they should just say this because dentists know their team. So if I was selling my practice, I'm not. But if I was, and I had a buyer, and I wanted to do to go well, and I know I'm the doctor Nacho guy, and I know that I have people observe, I would say, Hey, Dr. Rob, here's what we're going to do, I'm going to say that you're a dentist visiting, and you really want to see how we do implants. And you want to see how we do implants. And you're just going to be observing. But I'm going to tell everyone I'm teaching Dr. Rob implants. Now from my practice that's on brand. If nobody has been inside of your practice for 30 years, and you say today's the day Dr. Rob's gonna watch me do a feeling. There could be a red flag, but what I'm getting at is there's an operational component to the team, and how the team manages you each day, how hands on are your assistants with the patients, how much you doing behind the scenes. So I'm kind of stuck in a conundrum, you can talk from the attorney perspective, it's hard to evaluate the operational part of the gas. Without seeing the game, you can see the schedule, you can see the schedule, you can look around the office, you can definitely talk to the, you know, practice owner, but sometimes practice owners just like with our kids, we have some quaint delusions about our practice, such as we always run on time. And if the team was there they go, what is this guy saying? Yeah, he's always yapping too long that we miss half our lunch all the time. And these things really aren't probably deal breakers, but they're important operational themes that I think will help a dentist be happier and happier inside the practice. Yeah, it's
Rob Montgomery 18:37
a tricky issue, you know, because you could see where the sellers coming from that they just don't until or you know, things are sort of like a somewhat certainty. Is that a thing? Right? Yeah. You know, they don't want necessarily the the staff to to meet this person. And I can see that. I kind of wonder, though, you know, like, can you just schedule a hygiene exam, you know,
Paul Goodman 19:01
if you're any good, I like that.
Rob Montgomery 19:02
Like, see what it is
Paul Goodman 19:04
cleaning, that's a great idea.
Rob Montgomery 19:06
You just walk in, just tell the seller like, Hey, I'm going to you know, I'm going to schedule an appointment. I'm gonna I'm gonna go through the whole process. I'm gonna call up I'm gonna do it online. I'm gonna see what it's like when I when I walk in the front door. It's sort of like that. It's sort of like a version of what's that the undercover boss yeah TV show. And you know, the buyers here like if nobody knows it's the buyer right?
Paul Goodman 19:27
We will I love that idea. You should you should suggest that I think that's great. But I will say this, and no, we come at it from different angles, because your job is to make sure the deal doesn't fall apart. And my job might be to make sure the dentist is happy but like, it's the way it's going now. A good one with the teams like I don't feel like is right, like Hide, hide, hide, hide, hide, tell them the day of the thing. I don't know. Like, I'm not saying we're gonna solve it in the next 15 minutes. But like I don't know if the current system is we're like, oh, this is really going well, right? Yeah, you got people crying. You got people mismanaged expectations you got sellers being sold. afraid that they just say, hey, nine o'clock. Here's your new balls. 10 o'clock do a crown. Right? Yeah. You know. So I do believe that this portion of the process, and I know we'll get to it in a future episode is open for improvement?
Rob Montgomery 20:12
Yeah. Well, I think, and this is probably one of the instances where you know, every deal and every situation, every practice, every seller, every buyer is different, you know, and I think it's, it's hard this is, but it's a hard thing to manage, you know, because they're very much competing expectations and anxieties, and they're both somewhat valid. I mean, I think sometimes sellers do kind of like, just overthink the fact that you know, that there's this, the staffs gonna know that we're selling the practice. I mean, if you're 68 years old, and the staff sees that there's somebody coming in to buy the practice, it might be a relief for them, you know, they might have been wondering, like, what's the transition plan here?
Paul Goodman 20:54
So you could say this, you know, and I know this is kind of fits with due diligence. Later things, we don't have to dig in too much. But could be like, the seller could be the champion and say, what I'm doing for all of you team is trying to figure out the best person so you can keep up this legacy and keep your job. Yeah, I mean, there's not many dental teams that don't want to look at another job. Yeah, not many people walk into work, saying, I hope today's the day I have to get another job in my field. So if you say to your hygienist, I'm trying to find the best person possible. So you can keep up this legacy. And you're such an important part of the practice. You could totally reframe it, but not dentist Rob, we're not that they make if dentists can make something weird, they're professionals. Totally, you know, but also, I'll share real quick in the due diligence phase. And maybe this is good. Like, if you've never printed out a dentrix report or practice management report, I know, you know, some of this language from what you do. Yeah. And you said your office manager, could I get all the codes for the last three years today? They're gonna know something's up. Right. You know,
well, I mean, again, this is why this is different from practice, to practice deal to deal seller to seller that some people have better communication with their staff, some people could, you know, they already know that information they don't have to ask. So I think it's hard to really kind of assign a one size fits all with us. But it's a tricky thing to navigate for sure.
So that was my thing. I mean, you can look at the schedule, you can look at the booked out factor, you can look at the patients and the procedures, but the operational end game stuff is still kind of in a very difficult way to assess it by like your idea of Schedule A secret shopper hygiene visit.
Yeah, I have a clinical stuff problem. Like when
I mean critical stuff is, you know, I don't know how to fix it, there's, there's behind the scene cases, you can show like the lab work that you're doing for implants, you get in context of the quality, you know, of what lab they're using these, these are interesting things where like, that actually, I believe has a lot of ability to change after you take it over. Where like, I don't know, I mean, I'll just use example, if you're buying your food at ShopRite, you want to get into Whole Foods, it's not like dramatically different. So if someone's like, this lab seems like a bad lab, like you can get a different lab, you know, type of thing.
Just like similarity with procedures, though. I mean, that's I mean, that's gonna be something
that they if you think of like a giant pizza, but it's not cut into eight individual slices. And if the owner is doing a big slice of root canals, you can't do a big slice of root canals, that you should know that that piece was one that you might not be able to consume. So it's a really good point that you should just be seeing, can you replicate these procedures? How many specialty procedures are they doing? If you weren't, we had Todd Fleischman on one of my favorite dentists and people, he does a high level at high level cases, if you're buying his practice, and you couldn't do those high level cases, or that production is not going to be on the table. Right? So it's a good point, that you really should take this pizza, this unequal pizza pie and say, What can I do? What can I do? Part of me feels Rob, maybe some suggest that some of this should be thought about prior to this stage. Right? Like if you're having a conversation with seller back from our last episode, and they say, I do all my own ortho and Endo. And that's how I make money. And you don't do any of that. My hope is you don't get to the due diligence.
Yeah, that's true. No, I'm
saying it's true.
Now, that's a good point. All right. So the the third and final area of due diligence we're talking about today is legal due diligence. And, you know, I'm gonna miss some of this stuff is all important, but it's somewhat more routine for us. So, you know, what we're looking at with that is obviously making sure that there aren't liens on the
fact checkers. But I remember, I know in New Jersey, there's like the bulk sale thing. Right, right. I could somehow absorb the debt of someone by accident. Right.
Rob Montgomery 24:36
Yeah. Well, that's, that's really more of like our it's not really due diligence on the practice for us. That's just sort of mechanics of of getting a deal done. That you have to make sure that the state isn't able to assert a lien on the assets that you're purchasing. So but good point. Yeah. So you've been sticking around. You've been listening, Paul. Yeah, I appreciate that. But now what we're talking about is just what liens are gonna have to be satisfied or paid off, and loans that the practice has. Sometimes the bank will perform lien searches, we do our own as well sometimes our clients get all miffed like what I'm good at, what did you do? Because the bank doesn't always catch the right thing. And, you know, we want to make sure that you're you're paying for something that you're not buying something that somebody else has a lien on. Also looking at, you know, a big one is to look at the at the lease, if there's a third party landlord, you know, what are what's in that lease? What kind of renewal terms how much term is left? Does it have good assignment language in connection with the sale, making sure that there aren't things in there that would allow the landlord to relocate the practice? Yeah, like just because you know, you're diligent and you're careful doesn't mean that the person you're buying the practice from right then just sign some lousy lease without even reading it? So you're gonna be taking this lease over? Or you might be you have to know what's in it. And if it's really bad, you might want to try to negotiate something with the landlord negotiate changes the at least but you know, the lease is a really big due diligence, legal due diligence item. I would say the last really big issue that's that's that's fairly common. And typical, is in a practice that has associates you want to look at those employment agreements with the with the associates, know whether associates have left recently to those associates have restrictive covenants, covenants not to compete, you don't want to buy a practice and find out that the associate can go and hang out a shingle across the street, after you've paid a million dollars to practice
Paul Goodman 26:33
in this phrase, maybe we could like the transferability of an associate, to having to work for the new owner, is that different than the normal team member? Or is it the same?
Rob Montgomery 26:45
It's it's different? Because the generally team members don't have written agreements. They don't have contracts, associates generally or should. And so there, it depends on what the agreement says as to whether or not that associate is quote, unquote, technically supposed to work for potential buyer. Obviously, if somebody doesn't want to work for you, it's hard to make them I mean, it'd be a good idea to try. But the the law varies from state to state, and it's also going to matter from contract to contract, whether or not the Covenant Not to Compete, or the restrictive covenants, generally, in those agreements are assignable to a purchaser of the practice. And that's part of what we're looking at
Paul Goodman 27:27
point. Yeah, that's a kind of shows the value of contracts in general.
Rob Montgomery 27:31
Yeah. And, you know, we talked about that issue, you know, this is why you need to have restrictive covenants in your employment agreements, because when the day comes to sell, somebody may not want to buy your practice, if your associates producing 70% of the dentistry in the practice, and you have not asked her to have a Covenant Not to Compete, and somebody is looking to say, well, if I buy this practice, what's gonna happen if she competes against me, you know, and so that's why I also want to
Paul Goodman 28:00
add is like, as someone who's been on their side, I think it's a really good point. If we're talking about buying a practice, acquiring a practice, we're talking a lot about first time practices. And looking at one that has an associate in place that's going to work with you after the sale is brings in a lot of complexity, versus the swap out for the owner. Oh, yeah. Because now you have to get along with this associate. Now, the power dynamic has shifted in the practice, because with the team, so I just want to kind of highlight to our listeners, if you are in a situation where you're purchasing a practice word associates gonna stay on just look at everything pretty carefully. Yeah. Because I can you talk to them socially ahead of time, usually not. Right. Yeah. You know, because they would. And then also, I have to say this, too. Yeah. Why isn't that associate buying the practice? It can be? Sure can be for really good reason. But it usually is for, you know, it's usually just creates complexities on multiple levels.
Rob Montgomery 28:55
Yeah, what I typically see though, even in situations where a seller doesn't want the buyer to meet the team, and the rest of the staff, that there's generally an expectation that the associate will have a discussion with the buyer, you know, with with the sort of the, the rules and the ground rules, being with the associates, supposedly not going to tell the rest of the team but like that, that's a conversation that as a buyer, really should expect that, you know, like, because if that associate is not on board, and if they are a major contributor in this practice, and you know, that's a problem. And then additionally, are they going to be okay working with for you, you know, What, did they have the expectation that they were going to buy the practice, you know, and it may not be that bad, you know, it could be that you meet the associate. Yeah, I'm happy being an associate. I don't want to borrow the money. I like my job. Three days a week. That's all I want. You know, nice to meet you and look forward to working with you. Awesome, you know share from that's the conversation is because
Paul Goodman 30:03
everyone dentists perspective because Dentistry has become so cool people go at all ages and stages. It's not a human age thing, which is dental age thing. And let's say that associate has been there for 10 years working with a practice owner for 30. And now someone with six years of dental experience is coming out the Myatt. There are a lot younger in dental aides and the associate, right that just can create some conflict. Yeah, you know, I mean, not to do it, it just means to really think about that transaction. And that's a really good kind of due diligence part there.
Rob Montgomery 30:34
Yeah, great point. Yeah, that's that situation that might be multiple meetings and longer meetings. And like, you really want to get comfortable with that with that situation. And look, there are certain people that would embrace that, yeah. And be be excited to have somebody that's doing some new things and injecting some new ideas and somebody for them to mentor some people, right. And there's some people who would be an absolute,
Paul Goodman 30:57
provide practice buyers, maybe these scenarios are usually these practices with their owner and associated what they say they're definitely going to be doing over a million dollars a year. And if they're selling to you instead of to a DSO. That could be the associate could be very happy with that, because kind of saying I'm selling to a dsoc later with the associates I've seen, right? Times the associates want to go out the door to right, so it might be kind of this great story with the preservation of the private practice nature of the of the locations? Absolutely.
Rob Montgomery 31:20
And I think, you know, we can tie it up there, you know, like, this is really with all these things, you know, I think it's important to have the mindset that you are doing your investigation, right and kind of have your eyes and ears open. And know and don't, overcommit don't overly hope, focus on certain things, but like, you know, just keep an open mind, is this what you want. And if you're starting to see too many things that aren't lining up, you know, be realistic, and say maybe this is not the right practice for me, because this is the time this is the purpose, this is why you're doing this, you know, this is not just some, you know, filler thing that happens between the LOI and closing, this is where you're kicking the tires to make sure that this practice that you're going to spend a lot of time and a lot of money in and that you say isn't does not have a return policy is the one for you. And just because you know, it might be otherwise good, or it may be gross $1.5 million. That sounds great. You know, that doesn't mean that that's the right practice for you. If there are problems on any of these things that we checked out, maybe one of them isn't isn't necessarily a quote unquote, deal killer, but like a few of them might be and depending on how severe they are, but just don't put on those blinders that once you've signed the loi, that proceeding at all at all costs, you know, this is it, you know, be be open minded, keep your eyes and ears open. And if you don't like what you see you do not have to proceed. Great. Great advice. Paul, as always, it's a pleasure, folks. Thanks for for listening. If you liked the show today, go on your favorite podcast app and give us a good review. And until the next time, thanks. Thanks, Rob.
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 Robbie 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