Phil Cole 0:05
Hello, and welcome to KLAS solutions dental education Podcast, the podcast series where we share knowledge and experience to provide value to you and to your dental practice. I'm your host, Phil Cole, and I'm with my co-host, Chris Webb. And in today's episode, we're going to be talking about Dental contracts or agreements, and what you need to know and learn about what needs to be in or should be in those agreements to protect you. And really in general in both parties. And so today, I'm joined by Joe has of Joe Hess law, who will be sharing his expertise and experience when it comes to those agreements. So welcome, Joe to the KLAS dental education podcast.
Joe Hess 0:50
Thank you, Phil, and Chris, for having me on.
Phil Cole 0:54
Yeah, absolutely. So okay, hot topic, always. You never can get a lawyer on interview or anything without having all kinds of questions, we're going to tone it down to just a couple, just but the important ones. For us, especially since it's a new year 2023, we have all the de force students that are going to be getting close to graduation. First, they worry about getting getting gret that they graduate, and that they get their boards. But after that the next of course, big thing is associate contracts, can you find an associate ship? Where do I go? What kind of associate should I go work for the big DSOs, the heartland, the Aspen's and stuff. Some want to go to community services and stuff. With that being said, All of these are gigantic monsters in some way or the other, and then what they do so with associate contracts, obviously important, but what do you what would you say are the key factors that these graduates coming out? Or in that matter, anybody that's an associate now that wants to move to an associate another associate place? What's some of the things that they should be looking for and what they should have in there to be considered a good Associate Agreement?
Joe Hess 2:24
Sure, yeah, great question. And it's good timing, too, because I've been getting a lot of requests from dental students who are going through that phase right now. For those students that are graduating, this coming spring, they're already reaching out. And like I said, I'm feeling a ton of requests, which is good, because my first point I wanted to make was that you always want to have an attorney review that contract, right. And even better, somebody who has dental experience, I can't tell you how often that dental students are afraid to spend some money, it'll come back and bite him in the butt later on, because I get calls all the time from students, for former students, but they're the dentists that have been out of school for a couple of years. And you know, they have some issues with their contract that they want to resolve or have mediate resolve. But if you've signed it, and it's generally reasonable, your hands are often tied. So you know, whether it's somebody like myself, there are other dental specific attorneys in Michigan, across the country, it's just a good idea to have somebody to review it. And, you know, shameless plug for myself, I'll do it at a at a fair rate, it's not going to be an astronomical price. So don't you know, as a student, don't worry about that I'll work with you. And then moving into the actual contract itself. I mean, there are a few things that I'm going to bring up today. And I mean, each of these could be a whole podcast in and of itself, right? I mean, as a starting point, make sure you're understanding your salary package or your compensation package, right. I mean, that's, it seems obvious, but make sure you understand it, are you going to be getting a flat fee? Are you paid on some sort of formula or combination of both? Right, so so make sure that spelled out ahead of time. And oftentimes, the dentists, the student, and the practice owner won't negotiate that ahead of time. But just have an idea of what you want. And and pay attention to if you're, if you're paid on a formula, pay attention to how that formula is defined, or you're getting paid on production, or you're getting paid on collections. And what does that mean? Right? What what are they taking out of your your bucket? That could count towards your collections, right? So just pay attention to that. And then, you know, lab fees, how are those being handled because there's always going to be some sort of situation where the lab fees are at play and those are going to be taken out or as a as a associate Are you going to be responsible for paying for 100% of those are reduced percentage of those.
Phil Cole 4:56
I'm gonna interrupt you real quick, Joe, because I do have a question for you on that just because of With technology now, 3d printers, the mills and stuff like that, are you finding that the associate the lab bill, at least I would say on our end, we're starting to see a very, very, it's becoming more common the decrease in a lab bill, because of the fact that there's so much in house stuff being done now versus the old, traditional 10 years ago, you're sending everything out to a lab? Yeah, I
Joe Hess 5:29
think that's sure. I mean, there's I think there's, I'm seeing practices, not even address it in the associate agreement when they're preparing it, which leads me to believe like you said, it's just, it's not as big of issue anymore with technology. So that's a good point. You know, the last point I want to make on on the salary components is, you know, as a, and this is, this is for the students out there. So the new grads, as a student, there's going to be a ramp up period when you join in practice. So I always recommend that you try to negotiate some sort of daily minimum that you're receiving for a period of time, you know, whether it's three months, six months, whatever it is. So it'll look something like this, you know, daily minimum, you're entitled to 600. And I'm just throwing numbers out there, where you're entitled to 600 bucks per day, or 33%, of net collections, whichever is higher. So that way, you're least guaranteed some sort of daily minimum when you're joining the practice and getting your feet wet for the first time. So always, always try to negotiate that from a new associate perspective, I think that's, that's incredibly important. And then the other component, in addition to your not your salary or compensation, but related is the benefits package, what sort of benefits are they offering? Is a practice owner going to pay for your malpractice? Are they going to give you CE reimbursement or credit or a budget for SSI? Are they going to give you 401 K money? Are they sponsoring some sort of retirement plan? You want to have all of those things specified in the contract? Because the more specificity that you have, the less likely there's gonna be dispute down the road. So, you know, just to recap, make sure you fully understand your total comp package, not what you're just getting, not just what you're getting paid, but also, what sort of benefits are they offering for you? I think that's, that's, that's Topic number one in terms of associate contract. I got a couple more affiliate a question.
Phil Cole 7:26
Well, no, I was just gonna say the word. There's one thing about that, see, because it gets brought up all the time, you know, who's going to pay for the see, and I just think it's important for the dentist that wants that associate, to actually offer that I get, I get doctors all the time that will say, Well, why should I have to pay for their CEE, they're just an associate, they should educate themselves, because what happens if they go somewhere else down the road, you can, you can go ahead, this is my opinion, only, you can go ahead with that attitude of that. But you also have to understand that if you are going to have a team environment and a and a healthy environment in that practice, then the then educating getting that associate and if you want an associate around for a long time, getting that associate to feel as though it's an absolute part of the team. And it's not a separate function that is just used until I don't need you anymore, per se, you know, kind of attitude that is so huge and to have them educated, and getting constancy ease so that they can better that practice. While they're there. We see it all the time when doctors make that associate part of the team. And part of the practice associate chefs can last a long time, but it's the guys that don't that, you know, treat it as though this is a part time situation per se, that you see them just rattle through sociate after associate after associate and we know because we're the ones Chris and I are getting these calls all the time find me associate, find me associate How many of you had well in the last five years I've had, I've gone through three, six, whatever, you know, and it's always the same thing it ties into the benefits package and these things that you're bringing that you're going to continue to bring up on this question. But it's just I think it's important for everybody to understand those things that that not the person that's not the associate that we're talking to you right now but the doctor themselves the owner and what they need to be concerned about going in that contract as well. So I apologize for cutting you Oh, that goes
Chris Webb 9:40
well with with that. Like so I've seen for like CEE right. I've seen a few different ways that that's allocated, whether there's a specific allowance. Whether it's like hey, CEE that you want to do is is totally like on you as the Associate but Anything that we do as a practice or that we want to make mandatory than we cover, and then I've also seen where it's like, hey, I'll either pay for your seat, or I'll pay for you to be a member in this particular study club. And I'll pay for your study club dues. And you can you can join us and be part of that, and be part of that regular doctor to doctor, you know, study club. So, I guess to kind of follow up with a joke, you see more than what I have. So have you seen other different creative ways that they've offered to do CEE?
Joe Hess 10:31
Those are the ways you talked about is generally what I see. So I mean, to echo off what Phil said, and a roundabout way, answer your question. I think it's important that, like Phil said that the practice does offer some sort of see, because Phil, you hit the nail on the head? I mean, it's just going to better the practice, right? And if and if you're the owner, why wouldn't you want to better your practice? And it's not only in dental industry, but any industry right now. It's hard to retain talent, right? Find good talent. So it's particularly true in the dental industry, you want to be able to, to attract talent and keep them. And you know, what better way to do that than to say, Yeah, you know, I'm going to give you a nice budget for see, of course, I'm going to pay for your malpractice insurance, of course, I'm going to pay for your licensing fees. Right. And a quick point, I want to bring them up, but about that, too, right now about the team environment and not looking at this as just like a transaction. You know, I get frustrated when I see contracts that okay, yeah, we're going to offer you some, you know, some sort of C E credit or budget, but you know, if you leave within the first two years, you're gonna have to pay it back to me, it's like the I don't know, it's just I understand it, as a practice owner, you don't want to lose that money, you don't want to pay for somebody who's just going to leave and you don't want your practice to be revolving door. But, you know, I think you're setting yourself up somewhat for failure by anticipating the will this person is probably going to leave. So I want to make sure that he's going to pay or he or she is going to pay me back. If they leave within the first two years.
Phil Cole 12:06
The mindset right mindset, you just got the wrong mindset to go in with that kind of that mindset, it's a fail man mindset versus having a successful mindset. And I'm going to give these guys what they need, or Dale's what they need to be able to get what you know, to make this make them productive, because ultimately, like said, done, you're talking about doing, you know, $1 days, minimums and stuff until they get up to speed, well, what's one of the best ways that they get up to speed is also been educated. So I mean, it's kind of a, that also rolls around, you know, through the whole process. So
Joe Hess 12:44
one of the one of the best calls I've got recently was from a practice owner, who was going through the struggles of trying to find an associate, they found a good associate, and we spent at least 30 minutes on the phone, going through all the possible benefits and packages that they could offer. And they were sincere in it, they kept saying to me, or she kept saying to me, I want to make sure that this person feels welcome. And I want to offer the best package I can to that person. And I don't hear that very often. And I thought that was a great start to a relationship, you know, whether that turns into a partnership, whether that associate buys that person out, you're just gonna you're just you're starting the relationship on the right foot that way?
Phil Cole 13:26
Well, I agree. 100%. And I think one of the just, the last thing that I will piggyback on that is when she put a lot of effort, it sounds like to me into really considering the practice, what she can afford, what she can afford, and so forth. And I was just gonna say, I think the biggest thing that when you're bringing on that associate is, once again, do you know your numbers? Do you know what your breakeven point is? Because for you to say, I can't afford malpractice, I can't afford to do that. The things you know, blah, blah, which we hear a lot of times can't afford it? Or, you know, did you do the break even point because when you do your breakeven point, and you find out that you could give them $1,000 A day, full benefits, malpractice insurance and all this stuff and still be making money in being proper off, but it's a viewpoint so you shouldn't even have brought it up and you shouldn't even started that conversation. So
Joe Hess 14:20
okay, so Good point. So like I said, we could talk all day about each one of these topics. I'll try to there's there's two more that I just want to touch on for associated contracts. You know, one on one is the term termination section, very important to look at. You want to understand I mean, it's some of this stuff seems really obvious, but you want to study it, you want to make sure it's specific, you want to understand how long is your contract lasting right because Michigan like most states are at will states at will employment states. So you can you can be fired terminated for anytime for any non discriminatory reason. But you know, if there's a term in the contract, and if there's notice periods required for termination, I mean, that's somewhat modified. As that at will status, so you want to make sure you understand that both from the from the practice and the associates perspective. And in particular, where I see associates get themselves into trouble again, by not hiring somebody to look at their contract or just accepting whatever is thrown at them is penalties for not providing enough notice, right. There may be a provision in associate contract that says the associate can terminate at any time without cause. So long as that associate provides 90 day notice, right, and if that 90 days is not provided, sometimes there's a per diem per day per day amount in the in the contract, that the associate has to pay the practice, if that notice periods not withheld. And I get calls all the time, as you know, is that enforceable? Yeah, kind of it is enforceable. They sign it? Yes, you're signed it? Do you have anyone look at it? No, I just signed it. So just just be on the lookout for any sort of, you know, tricky things like that. Last Last thing, a very important thing and associate contracts, restrictive covenant. Make sure you're looking at that, right. You know, as a practice owner, you know, I have the benefit of being on both sides of the aisle for these things, right. I represent a lot of practices. So I do the drafting of contracts. And I represent a lot of associates who are negotiating their first contracts. You know, as a practice owner, the practice owner wants to push the envelope as much as they can for the noncompetes. Right. I mean, that makes sense. On the flip side of that the associate wants the minimum restriction possible. So there's there's that tug and pull, that's, that's always at play there. And, again, we could talk about this all day, I'll say the, the biggest issue that I see, associates getting themselves into are situations where they sign associate agreement with a non compete and there, and then you know, there, I provide advice and say, hey, you know, the radius, and this is probably a little bit too long, it's going to restrict you from working in, you know, XYZ cities down the road. Oh, don't worry about it. I'm never going to want to work there down the road. If I if I want to start a practice or buy my own practice. I'm not I have no interest in looking around this city. And then I get a call two years later, saying, Hey, Joe, remember me? Yeah, of course. So I found a practice. Oh, great. Where's it at? Well, it's within my non compete zone. Is it enforceable? Can I buy the practice, right? I say, Well, remember that conversation we had you the point of me making that is to not only be comfortable with what you're signing now, but think about the future, you're never going to know what the future is going to hold for you as an associate. And you know, you want you want to get that radius down as low as possible from the associates perspective.
Phil Cole 17:58
Yeah, no, I agree. 100%.
Chris Webb 18:01
And to look at it, and remember, it's the radius is as the crow flies, yeah. So it's an ally, you can go to like mapquest.com and figure out, Hey, is it am I out of this radius? Because twists and turns don't count. Right. And so that's where, when you let it extend, I know, I've been in conversations with you, with doctors looking to buy a practice or start a practice, like, Hey, I found this great location. Awesome. Let's look at your non compete. Oh, your non compete is, is 15 miles. And this one is like 14.5. Well, that half a mile doesn't matter, does it? Matter? That's another
Joe Hess 18:34
good point, right? Because we get that we've got that question a lot. And I've got that question a lot. And it's like, you know, my response is, yes, it's reasonable, that the mileage rate is reasonable. And, you know, if everyone started saying, Well, you know, is this really not? Or is this really enforceable? Because I'm technically only point five miles within the non compete. So it's probably not enforceable. And I'd say, well, then what's the point of having a 15 mile non compete, it should have been 14.5. So whatever numbers in your agreement, assuming it's not, you know, out of the ballpark, it's going to be enforceable. And Michigan, and most most states have, or most states enforce non competes. Now, you know, there are other states like Colorado and California that are that are different. And of course, right now, there's some legislation out there about banning non competes federally, you know, what impact that will have, we don't really know. But you know, as of right now, you know, in the state of Michigan, in most states, non competes are enforceable as long as they're reasonable.
Phil Cole 19:36
But I think the other thing too, that and I know that, you know, it's it's growing, the knowledge is growing more on it, but I still, we just ran across a buyer two weeks ago when we were talking looking down in Florida, and they want to buy a practice, but they're with a large group practice now. How to DSL but doesn't matter large group practice that has eight locations? Yeah. First thing I asked is, is that non compete is your restrictive covenant on your practice, or on all eight practices? No, it's I'm just my practice would just do me a favor send me it anyway. Right? As soon as I get it, it's very vague wording, but I can tell if I sent it to you, you and be like, nope, folly. And so now you've just where'd they want to live? That non compete doesn't, is just over the restrictive covenants where they want to go is they're just over it, they're safe on that one, but boy, you go over to this other one. And guess what, it's within a mile and a half, outside of it. And I guarantee you, that guy put that in that contract the owner of that, that large group, put that in that contract for that specific reason. You're gonna guess what now what do you do? So?
Joe Hess 20:57
Now, that's, that's a great point, I run across that issue a lot as well. And, and again, I mean, not to not to beat a broken record here. But it just, it comes down to associates signing agreements without having legal representation, right? If I'm looking at that, there's no way that's going to fly. And there's no way that I'm going to let an associate agree to that. Now, if that associate of those eight practices is performing, you know, 40% duties here 60% duties here? Well, then, yeah, I guess there's an argument that can be made that he or she, you know, the non compete will apply to him or her based on working at both locations. But that associate is truly only working at one location, never been in the other seven, doesn't have any interaction with the patients there. You know, that's, that's, that's unfortunate. And in that scenario, right. What do you do? You roll the dice. I mean, you got to take some sort of legal action, probably somebody's going to take legal action, and you're the practice is going to sue you, or you're going to have to go to court to get a judge to say this is unreasonable, and scale it back. So you're kind of caught between a rock and a hard place in that scenario?
Phil Cole 22:10
Well, we ran across it in Wisconsin, you know, it was mile less than a mile, I think it was four tenths actually get along so well, we get, you know, blah, blah, blah, the typical once again, I mean, it's kind of like you said, beat the dead horse here with how many times we hear it. But you know, he would never do that boom, the owner found out that he was looking at that practice found out through the grapevine. I don't know how he did. But guess first thing he said is as you move, I'm slapping a one on you right away. And it's like, all of a sudden is like, boom, like I can't buy it. And like, we tried to tell you that from day one, that you're spending too much time on that on this. And boom, it was like But convinced that the seller or the owner was so nice, and they would have no problems with it? Well, when it comes to taking away patients and stuff, it becomes no longer, you know, friendship, it becomes a business. Right? And that business has got to protect itself. So
Joe Hess 23:11
no, I agree. Worst thing you can do is just rely on a good relationship.
Chris Webb 23:17
So talking about so talking about like protection. If we if we kind of switch gears into like an acquisition or an asset purchase agreement. What are what are some of the things that are super important to have? If we're going to call it a fair contract?
Joe Hess 23:35
Sure. Ya know, another good question. And again, another topic we could spend a lot of time on. So kind of stepping back, I look at these deals. In the following way, there doesn't have to be a winner and a loser there can be buyer and seller side. A lot of various Fermi's will probably disagree with me. A lot of attorneys act in disagreements with me. But you know, when in this specific industry in the dental industry, when a buyer and seller come together, they want to get the deal done. Right, it's not my responsibility to mock up the deal. Now, I can still adequately protect either side that I'm on. But it doesn't need to be a situation where I'm trying to win, win, win, win, win and make the other side lose, lose, lose, lose. Right. And I think you guys can attest to that based on the contracts that I put out. So I think that's that's the general starting point that I walk into in any deal. No matter if I'm on the buy or sell side doesn't matter, right? You can prove that you can you can present a fair contract, no matter what side of the table that you're on. Now, to your specific question on on things that are going to be are in a contract and make it fair. You know, since we are dealing with a dental specific transaction, you can just pull an APA off the internet, or just use a general attorney who doesn't necessarily know what they're doing doesn't have that skill set. So I mean, there there are a few things that I just want to quickly highlight and make sure that they're covered in a dental specific APA transaction. So, first one is accounts receivable, make sure that's spelled out specifically, right? You want to, you want to ensure there's usually one or two ways to handle it, either a ours are being bought, or they're being collected. Again, generally, that's how it's done. So you want to make sure that that you have the specific standards out there for what the purchase price will be, if they are being bought, you want to if they're being collected, you want to have a specific timetable for how they're going to be collected, and for how long and paying the administrative fee and etc. So, again, make sure you're very clear on those on those provisions. So there's no disagreement down the road. Another issue that again, comes up and Donald transitions transactions, you need your APA needs to address, reduce and retreatments. So, for example, if there's a sale goes through, and there's a post closing issue that comes up, but it relates to pre closing services provided by the seller, right? Does your APA address that scenario, because it should and it needs to. And again, there's their standards on how that's handled in terms of how long that retreatment period is, and who's going to do the retreatment. And who's paying for it. Again, get yourself a good dental attorney so that you can ensure that that provisions in your contract. So you don't want the buyer and seller to be fighting post closing over something like this, you want to make sure that that's in the contract itself. Third, point representations and warranties. Again, reps and warranties are going to be in any APA, no matter if you're doing dental manufacturing restaurant no matter what it is. But, again, because we are in the dental industry, you want to make sure that you have specific reps and warranties applicable to the dental field. So again, you just don't want to pull something off the internet or use some general form, because you're going to have a ton of likely have a ton of irrelevant reps and warranties, you're going to be missing some important reps and warranties as well. Last point that I'll make on this topic is the transfer records. I've had this issue come up a few times lately that's on arrays and you know, maybe not be such a hot topic, but it's come up a few times. And it's this because we're dealing with the dental sale, you want to make sure that the contract itself says that we're not paying for the dental records, right? They're being transferred over to it's illegal to pay for them. But you want to also pay careful attention to what records that buy from the buyers perspective, what records are you taking custody of? is it defined as active? Is it defined as all is are inactive records excluded patients excluded. So a quick example on how this came up recently in a deal where the seller had records from 15 or 20 years ago. And in Michigan, the retention time period for maintaining these records is only 10 years. So after 10 years from the last treatment after 10 years, you can try them get rid of them, right? The seller kept tons and tons of records in the storage unit was basically like, alright, buyer, you're buying my practice here, all the records do and you got to figure out where you're gonna store all this stuff. Like no, no, no, no, no, we're not taking all this stuff. So again, if you sign an APA, and you're not paying attention to that, and just says all records as a buyer, well, you're probably going to inherit all records and there could be some old ones that you're going to have to figure out where you're going to storm or you're going to be responsible for getting rid of them when the seller really should have done that before the deal closed.
Phil Cole 28:40
Excuse me, that I got choked up on that. Because it's because you remember, we worked with a client and that's exactly it was it was funny because he went out to a shed. This was not disclosed, even though we were we told him to ask he didn't. But not this. He didn't the seller didn't disclose. And next thing you know, it was probably about six, seven months later, there was a question asked and it's like, oh, you might want to go check the shed go out to this metal shed and there's nothing besides boxes and boxes of 30 year old client you know things and stuff and so ended up spending tons of money bringing in the old shredding company to sit there and just go shredding all the files because he wanted nothing to do with these things. You know, but it's funny because it like you said it is happening a lot. I mean, that topic is becoming very popular.
Joe Hess 29:41
It's becoming more relevant now than even a couple years ago that and that's why I brought it up you know, it doesn't seem like something that we would be discussing, you know what's important and asset purchase agreement, right purchase price and restrictive covenants. Of course, all that stuff's important but I just tried to bring up something that that's been coming up more ragged really, than it has in the past, so you just want to pay attention to that?
Phil Cole 30:03
Well, I think the other one, that's the, I think, is becoming irrelevant. And I'll bring this one up too. And I don't know, you and I have not discussed this, Joe. So I'm not putting you on the spot. But maybe you can at least give your quick opinion is I'm not, I've always watched during the transition, the credits, but I'm noticing more and more that the amount of deals that that have gone through different people, since we coach and stuff to that when we're coaching, and we're seeing a tremendous amount of credits, those credits can't, those credits can't be transferred over. Like, it's that's against the law, they have to either be real, if you either have to remit those back to the patient, or they have to sign off that they're willing to carry that credit, you know, into the new purchase and stuff. Yeah, how I you run across that as well? Or is that something that?
Joe Hess 31:04
No, that's another good point. credits come up in every 100% of deals
Phil Cole 31:09
almost every time now.
Joe Hess 31:13
It's possible. Now,there's, you know, anything from, you know, hopefully, hopefully a 1500, you know, dollar balance, and then up to $80,000 $90,000.06 figures in credits, which is just, you know, outrageous. But yeah, again, you know, if you don't know what you're doing, you don't hire the right attorney, this stuff is gonna get overlooked. And there is a standard, there is a way to handle it. And you brought up, you brought up a good point, I mean, they're not just going to magically transfer over, there's got to be some sort of contractual language. And if the sellers has a huge credit balance on its books, starting point, figure out what that is, when you first start the transaction, right, you and if you're 60 days away from closing, get an idea of what that is at the beginning. Yeah, it's gotta be due diligence. Correct? That's, that's due diligence one on one, that's, that's part of what you're looking for. And then, you know, as you're getting further along the deal, the seller should should be crediting that money back to the patients as you're making your way through the deal. That's the ideal scenario, does it always happen? Absolutely not. But as a buyer, once we get the balance, okay, it's $50,000. Alright, seller, you know, we're not closing for a month or two here, you need to start getting that money back to your patients. And assuming, again, 99% of the deals you get to closing and there's still a patient credit balance, where your your asset purchase agreement needs to address that, right. If we're if we as a buyer agree to assume some of those credits, then we better be getting credit off the purchase price. So it gets some sort of check being made up to a set closing, right? Because if not, well, then you're you're not you're you're potentially inheriting credits on the books, and now you got to provide free services, you're not getting compensated for it. So big, big topic, good, good point and bringing that up. And there's also, you know, these things called State achievement laws, which basically you have to turn over unclaimed property to the state after a certain period of time. And Michigan, I believe it's three years for, for patient credits that fall within that bucket. So, you know, from my perspective, if I'm representing a buyer, I don't even want to inherit or take over those credits that are three years and older older than three years. Because if I can't get those back to the patient, then I technically under law have to turn them over to the state and what a pain in the butt to deal with. So when I'm on the buy side, I'm putting in the contracts will will take over the credits, but they got to be less than three years old, and sellers responsible for doing anything older than that.
Phil Cole 33:42
Yeah, and I think that, like you said, having a dental attorney to do this. But I think once again, this is, I guess, maybe a shameless plug for for us. But, you know, you've helped us with this to sitting down and creating so we create that an APA, we have a worksheet with that APA that we worked through, especially since you all these things that we're discussing today, we sit down with our buyers and sellers together and go through this lengthy worksheets so that ever we make sure every one of these things is covered, so that if they're not going to use you or they're not going to use a dental specific lawyer, at least we know at class solutions when we hand we can hand that lawyer this worksheet and say don't muck it up. Yes, like this has been agreed by both parties on what is going in AR allocations you know credits all that stuff and all the other restrictive covenants all that's built in. Now don't muck it up in the reason why we went to you and you helped us build this worksheet is because we didn't want it's those lawyers because we you take it there and then next thing you know the deal is going on I because of a situation where they don't know what they're talking about. And we're fighting. And a lot of times you've been on deals for us, Joe, where we're dealing with a lawyer that you're actually teaching them, what what needs to be in these contracts, and we've had one that should have closed within, you know, three, four days, with the APA, getting filled out and the closing date, and we had to push closing date back what I think that one in two summers ago was like, two months, because we could not get the lawyer to understand, you know, what credits were and, and everything like that. So I think it's just gigantic, to make sure that, and I think there's once again, is, I always distinguished myself as, as we are a transition consulting team. So we're consulting all these things throughout the whole process, bringing you the specific team members that need to be brought in dental specific to handle these transitions versus a broker, I feel I feel, and that when you deal with a broker, the broker, I brought you the practice, now golf, you should do this stuff, or you should know how to do this stuff, I look at it as is, you know, even guys that have bought two, three practices still make mistakes, make sure you're going through everything big time. So
Joe Hess 36:31
I mean, this is like one of the most important decisions you can make in your life, right? Buying or selling, you want to make sure you hire the right team, you don't want to just hire any member generalists.
Phil Cole 36:42
Especially when, especially when the majority of them are only going to do at one time in their life. So you know, right? You don't have room for you don't have room for mistakes. Each end. Oh, I'm sorry, Chris.
Chris Webb 36:53
I was just gonna say just one time on each end of their career. Right? And, and why I guess why pay for it with either a bad contract or a bad deal. And, and it's literally to try to save money, but you don't end up saving money. Because think of all the hours you're paying that attorney to learn how to do it. And they're still not going to do it. Right, which is what I've seen time and time again, when when I'm working with Joe on stuff. And the other attorney is bringing things and I'm like, Joe, what are they doing? Like, I don't even I don't even have a grasp on law like you do. But what if this doesn't make sense. And so you're just watching them rack up bills for attorney fees, to learn what they're doing. It doesn't make sense. No major,
Phil Cole 37:37
major attorney fees,
Joe Hess 37:39
not efficient. It's not efficient. I mean, I just quickly on that point, I mean, I generally try to work off a flat fee in most projects. As you guys know, once I understand the scope, you know what the practice sale entails what's going on with the real estate, if there's going to be purchased or leased, there's going to be an associate contract after the fact. And then, you know, I'll give a flat fee, or at least from the beginning, I give a pretty tight estimate on it's going to be between x and z. And it frankly, always comes between there unless something crazy happens. But that's that's the benefit of having somebody on your team who understands this stuff and lives and breathes in this every single day, not somebody who touches a dental deal once or twice a year. That's a big difference.
Phil Cole 38:21
I agree. 100%. Okay, so last but not least, something that seems to me is starting to be talked about again, I think it went away there for a while it's become popular again, excuse me, partnerships. Me personally, not a fan of them. Just because of the simple fact that it can there's a lot that goes into it. And like I always try to say is, you know, you're you're basically marrying somebody. And so are you ready for this relationship? So what are some of the most the most for both parties to give for a win win partnership?
Joe Hess 39:00
All right, I'll try not to speak to lines and stuff. So I know I've been rambling on a few things. I mean, let me back up, you hit it again. Perfect. It is another marriage. So that's literally one of the first things I tell people when they're getting into these situations. You know, big they can work? If they're done, right? If they're documented, right, but they may not right, but it is it's a marriage, you're marrying that person. I think a few things or maybe three things to think about when you're doing a partnership and have these discussions up front. And of course, make sure everything's documented. But I think the best partnerships are ones that are 5050 rather than 2080 or or my favorite the 49 51% partnership, right? I want to I want to you know, the owner, I want to bring so many as my equal partner. Well, how much do you want to give them 49% All right. Are they good? To be a manager to know they're not going to be manager either. Like go get. Again, everyone has their own agenda and stuff like that. But from my perspective, looking at it from the outside, and just seeing enough of these, I think the best partnerships are the ones that that start at least 5050. Right? If you got an older doc was eventually going to be bought out, I understand the percentages may change down the road. But from a practice owners perspective, if you're thinking about having somebody buy into the practice, I would recommend starting with that 50%, I think you're going to start off on the right foot, I understand you're maybe giving up more than you want. You think you may give me giving up control. But you are I mean, that's the point of a partnership. Right. And so I think it's just echo that point, I think 50 It needs to be a 5050 partnership, right. And within that 5050 partnership, both of you should be manager making managerial decisions right? Now, of course, people may disagree with me and the partners may disagree and think well what happens, you know, if we each get a say in something 5050 Why would we decide something that you know, we run into a deadlock on? Well, that's the point of having a good dental attorney, they'll draft your shareholder agreement or operating agreement or bylaws, which we'll talk about situations where you do become deadlocked. There are outs for that there are third parties who can handle it, there are buyout provisions. So I just think 5050 make it that way. Make sure each of you got managerial rights and run the practice accordingly. Second thing compensation profits, make sure you guys are understanding and make sure the partners are understanding how that how you guys are going to be paid. You want to do that at the beginning. I'm going through one right now where the partners are disagreeing over the compensation and profits formula, they should have, from my perspective, any attorneys are arguing over it right. But it's like I don't have as a bone in the game. I can tell you what I see generally, and I can tell you what I recommend. And I can argue with the other attorney all day long, but really, it's the partners that should have sat down before they got their attorneys involved and say, All right, yes, we're going to be 5050 partners. Yes, we're going to, you know, our compensation structure and our profit structure is going to be this XYZ, right get that hashed out ahead of time, because I'm dealing with a non dental specific attorney on the other side of this one, and it's becoming problematic, so hash that out ahead of time. The third, the last thing I want to touch on with with partnerships and things to think about, you should think about beforehand. You know, what, what happens if somebody dies? Or what happens if somebody comes disabled? What if your partner's embezzling money and what if your partner's retires or wants to leave the practice? There's gotta be agreed upon buyout provisions mandatory in my opinion, mandatory buyout provisions for those scenarios. The last thing you want is a situation where your contract wasn't done, right. Or it's inadequate, and you have a disagreement, or somebody God forbid, passes away, or somebody wants to leave the practice, and you don't know what to do because your contract doesn't address it. And you feel stuck. Phil, we've had one of those scenarios not that long ago, maybe about a year or so ago. But again, you want to you want to make sure you're on the same page for those important trick. I call them triggering events in the event that something happens to one of the partners.
Phil Cole 43:31
Yeah, no, I agree. 100%. I can't. I think that once again, this is one of those situations where this a lot of it is negated if you have these conversations before you go to contract.
Joe Hess 43:44
Yeah, 100%, you should, you definitely should. Because you'll you'll, you'll vet out these issues early. And there's, you know, a less likelihood that I'm going to have to be sitting there arguing with the other side, the other attorney about stuff that really it's up to it's up there should be up to the partners, you just got to have that communication ahead of time.
Phil Cole 44:08
Yeah, and I think the other one is, is is is once again, the 50 thing, I just been doing a valuation out in Colorado Springs. And that's it wants to do the partnership. And that's the first thing after we get to valuation, and I said, Okay, so how do you want to set this up? And the first thing he says is 4051 49. And it was just immediately, like, the whole time you're talking, he's like, my associate is, you know, just really, really good. I just really like them. They're the he does a great job. He fits in and blah, blah, blah, blah, blah. And the first thing is is so why 49? Yeah, well, I want to make sure though, that I'm going to be around for five more years. I still want to make sure that I'm the one that's making the decisions while Yeah, I get that Add, yeah, but then that automatically now you just you immediately if you have a relationship that you have, like you say you have you just cause animosity immediately, because that guy is going to sit there and immediately say, Well, wait a minute, why 49. And as I told him, any good lawyer, that lawyers going to look and say, Why would you do this deal? Yeah, right.
Joe Hess 45:24
Yep. I agree. I agree. Again, back to what we talked about earlier, you're starting the relationship off. In my mind, I know, there may be situations where it's applicable. But I'd say nine times out of 10. If you really want a partner, that partner needs to have equal say, that's what it comes down to.
Phil Cole 45:43
And I you know, for us, our transitions, we believe in simple, fair, transparent transitions. And I, you know, the simple comes first in our in our model, because it can be very simple. If there's two things, you you are fair. And once again, getting a dental attorney like yourself, and we have other dental attorneys that we work with, you know, in Georgia, Utah, and all over, that have the same mindset as you the same concept as you. And that's the reason why we work with them. Because once again, that it's when you can have everybody understand that you can have a win win. I mean, that you see, so many of these other brokers out there that push the Like, there's no such thing as Win win, that's absolutely false, there is 100%, the ability to have Win win, because that's what both the buyer and the seller want it originally, they all come with that same pre taxes, I just want to win, you know, I just want it to be fair, it's everybody else that mux it up in the bid that causes them to lose that mentality, but fair, and then like I said, the transparency and that's once again, if we, if we work with them, from very beginning, the inception, to the close, and we're bringing in our dental professionals, this thing is can be so transparent, and so simple. It just needs to you just need to make sure you're working with something that covers all the bases.
Chris Webb 47:10
Yep. And I'll, and I'll throw one more plug in for you, Joe. You know, the the old there's the old sales adage of Have you got a good deal when everybody walks away equally pissed. Which is, which is stupid, because realistically, if you've done it, right, because your dream as a buyer, and your dream as a seller is you're taking this, this business that you've built this practice you've built and put your whole life's work into, and you're gonna hand it off to somebody that's going to run with it and carry your legacy on. And basically, you're just gonna hand the torch off, and they're going to take off running. And for any buyer, they're kind of feeling the same way like, Hey, I'm taking on this person's, like business that they built, and I'm gonna go run with it, they want to get to the end, and feel positive about it not feel screwed. And so that that equally pissed is just stupid. But I've done. I've done so many deals with you were we get to the end. And because everybody's been open and transparent, we get to the end and everybody's smiling and happy at the signing table and everybody walks away feeling like, Man, this was really good. I feel really good about this. And that I think that should be the gold we aspire to not to be equally pissed. But to be equally excited and happy for one another.
Joe Hess 48:20
Yep. There's nothing more comfortable than walking to a closing where everyone's been fighting. Yeah.
Phil Cole 48:27
When you when you go when you look at me, Joe at a closing and boom, we're walking in and you're like, so is this going to turn out?
Joe Hess 48:38
You just surround yourself with the right team, like yourself, you guys, you guys handled the transition flawlessly. Get yourself a good dental attorney. And, you know, it'll be it'll be a good process. It can be it doesn't need to be it doesn't need to be litigious, or contentious or anything like that.
Phil Cole 48:56
Yeah, no, I totally agree. It's 100% preventable. So if anybody that is listening wants to check in with you. It's Jo has law.com Correct?
Joe Hess 49:09
Yep. Jo Jo s law.com. And my emails are iteration of that. So Joe at Joe has law.com is my email address. So you can just go to my website, you can look a little bit about what we all do. And we handle anything from acquisitions to associate contracts to real estate and everything in between.
Phil Cole 49:29
And you're not just Michigan, right?
Joe Hess 49:32
No, not Yep. So I work yeah, I work I've done work in probably 30 states across the country. That heavy emphasis in in the Midwest, but you know, we get down to Florida sometimes and out west, but yeah, I'm all over the place.
Phil Cole 49:48
Okay, I just want to make sure everybody realized that and that we don't, they don't those who are listening don't feel as though they're, they just have you in Michigan so they can reach out to you anywhere and use your right All right. Well, I appreciate it. Thanks to you, Joe, for checking in with us and giving us some good information, we are definitely going to have you back because as you, like you said, one of those questions we could have spent the whole podcast on. So we'll we'll dive into some other things later. I know we're going to put some things together to win a webinar down the road in the future here too. So really appreciate it. Once again, anybody that wants to talk to Joe and learn more about his services stuff, Joe has law.com. And so I hope everybody got some great information off of this. And those of you do for students that are graduating with that associate ship, reach out to class solutions, or reach out to Joe start asking these questions and making sure that you guys are prepared. So if you enjoyed if you enjoyed our show, please rate us review us on Apple Spotify or wherever you get your broadcast. I'm your host, Phil Cole with Chris Webb, the co host and when we want to appreciate and say thank you one more time to Joe has Joe has law.com Thanks for listening and everyone have a great day. Thanks, guys.
