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 your dental practice. I'm your host, Phil Cole. And in today's episode, we're going to be talking about partnerships. And just want to kind of talk to you a little bit more about some of the prevalent things that are happening in the dental transitions right now. And so today, I wanted to once again talk about with you or just kind of go over some things with you, in the dental transitions world has become a hot topic lately. And that's partnerships. And I think that when getting involved into partnerships, it's it's a significant decision. And sometimes I think that when I'm talking to groups, or shall I say, to, to buyers, or to dentists, that are looking to partner up, or a single person looking for a doctor that's willing to partner up, there's just like I said, some really careful considerations that I think are missed a lot of time, and some important questions, concerns that you have to address before finalizing a partnership agreement. But I think more than anything, you know, even even thinking about getting involved in one. And this is this kind of has been a hot topic, at least for us at class solutions here with with transitions lately. And it's been interesting, because when I have conversations with the people that want to talk to me about partnerships, it's it's one of those things where I start asking a few of these questions. And once we get through it, it's kind of one of those things where I'm not quite sure now that you mentioned this partnership, is the thing that I want to do. Or it's while you gave me a lot to think about. And that's really what we're here at class solutions, what we want to do is basically educate and be able to give you the opportunity to make sure that with a major decision like this, and that you're going to become an equity owner with another colleague, that you are able to have the questions and the answers and stuff that you want. And so just have, like, you know, 13 different questions that I've kind of, or ideas or topics, I think that you should think about before becoming a partner, because I know this may sound funny cliche, whatever you want to say it. But I know a lot of times, I always tell people, you know, when you get involved in a partnership, you have to understand you basically are getting involved in a marriage. And so I would think that somebody that gets married, very seldom do you hear someone say, we went out on our first date, and we decided to get married, not saying that doesn't happen. But majority of the time, in a marriage we're dating, we're finding out some things we're finding out if our partner wants maybe, to move into a different part of the of the United States, whether they want to have kids where they want, what kind of a career they may want, and so forth. Same thing comes to partnerships, is making sure that you understand where each person wants to go. And I think the big thing is, is one of the first points that we got to bring up is vision and goals. You know, what are the individual and collective long term career goals for each of you. Because if one wants to, per se, work until the average age of a dentist right now, which is 78, I think point two years old, and the other one wants to work until the age of 59. That's there can be a little bit of a discrepancy. And there can be a little things little bit of difference on where they might think the practice wants to go in for the future. I think the other thing is vision and goals is another important thing is you know, how do we envision the growth of the practice? What direction do we want to take it? In other words, do we want to keep it as a you know, kind of a bread and butter per se? prac dental practice or do we want to do high end stuff? Do we want to get eventually into real big time implants? Do we want to get sleep apnea? Do we want to do IVs station so forth? Got to ask you got to ask each other you know what is that vision because once again, I've seen many times where we In our own experiences, and in my own experiences where I've had a partner, that is, you know, of course, 15 years older than the other partner, and wants to retire in three years, and now all of a sudden, his idea or his vision is retirement. But the other dentists vision is getting into implants. And this was several years ago, you know, when implants are still once again, you know, not as, shall I say, common for everybody is what they are now. And so, there was that, that tug, pull and tug, taper, or I should say push and tug type situation, with the two dentists that have very good relationship, but started to grow tiresome on them. So that's one vision and goals, I think, is a huge thing. Another one would be roles and responsibilities, what what will be each partner specific role and responsibility of the practice? So do you both? And here's something to consider your personal doing personality profiles? Do you both have the same personalities? And do you both have the same aspirations of wanting to do specific roles, in other words, we both want to be the person that's in charge of hiring, the person that's in charge of payroll and paying the bills or running the books or keeping their eye on the books. When that happens, you know, there's going to be more struggle there. Because which one wins which one it but when you have a partnership where one wants to be more clinically, in charge, and the other one wants to be more business in charge? Hey, now we're starting to get those roles and responsibilities clicking a little bit more, and it gives each other the ability to excel at what they do. Another one, how will decision making be structured? What's who, what and what's the major decisions that will require mutual agreement? Like To what extent? So in other words, if you one of the doctors wants to put in new light bulbs, and they want to put in all the new LED daylight style light bulbs, is that considered a major enough decision to the partnership, that they that you have to require mutual agreement on that? Or do you consider something like that to be, you know, whatever big deal, you're in charge of that, that's your responsibility, that's your specific role in a partnership. And we make that so you can make it $1 amount, you can make it, you know, a decision on and what it does to the practice and so forth. You know, in this situation, I know it sounds, you know, miniscule to say that LED lights are going to be a big thing. But once again, two $300 worth of floodlights. That's a that's a cost to the company. But on the other hand, if you can ROI out and show that that's going to be made up in a year's time. Hey, it makes sense. And so there's no decision to be made. Besides, it makes sense. So roles and responsibilities, big deal. financial arrangements, you know, how will the financial aspect of your partnership be structured? This, this is basically I think the big one is is like profit distributions and expenses. How are you going to set that up? There's several different ways. This is this podcast is just an overview. And what I'll do is look and break this down, and another podcast. We're going to be doing courses on this soon, for a little bit more detail, but there's several ways for those for those financial arrangements to be structured or the way that the partnership will be structured.
Phil Cole 9:02
And then the other thing is, too, is the partnership as it grows. We have one out, we have a practice out in Wisconsin that is grown grown from two doctors who now can bring on a fourth factor. So, you know, once again, how will the buy ins happen? And if so, what's the financial commitment to each partner? I've dealt with a partnership where the partnership buyouts where the how it was written up, was not well understood. And so you have a doctor the fourth doctor that felt as though he should get a for his he's retiring and wants his fourth bought out, but the way that it was written up is its stock options and your stock options are worth based on your production or how what you are producing You're giving to the practice. And so now when this doctor everybody else is, let's just say for the sake of easy math, they were all doing, the practice was doing 4 million. And so he is expecting a million, but yet, he's only producing a half a million. And according to the way the partnership, the final financial arrangements were made up, he only gets a half a million for that buyout, that did not go well. And so not only would I say that, you want to check your financial arrangements, make sure you know how they're going to be set up. But I would say that you want to review those on a regular basis in a partnership too, because obviously, this this gentleman, this doctor forgot how they set it up, and was not happy with that when it came time for him to do it yet to doctors to other partners that we had retired, sold their portions to new partners worked it out the same exact way. The only difference is is this doctor was you know, is 78 has slowed way down only working two days a week. And when the other two partners sold, they sold at 65. They were working four days a week. And so they got there per se million dollars. So financial arrangements are gigantic. exit strategies, you know, this kind of coincides with the financial rains. But what happens if one partner wants to leave the partnership? So let's say it's only a two, a two Doctor partnership, what happens one wants to leave? How is that going to help happen? Is there a Buy Sell agreement in place? How will the value of the practice be determined, and making sure that that valuation is determined properly? It's the exit strategy is in place and and settled properly, can be very simple, or it can be very, very complicated and create a lot of issues. Another one, patient ownership and non compete agreements. So how are the patient record is going to be managed, who owns the patient relationships, I've gone into partnerships where the partners are, these are my patients, these are her patients. And then I have other partnerships where it's there, we it's just first come first serve whoever, whoever has the slot open to be able to see that patient first is is how we work at which one is right. But I'm not going to tell you there's a right or wrong on that. I think the biggest thing is is understanding how that partnership ownership is going to work. And making sure that your systems are built around that patient relationship. So that the the way that you're scheduling the way things are working that way, coincide with what your patient ownership is. I see too many times where doctors say he has his patients, I have my patients. But yet, the front desk schedules first come first serve, or vice versa. And it can create that once again, not having the proper systems and understanding the protocols of how that works can create a massive mess. Are there going to be non compete clauses? And if so what's the terms? I get doctors all the time when I when I go through these questions with them. They're like, What are you talking about? We're partners. I mean, why do we need a non compete? Well, once again, a non compete if we have a if we have it written into our contract for an exit strategy, then that exit strategy you want to make sure is protected by having a non compete and it's not a case in point of 15 years down the line. 12 years down the line. One of the doctors is just getting so disgruntled as partnerships not working. And there's not a non compete there and you go next door and you take all the patients. So it's it's vitally important. Another one that I think is missed insurance and liability. What will professional liability insurance how is that going to be handled? Right? What protections are in place in case there's a malpractice claim? Or if there's any other legal issues? How is insurance and liability going to be handled? You know, I've had a situation where a specialist wants to partner with a general dentist, but general dentist is actually going to be doing 80% of the business in 20% by the specialists but the specialist sits there and doesn't want to hold any insurance does not want to hold any liability because they feel that they're not doing enough percentage of the work that they should have to carry that. Well, once again, there's a problem with that. You it, you have to think these things through to make sure that once again, one person isn't going in to try to get a windfall overtop of it. So insurance and liability is huge thing, huge thing. Another one decision making process. So how will decisions be made within the practice? And is there a process that you're going to use for resolving the disputes? There's, we won't go through them all on, like I said, on this podcast, but there's several, is there going to be a third party decider? Is there going to be a specific dollar amount that's going to make the decision? In other words, so here's a prime example. I had a doctor partnership, that actor wanted to get into when this was cone beams were just coming out and wanted to get a cone beam, the partner said, No, I'm getting I'm only six years away from retiring and leaving the partnership. I'm not buying at that time. And $160,000 comb beam, to and have to pay off that lien just to be able to say that we have a comb beam, I'm almost done, things are going good. We're right. In a ton of business. We don't need a comb beam. We've we've been doing dentistry this long. It's okay. So now what what you can, what you do is, is if you can show that putting that comb beam in, and a return on investment that it can be paid off in, let's say, three years, two years, maybe in the first year, depending on how many active patients and and run the formulas and do the forecasting and stuff. Does it make sense is that going to be in you can make the factual math be one of the decision making processes, then, you know, we get to have that comb beam. It resolves the emotion part of it. But that's just one example of how that that decision can be made. And like I said, another 1/3 party and some people always ask me, Well, what's a third party decider. And this is just my own personal experience. I've had two doctors that had a third doctor that they were best friends with. And that's what their third party decision maker was. They all went to school together. And the third, but the doctor, the third doctor was had his own practice and so forth. And so whenever they had some tough decisions, and when I say tough decisions, they never got into real big arguments, but maybe more or less what I would say, you know, kind of listen, you and I aren't agreeing on this. Let's go talk to Ted. They would they both respected Ted enough that Ted would look at the information. And in analyze it, I guess, if you want to say that and say Listen, you guys, I think it's in your best interest with what I know what the both of you guys, you should get the comb beam. And so no one took any offense that that was their third party decision maker. There's more. And that's stuff that you when you're dealing with wanting to do a partnership that you should think about. So another Are there specific areas where one partner is going to just have flat out have the final say,
Phil Cole 18:42
situation with the with the monies maybe want the one doctor could care less about anything to do with the business aspect of things doesn't want anything to do with payroll with, you know, the LLC portion of the practice. So do they differ than that the one partner always has final say, as long as they aren't doing anything to wreck the profitability of the practice. You know, once again, things to think about well, it's another question and then we got to we got a few more but like I say there's there's we're about halfway through, but work life balance. This. I mean, this is a prime example. And this goes back to the specialist and the general dentists that I have down in Texas, that we're thinking about doing a partnership wants to come in one day a week wants to be the owner wants to be 5050 partner but only come in one day a week, while the while the dentist general dentist works and is is expecting the general dentists to work five days a week. Now, how are you going to have that work life balance in that situation where one person Who wants to go home with their kids than the other person is getting to go home with their kids? per se, you know, that there was in theirs. In that situation, when we when I ran through the questions with the general dentist, before they were when they were about ready to do this partnership. There, the answer that I received back was the specialist couldn't answer 1/4 of these questions, without an end started to get offended that I was asking these many questions. These, like I said, you get into a partnership, it's a big, big decision. And sometimes, depending on how you write up these things, can be very, very hard to get out of, without it being become very, very difficult and just taxing emotionally. So how are you going to? How are the work schedules in the time off going to be managed, so that you can make sure that both partners are not feeling like one is working harder than the other? Staff in human resources? Right? Who's going to do the hiring? Who's going to do the firing? You know, who's going to be? Is there going to be one person in front of the staff? Or are you going to collectively work together? Are there going to be specific policies in place that staff relationship and there's going to be performance evaluations? Or are you going to have a situation where one doctor doesn't feel like we need to do that, you know, that that's to me, that feels to corporate as we've been, as we've been told, when we're dealing with partnerships, I don't know if I want to do that. Because that comes across as you're going to be like a DSO or a corporate account. performance evaluations are still very important to make sure that you have a team. And it doesn't have to be for so whether or not they should stay hired. It's also culture, find out what's going on with your team and make sure that your culture isn't getting broken, but your culture is, is you know, well oiled in, in a partnership to culture is more important than anything, because you technically have two leaders to to refer to, I have, I have one right now that I just got a call in, and the doctor, it's a difficult situation because of death. But it you have a situation where the partner, the other partners have all kind of gone to their semi retirement years. And now you have one that is no, the main guy is no longer there. And now you have a situation where no one knows where to go. No one knows how anything is handled. So once again, important marketing, business development, how will marketing efforts be shared? Who's going to strategize with the employees? And who's going to want to be the visionary I guess, of the business development? Our marketing efforts going to be agreed upon? Are there going to be specific plans on how to expand the patient base? Once again, just a quick stat, once again, national national numbers are you should be bringing in 26 new patients per month, I think that's going to raise in the neck stats to around 30. So let's just say 26 to 30. You know, our who's going to be the one that works that marketing? Or do you both agree that you constantly have to be working to gain new patients at all times? You know, once again, average marketing for a dental practice should be anywhere between a low end of 2% to 4%. And I would say when we do our analytics, and when we do our inner interviews in different things with doctors, we've in our valuations, we see usually 1% is the average in there and we've run across me personally, on my last three valuations. I think that I'd be lucky if there was 1% and all three combined, in in marketing. So marketing and business development are a big thing. Be Because sometimes dentists can become creatures of habit. And if everything's going good, why mess with it? Why do we need to build a business? Why do we need to do anything else? But if you have two different people, one that does constantly want to expand one that is a visionary that constantly wants to push, is the other person going to be on? Or in favor of that business development? Another one regulatory compliances? How will the partnership ensure that there's going to be compliance and all the dental regulations, licensing requirements and so forth? And are the protocols going to be in place for handling audits, investigations and stuff like that? Are you going to do regular chart our chart, chart audits, I apologize? Are you going to purge your system, every once every three to five years, you're gonna do chart audits every year, are you going to make sure that you are up to date at all times with Windows compliance and email compliance, we just sold a $3.2 million practice in Wisconsin. And once we got in there and start digging around with the valuation, we found out that there was computers that did not have the right Windows licensing on there. So they were technically I guess, open for a breach. Because it was non supported Windows. It was old, old windows, I think it was actually windows seven, if I'm not mistaken. And then also found that there was their company emails weren't encrypted. So you know, once again, these things who's going to be in charge of that who's going to be on top of it? I'm not saying as partners that as owners, you have to be the ones that are doing it. But you do have to be the ones that are in charge or being paying attention to it. So it was funny as watching the news. And I go back to the this the movie shooting that I just lost that the actor's name.
Phil Cole 27:29
The brothers and he that he was went to court and was got off for supposedly not being responsible for shooting one of the people on the on the scene. But he's an actor, the Baldwin brothers, sorry, couldn't remember, but Alec Baldwin, and, and so he says that he had nothing to do with it. Well, in the regulatory compliance, this is very similar. So he was an actor, and he was the producer. Right? So as an actor, he pulled the trigger. So that would be like a front desk person. But as a producer, he is basically the owner of the company. And so he said he didn't have any responsibility. He was the actor, he went, he looked at the person, they told him to give me the gun. And they said it was a cold gun, I could do it and boom, an accident happened. Well, that's no different in the in the regulatory the compliance when it comes to say the OSHA's in the in the email, encryptions, different things like that. As an owner, you're right, you may have given that responsibility to someone else, but it's your responsibility to make sure your your stay compliant. Because ultimately, you're the owner. So once again, who is going to be in charge of that? Two more? That's very important, I think, technology equipment, how would once again, are all the decisions regarding technology upgrades and equipment purchases going to be made? And who's going to be responsible for the maintenance and upgrading of that technology and equipment? Now when I say who's responsible? How maybe how are the how is the LLC going to be responsible for that too? Like, are we going to set a thing in there that upgrades are going to happen when they break down? Or are we going to actually have a maintenance upgrade when you have a certain time allotted? So I have a great company that I think does a wonderful job on this is uptime health right? Where you can put in your when you buy your when you bought your equipment and it'll actually keep pace of the years and every time you have a service depart a service on it. And it can tell you when this piece of equipment basically is it's time to upgrade. And so are you going to put Something like that into place to basically protect yourself. I think it's, I think it's absolutely a must. Because once again, technology and equipment are a tough one, I gave you a couple of the ones, I have another one where partnership where one wants to really get into IV sedation and 3d printing at the same time. And the other doctors like, whoa, whoa, we're good. We're doing Endo, we're doing ortho. We don't need all this equipment we don't need to bring on this kind of patients in that, once again, is a huge thing to solve. Because that technology and that equipment that you're going to need to do IVs, IV sedation, the CPE credits, the responsibility of go back to one of those other things I mentioned with the insurances and liabilities, you can see how as I go through these different scenarios that we've run across, how you got to think through all these things, and then and then really sit down with a company like us class solutions that's going to consult and make sure that you're thinking through all these and giving you those ideas. And last but not least, I think probably and then there's more, but we'll we'll just cut it off because of just time constraints, not making this thing dry out too much. But dispute resolution is probably hands down. The biggest one, right? Is there going to be a mechanism that you're going to click to have resolve conflicts, such as meditate, a mediation, or arbitration, or how our disagreements that can't be resolved and look could be be addressed. Like there's gotta be something in there. And I think that that's just really, really huge, the dispute resolution. But I think that if you go through some of just some of these other ones that I mentioned, for you to think about, as you go through those, a lot of that dispute resolution handles itself, by finding out how you want to handle each and every one of these, these little topics or subtopics that I've talked about. So it's just crucial to make sure that you have an advisor to walk you through this partnership process. This is once again, where I would say, if you're going to go to a lawyer, for example, excuse me, do not go to just any lawyer, you're going to want to make sure that you're dealing with a transition, dental specific transition lawyer, making sure that you are you going to have someone that's gone through, you know, hundreds of examples, like I've given just a few in here, so that they can give you different examples give you different scenarios give you different options, to be able to really come up with the right partnership process. So I hope that this helps with you, those of you who are thinking about doing a partnership, or if you've never thought about doing a partnership, it was in the in, you know somebody that wants to, you know, have them, have them, listen to this podcast, take a listen. And if you have any questions, feel free always to reach out to myself, Phil Cole at class solutions, you can go to class solutions.com and get all the information, learn more, and set up a consultation there. So I hope this was a just a good podcast to give you the ability to understand just some of the nitty gritty things that need to go into a partnership. And some things to think about. If you want some more information, like I said, please reach out to us. And we can help send over the different things that we talked about and just a little checklist for you so that you can read through and make sure that you're you're covering your bases. So thank you. Thank you very much. If you enjoyed our show, please rate review us on Apple Spotify or wherever you get your podcasts. Once again. I'm Phil Cole, your host and thank you very much for listening to dental education podcast.
Transcribed by https://otter.ai
