Episode 610: Be Smart Legally With Buying/Selling Practices

David Cohen is a master at dental law, joining Kiera in this episode to discuss the transitions of buying/selling practices. The pair touches on the legal side of: trends being seen, pitfalls to avoid, benefits and red flags of selling to DSOs, doctor protection, future partner buy-out, and more.

More about David Cohen: 

David Cohen has extensive experience in representing individuals, mid-size corporations and small-size corporations in partnership and limited liability company law. He regularly counsels clients ranging from start-up ventures to large companies to nonprofit/charitable tax exempt organizations and professional corporations.

Mr. Cohen also has expertise in contract negotiation, review and construction. He also takes a proactive approach for clients by regularly constructing Non-Disclosure Agreements, Confidentiality Agreements and Non-Compete Agreements.

Mr. Cohen’s experience extends to the labor and employment realm, where he consistently advises employers about their relationships with their employees and independent contractors, as well as creates legally binding agreements documenting the details of those relationships.

Episode resources:

Learn more about Cohen Law Firm

Get in touch with David: (o) 972-294-7531, (c) 206-919-9060, [email protected]

Reach out to Kiera

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Transcript:

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0:00:05.9 Kiera Dent: Hey everyone, welcome to the Dental A Team podcast. I'm your host Kiera Dent, and I have this crazy idea that maybe I could combine a doctor and a team member's perspective, because let's face it, dentistry can be a challenging profession with those two perspectives. I've been a dental assistant, treatment coordinator, scheduler, biller, office manager, regional manager, practice owner, and I have a team of traveling consultants where we have traveled over 165 different offices coaching teams. Yep, we don't just understand you, we are you. Our mission is to positively impact the world of dental, and I believe that this podcast is the greatest way I can help elevate teams, grow VIP experiences, reduce stress, and create a team. Welcome to the Dental A Team podcast. Hello, Dental A Team listeners. This is Kiera, and you guys, I am so excited to bring to you someone from the legal world today. I know there's a lot of hot talk about transitions and purchasing and what do we do and how do we recession proof our business and should we just sell it? Should we keep it? So I'm really excited to bring in David Cohen. He works specifically with general dentists, orthodontist, periodontist, endodontist, pedo practices, pros and oral surgery.

0:01:17.6 KD: So David, welcome to the show today. How are you?

0:01:20.9 David Cohen: Doing great. Thanks so much for having me. I feel privileged to be on this show. This is the podcast of all podcasts.

0:01:26.3 KD: Well you're kind.

0:01:28.0 KD: So I'm definitely excited to be here.

0:01:31.1 KD: Well, I am excited to have you because I think it's such a fun gift to share with our listeners. Somebody from the legal world that seeing this you're working, I mean, you specialize with dentists, so you're really able to give that bright eyed, first hand view of what to do and what not to do. So David, I kind of gave a little bit about you, but how did you actually get into the world of dental law, like specifically working with dentists, with working with all these areas? How did you even get into that?

0:01:57.9 DC: Yes, it's an interesting question. I grew up in the dental world. My father's actually a periodontist and my father was always been heavily involved in continuing education and he started the Seattle study club, which is a continuing education network for dentists. And so I grew up going to meetings and always knowing dentists and specialists throughout my life. And so you would think that like the most organic way for my involvement would be that and it definitely was. There's another aspect to it too, in which I was working, doing some legal work on some investments overseas in international maritime law. And I was helping people invest in shipping investments and I did a lot of legal work on those. So a lot of the investors happen to be dentists and they needed things in their practice. And so they approached me asking for help with their practices. And by doing that, I sort of learned that there was definitely a need for helping dentists in their practice from a legal perspective and primarily practice transitions, just buying and selling and partnering and practices. So there's sort of two gateways, so to speak, that got me into the dental world and got me into doing what I'm doing.

0:03:12.9 KD: I love it. Well, and I love that you come from first hand experience of dentists, but then you just stayed niche with that. So I am real excited and real. I just want to pick your brain because there's a lot of talk of partners of DSOs. Do I sell? Do I keep? And I think a lot of people are feeling the FOMO of if I don't sell to a DSO, am I not going to be like peak of market? But then there's the other side of if I sell out, then I lose autonomy. Then I've got people wanting to partner, but they don't want to give up 50% of their practices. And then we've got new grads coming in saying, but that's what I've been told you've got to do is only do 50%. So David, I don't care where you want to start on this. Those are like my burning questions, things I'm hearing from offices, things that we're coaching on, but kind of take it away on this transition, selling, buying, partnering, like what are some of the things you're seeing and then maybe even some of the pitfalls and how to avoid those?

0:04:05.7 DC: Yeah, that's a great question. So to start off, I'll say that we do a ton of practice transitions. In 2021, we did 330 and this year we will do about the same, if not more. So we're seeing every type of transition out there. I'd say about half of the transitions that we do are DSO deals where we're helping doctors sell to a DSO and about half of them are private deals where private doctors sells to private doctor or partners with private doctors. So we're really seeing it from every angle. And I think the biggest thing to focus on for doctors is to really find within themselves what they ultimately want to do. I think there's a lot of peer pressure, so to speak, right now going on with doctors seeing other doctors do particular things. And I think it's really key to go back to the core and find out what works for that doctor. Because one thing that I can assure of, obviously I can't predict the future, but I have a strong feeling for it, which is I think that everything is going to be relevant going forward. I don't think that it's going to be a scenario where there's only DSOs and every practice gets eaten up and gobbled up by them.

0:05:15.6 DC: And I don't think that it's going to be the reverse. And so I think there's a place for everybody and it's really important for each doctor to kind of find their niche and decide what is going to work best for them. I'm definitely not a believer of sort of like the polarizing opinion of DSOs are bad or DSOs are good or whatever it might be. I think the DSO transaction is a specific type of transaction that fits a certain type of seller, a certain type of person. And I think they're amazing for some people that have changed a lot of people's lives in a positive way. And I think they may be not as good for others. And one thing that I can say is that I know that DSOs have made a large effort recently to really provide autonomy to the doctor because the feedback they've been getting for years is that.

0:06:02.1 DC: They kind of come in and ruin practices. And I just don't think I don't see that happening with my clients. Most of my clients are extraordinarily happy. And for the most part, the DSOs are hands off and they let the doctor do things like they always have.

0:06:16.3 DC: I just had a doctor call me this past week telling me that it was almost like spooky because they don't even realize a sale and DSO transition happened. They just go in their office like they always did and they do what they always do. And so they don't really notice much of anything. I think that...

0:06:32.7 KD: So can I ask on that? I have a question for you...

0:06:34.7 DC: Yeah. Go ahead.

0:06:36.0 KD: Is what then is the benefit of selling to a DSO if things don't change? Like that's something I haven't been able to wrap my mind or and maybe you can see it from your standpoint from the clients that you've worked with is if I'm going to sell, I'm still going to have the headaches of the team. I still like I get to do the same thing, have the autonomy. But yeah, I'm an associate in my own business. What are you seeing is the benefit for doing that?

0:06:58.2 DC: Well, I think things do change in a positive way. And I should have probably elaborate a bit more...

0:07:04.9 KD: No, this is great. I want to hear it. These are the questions I want to ask. And I'm like, I hope people listen. You're like, Kiera, like, keep asking those questions because I'm curious, like, what is it? And I want to poke holes in it. So people can then have better information and make smarter decisions.

0:07:17.8 DC: Yeah, so I think that for a lot of doctors, things do change in a positive way with the practice. And when I say go into practice, like they always have, I think what I meant more by that is they go into practice and it's not like there aren't like huge noticeable changes, like in terms of like the office looking different or them being being told what to do in every step of the way, right? They feel like it's still a good flow. They don't feel like remorse that now they're sort of like, got being micromanaged by somebody else. They still have the clinical autonomy. But the DSOs typically do take the business stresses away from the doctor. And I think that is something that's important that does seem to change for my doctors. Also, I think one of the advantages to the DSO deal is that a doctor can typically get more money and have more opportunity than they would if they sold to a private buyer. And so there's a lot more opportunity there. In addition, there's opportunity to grow moving forward, especially for the entrepreneurial doctors who want to own stock in the DSO or want to engage in other opportunities down the road as that DSO grows and they get to participate in that because most DSO deals involve the doctor getting stock in the DSO moving forward.

0:08:39.2 KD: Totally.

0:08:39.2 DC: So I think the benefits really are in general that there's more opportunity from a financial standpoint and from an entrepreneurial standpoint for the doctor. There are less burdens from a business side of the practice standpoint. And also they get to be in their own practice typically for a longer period of time. You know, if you are a doctor and you sell to a private buyer, most likely, not in every case, but most likely they're going to take over the work and the practice. Maybe you associate back in the practice for a certain period of time, but usually it's kind of a transition phase out. In a DSO deal, the DSO can't practice in your practice, so they need you. And it's really an opportunity for the doctor to sell take some chips off the table, but still stay in their practice and be the primary doctor that gets to be in their practice, continuing to work while still benefiting from the fruits of these opportunities. So I think those are, those are the upsides. I think the downsides to the DSO deal are that there is less control, at least from a legal standpoint.

0:09:44.6 DC: You know, I think if everything's going as it always would, the doctor probably doesn't notice very much, but certainly if things don't go as they were...

0:09:51.3 KD: For sure.

0:09:53.1 DC: There's going to be there's going to be a hammer drop. And I think that makes sense. I mean, any of us that pay millions of dollars for something, if it's not going how we would want it to, we would step in and we have a lot of pressure from our investors to do that. So it makes sense that they would do it. But I think the doctors that still want to have control and autonomy over the practice, but still sort of have their cake and eat it too, and receive the rewards and the benefits from it, I think are not as good a fit for a DSO because they're not going to have the ultimate decision making on those business decisions going forward. And you know, sure, the DSO might choose to use a different laboratory than the doctor wants to. Usually they like to keep it status quo, but if they do, I mean, technically that some community DSO has the ability and the right to do because they bought the practice as their business decision to make.

0:10:47.6 DC: So there has to be a trust factor from the doctor that they're going to not want to do anything that's bad for the practice because they have a lot more to lose than the doctor does. They just paid the money for the practice. So, but they could, right? And for the doctors that are uncomfortable with that and relinquishing that control, I think that's a big issue as far as the DSO is concerned. And I think for the doctors that don't want to practice very much longer, that also could be a not a good fit because most DSOs need the doctor...

0:11:16.6 KD: A 100%

0:11:17.8 DC: In practice at least three to five more years. So those are two examples of doctors where it wouldn't be as good of a fit and goes back to the whole thing of it's a good fit for some, but not as good fit for others.

0:11:29.8 KD: Gotcha. So.

0:11:30.6 DC: Sorry I've kinda.

0:11:30.7 KD: No. No. No, don't even say sorry. 'Cause that is, I actually was just chatting with a doctor the other night and I get these calls a lot of Kiera, what should I do? Should I sell to the DSO? The multiples on it are much higher.

0:11:41.3 KD: I do. And I'm like, well, you got to think about it. They will give you their autonomy for now. But if, like you said, things go down, I'm like, they're a business at the end of the day. So they are going to come in and make shifts and changes if things start to go south. If not, like you said, things are fine. But I'm curious, what are some of the legal ramifications just for the listeners to know of, if I were to sell my practice to a DSO, I've got to work there for X amount. But like, what are some of those nitty gritty details that you're seeing on the deals that you're doing just so listeners kind of know, like, I feel like be a better educated to make better decisions. So what have you seen on those deals when specifically selling to a DSO?

0:12:20.0 DC: Yeah, so the legal ramifications for a DSO deal, typically are as follows. First of all, the DSO is not going to typically provide all of the money upfront at closing. Now, in most cases with my doctors, they usually still get more as much upfront or more upfront than they would from a private sale, but not always.

0:12:41.1 DC: But all of the money is not always provided at closing. So number one, there's typically a holdback of funds, which is usually about 10% of the of the price. And that holdback is used for indemnities and liability purposes. So if any liabilities are hanging out that were undisclosed or unknown, the DSO has the money to then go pay those off to make sure that they are paid off so they can continue to operate because let's say a creditor hasn't been paid off that is crucial to the practice and they cut off services to the practice unless they're paid, the DSO would want to know they just have that money and they can go pay it as opposed to trusting that the doctor will write a check and make good on that. So usually there's a holdback and it's usually returned within a 12 to 18 month period to the doctor that as long as there's nothing hanging out there, they do get that money. But that is one sort of caveat that they're not getting at closing.

0:13:34.5 KD: Okay.

0:13:36.2 DC: Second, there's something called an earn out and an earn outs not in every DSO deal, but in in many DSO deals, it is a part of it.

0:13:43.0 DC: And an earn out means that part of the money is only going to be paid if certain goals are met in the practice. Usually those goals are production based and usually it's based on the production of the practice as a whole and not necessarily like the production of that particular doctor alone. Sometimes they're based on EBITDA, but there are goals that often have to be met and if they're met, then the earn out monies are then paid. So that's money that's not guaranteed. And so the doctor needs to know that they're not guaranteed anything that they don't have in their pocket through the closing and they have to be well aware of that. You know, it's easy to see these big enterprise value evaluations of, oh, I'm getting blank millions for my practice. When you really look at it, it's blank is paid at closing. Part of it's in a holdback, part of it's in an earn out. And then in addition to that, there's stock usually. So part of that money goes towards stock and you know, the stock is usually in an investment vehicle that's strongly controlled by the DSO that the doctor doesn't have voting rights in or interest in.

0:14:45.7 DC: And so you're really as a doctor leaving it up to the DSO to your success is really contingent upon how well the people manage the DSO. So your stock could be worth nothing or it could be worth a lot depending on how well things go. Usually things go as planned, but you know, not always. So that's also money that's not guaranteed and it's in stock. And that stock is typically not liquid, meaning the doctor can't just cash out and say, Hey, I want out tomorrow and just cash me out. We would call that a put right in the legal world, meaning that the doctor can say, Hey, at X time I get to sell to you back to you DSO and you just cash me out. That's on...

0:15:25.2 KD: What happens to, can the DSO just decide they don't want to buy the stock though? 'Cause that's something I have wondered if they're like, no, I don't want to do it. Or can there be legal contract writing to where it is a guarantee that you have a buyer? 'Cause I get those stocks go down and that DSO doesn't do what they think they're going to do. That stock is worth truly nothing. So is there any caveat or language that you guys can put in to protect the doctors on that stock?

0:15:49.7 DC: Yeah. So there's, that's a great question. So there's two ways usually out of the stock scenario because like I said, it's usually illiquid either number one, there's what we call a recapitalization event where third-party private equity comes in and they, they buy the stock. And usually it's at a very high multiple, which is kind of the goal. In the end that these doctors are, it's sort of like dangled for these doctors that that could happen. Right. The second is the DSO actually buying out, repurchasing the doctor's stock. And that's what you're referring to. And that usually occurs when the doctor's employment is terminated. So when the doctor is no longer working for the DSO, usually the DSO will then repurchase, it'll trigger a repurchase of the doctor's stock. And so the biggest thing the doctor wants to look out for is, is there language saying that they must repurchase or that they may repurchase? Are they obligated to or not? So you really got to look at that. You also have to look at how the valuation is being determined when you are bought out by the DSO. Most of the DSO documents say that you're bought out at fair market value, but it's as determined by that DSO.

0:16:56.8 DC: And that sounds really sketchy. But if you actually think about it if you had an independent third party appraiser do it, that may not even be fair because you're bringing someone in. It's like the wild west and the DSO valuation world. Like how do we know that the independent third party appraiser is not going to value it worse than the DSO would just because they don't have as much knowledge and insight into that DSO's value. Right. So, those are all things that you play with and you look out for, but you definitely want to consult your, your attorney about like how that valuation is being done, but to directly answer your question, you can definitely attempt to put language in saying that you must be bought out and you just want to be careful about what valuation that that is done at.

0:17:38.6 KD: Hello Denali team listeners. This is Kiera and you guys, how was your 2022? I want you to look back and tell me, was it the year of years or was it a really hard year? Did you crush it or did it crush you? This is the time guys for end of year Dental A Team platinum is welcoming you where we will physically fly to your practice. We will come and we will elevate your dreams and make them into a reality. And guys, space is limited and prices are going up. This is not a sales pitch. This is not something where I'm trying to scare you into it. I'm just facing the reality of inflation is here. Flights are expensive and I want to see as many people as we possibly can and serve as many as we can. So if you want to be part of our elite group of people, there are limited spaces 'cause our consultants can only see as many. We are taking on 10 new platinum offices by the end of the year and that's it. That's all we have space for. So if you want to be one of the elite 10, come join us.

0:18:40.0 KD: Be a part of our top notch elite doctor community. Be a part of our office manager and hygiene and front office communities. Get your operations manual done and live the life that you've only been dreaming of today.

0:18:51.9 KD: Email me hello at the dentalateam.com and make 2023 truly a year that's unforgettable. We are a complete tax write off and like I said, we are only taking 10 offices, so don't get left behind. Be one of those 10 and I cannot wait to give you the biggest warmest welcome to completely and utterly changing your life for good. Welcome to the Dental A Team. I can't wait for you to join us. Hello at the dentalateam.com cheers to 2023 and making you your best self yet.

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0:19:22.4 KD: For sure. 'Cause that's, I think where DSOs feel great. But I'm like, it's kind of pie in the sky until pen goes to paper. And so just curious if on the legal side, there can be language in there to protect them because I'm also thinking tax purposes. You don't want that cash out right away and then you've got to still work there. And then when you get your stocks, how does that work for taxes too?

0:19:47.0 KD: So it kind of sounds like there is some tax sheltering in play by having stocks and not getting all of it up front. And it almost sounds like this is kind of a, you get some money at the beginning, you'll get some while you're working and then you'll get another payout at the end potentially as long as your contracts are written right. Is that, is that a fair way to think about it?

0:20:04.7 DC: That's absolutely correct. Yes.

0:20:05.5 KD: Okay. All right.

0:20:07.4 DC: And every deal is different. You know, I've had some doctors sell the DSOs where they just sell, sell, get cash at closing and that's it. And I've had some doctors where actually this only happened once, but I had a doctor who literally took everything in stock. They didn't take anything at closing and that was their choice. But, which made me nervous. But, yeah, for the most part, yeah, that's exactly how it goes.

0:20:30.4 KD: Okay. So that's the DSO side, which that was really helpful, David, because again, like I want to know all these things and I also want to know how can doctors protect themselves just to make smarter decisions. 'Cause they're literally like Kiera, what would you do? And I'm like, I actually don't know what I would do if I was sitting there with a DSO offer with a partnership buy-in offer or to sell to private because I'm like, I see benefits on all of them. So going into, let's say we're selling a, actually I want to do partnership if you don't mind, like how does this partnership world work for you from transitions? 'Cause a lot of doctors are literally sitting on this tipping point, David, I'm sure you're seeing it where they're like, like DSOs are hungry sharks out there and they are sending them offer after offer after offer. Like I'm hearing eight, 10, 15 times EBITDA. Like it is nuts what these DSOs are doing. And I know they see the potential in dental practices, but then there's the other side of, well, maybe I just want a partner. How do you make that decision that you're seeing with your clients between selling to a DSO and then partnering for a future partner buyout?

0:21:33.3 DC: Yeah. So I do a lot of those as well. I actually have been doing a lecture over the past year or so called Investing in yourself. And so it's for the doctors that don't want to go the DSO route. They're almost like creating their own partnerships or DSO mini DSO just sort of like fight what's going on on the other side. But really the organic traditional partnership used to be where a doctor would just bring in an associate that associate would associate for maybe a year or so. And then as long as it was a good fit, that associate would buy in a percentage. Usually that percentage would be based on what level they produce at in the practice. And then over time they would buy out that doctor that was initially the senior doctor. And then that senior doctor in a cycle would then potentially work for the, that doctor before they phase out. That's kind of your traditional cycle of a partnership. We're now seeing a lot of partnerships that are sort of just like, I want to go partner with that person. And that's where we, you hear all the time about partnerships not being successful.

0:22:38.7 DC: I would say that most of ours are successful. We don't see them not be most of the time, but most of our doctors do usually what's necessary to make sure it's a good fit. And really there are two things to make sure it's a good fit. Number one, work together beforehand. And that's not always feasible, but I think that is huge. And number two is get personality testing because the number one reason why we see partnerships fail is personality differences.

0:23:05.5 KD: Interesting.

0:23:07.7 DC: It's not always about the money or other business terms. It's really about personality because if the personalities align, typically when there's issues, they resolve them because everybody understands each other and they're not running to the contract. The best partnerships and you know, this is a lawyer saying this or where the contract is signed and you never pick it up again because you don't need to. Right? So I think if doing the partnership the right way occurs, I think they can be done in that sort of like spontaneous, let's just do a partnership way. And then the third way I think is this investing yourself where you have your practice, you bring in an associate, maybe a smaller percentage and that associate feels ownership because they're part of things, but you can use that money to then parlay that into expanding and having other offices because lending sometimes the well can run dry from a lending perspective if you're doing multiple locations.

0:24:04.3 DC: And so you can then take the money you're getting from the associates, invest those in other practices and have these multiple partnerships with multiple partners and sort of like the new school way of doing things. And I have a lot of doctors that have several practice locations and they have multiple partners and they have a lot of associates who have bought in and they're really enjoying it. And I think a lot of the doctors that I'm seeing coming out of school and that are younger are really eager from a business standpoint to have ownership. So it really works out on both ends because the doctor that is coming in really feels ownership and that they're part of it. So those are kind of the three ways that I see the partnerships happening these days.

0:24:45.5 KD: Yeah. Which is super helpful to hear. I am going to ask the question because I'm feeling like I'm hearing a new trend and I'm curious what your thoughts are on it from a legal standpoint, from protecting the selling doctor, a lot of new grads or people who have maybe worked in an associateship before they're coming in and they're demanding, I've got two of them right now that are saying 50/50 or no deal.

0:25:07.8 KD: What's your take on this 50/50 partnership versus the smaller equity buying up to the 50/50 then buying the doctor out. What's kind of your take on that?

0:25:17.5 DC: I think it really depends on what kind of partnership it is. Is it, the doctors are actually working in the practice or is it an investment location that neither of the doctors that own it are going to be working there, but they're going to be associates working there and it's sort of like an investment. If it's the investment, I think the answer is easy. I think the parties need to be equally at risk. If it's going to be 50/50, they need to both be investing in whatever it costs to build the office or run the office together equally. They need to be personally guaranteeing any loans if there's a loan on it together. And I think as long as everyone's equally at risk, that makes sense to me. I'm not a fan at all of like the 51/49 partnership thing. To me that doesn't, it just almost screams like it just, the doctor wants money. You know, it's like, Hey, I just want as much money as possible without giving up control. So really I don't want to sell my practice. I just want the money because I want, I'm going to maintain the control.

0:26:18.8 DC: And so to me, 51/49 just doesn't, it's not a recipe that works. Nobody wants to be a 49% owner and they're not incentivized to want to like take over the rest when they really don't have a say in anything. So I actually like 50/50 far better from that standpoint. Now a smaller percentage might make more sense because then you're talking about how much is the doctor producing and how much and how at risk are they, right? If a doctor is going to come in at 10% or 20% and that's all they're producing, that might make sense. Or if they're not personally guaranteeing any loans or they're not taking the risk that the other doctor is taking, then they should have a lesser percentage interest in the office in my opinion. So I think it can kind of go both ways and it really just depends on the circumstances. Sorry, that was a very oily answer...

0:27:06.0 KD: No. No. It was good.

0:27:10.6 DC: But it depends but it really does depend.

0:27:12.0 KD: But that's also where I wanted to hear kind of how it works because I feel like some senior doctors if you will, who are the selling doctor, they're feeling this feeling and maybe you can speak to this because I feel like there's two sides to the coin, which I don't think either one really understands. And the selling doctor is saying, but David, I have worked so hard. I have spent 10 years. I have built a reputation. I have built my name and then they're just going to come in and I'm going to give them 50% of this. And then the selling doctor or the buying doctor says, I don't want to be a junior partner. I want to make sure it's vested. I'm showing that I'm committed to it. So do you have any, like, would do you do anything for those two different mindsets? And maybe it's just if the selling doctor feels that way, they're not a good partner. I truly don't know. So I'm curious, you do way more deals than I've ever dreamed of. I think you could speak to this a lot better than I could.

0:28:04.0 DC: Yeah, I'm sure you've seen plenty and know just as much, but I would say that first of all, there's no exact science to the percentage ownership thing. You know, I mean, if you want to say it's going to be based on the production of the doctors, then yeah, maybe there's an exact science, however much they produce in comparison to each other, it should be their percentage. But otherwise it's a little bit arbitrary. And I think really the percentage comes down to how much, value are the parties bringing to the table? If a doctor is willing to buy 50% of the practice, they're paying for 50% of it. So their argument would be that they're making up for the fact that that doctor has always owned the office and you know, blood, sweat and tears for 20 years. Well, they're accepting 50% of the money and that's sort of what was paid to relinquish that. It's almost like they were paid for that 50% of that because they were paid, right? So I think that the argument that the buyer would make is, yes, you've owned this for a long period of time, but I've paid for my right to come equal with you on that.

0:29:11.5 DC: I think for the doctors that still want to maintain control in the office, I don't think there's anything wrong with having the associate pay for a smaller percentage of the office, maybe 25%, 30%, 40%, whatever it is, and not have a controlling interest in the office because that doctor has always owned it and they want to maintain the control and gain the trust and over time have that transition organically sort of happen and the doctor can buy up to 50% later. But in that case, then the buyer is paying for 25% or 30% and they're not paying for an equal interest in the practice. So they can't have the expectation that they will be treated equally because they're not paying for that. Right? And so I think that also makes a lot of sense, but for someone who's paying for 50% of the business, but then they get no saying anything, they're going to feel like they're not getting what they're paying for. So I think for those doctors that want to still maintain control, there's nothing wrong with that, but I think they also have to be accountable and understand that then they're not going to get 50% value payment for that.

0:30:16.3 DC: They may have to sell a quarter and then go from there. So I think that's my take on it.

0:30:21.5 KD: No, I think that's fantastic. And do you work with potential partners and give them kind of your say and say like, yes, this works or no, it doesn't and kind of almost like navigate through it? Because I feel like they come to the table, it's like dating, right? They're super excited. They want to get married, but then like when they're really looking at this and like, do we really want to do this? And what does it look like if we get divorced? I feel they don't quite know how to navigate. So are you, do you work with doctors looking to potentially partner, looking to possibly sell to a DSO and advise them and give them guidance? Is that what you guys specialize in?

0:30:53.9 DC: Is exactly what we do. We help doctors buy, we help buyers and we help sellers. So we've been on both sides of it. We help them review or draft the legal contracts to effectuate the deal that they're going into. And we definitely give advice on what's reasonable, what's not. I think we're known for being super honest and direct with clients about expectations and you know, what if they're being fair or reasonable, it's a small community and it's different than I think other industries in that everybody does much better together collectively if everybody's happy and it's a fair deal than it is if somebody is scratching for every inch.

0:31:33.5 DC: You know, like I remember I actually, a couple of weeks ago I was talking to a doctor and I said something like, yeah, I mean, you could do that, but you'd basically be screwing the other doctor over. And I don't think that's really like good for anybody. And they were like.

0:31:47.8 DC: Well, I don't have a problem with that. You know, and I'm like, okay, well maybe it's not a good fit for me because that's not, not how I view things. Right. But, but I think it's, it's, yeah, we do help doctors all the time and we're always honest and we want to make a fair deal for everybody. So that's, that's kind of how we operate.

0:32:03.3 KD: Okay. That's awesome. And then also, I love lawyers, but I don't love that when I'm just hanging out with them, I pay them for like the small chit chat. Are you guys like an hourly, are you a contract? How does it work? Because I do know every lawyer is different. And I think some people want the legal, help. So that way they are not putting themselves in hot water, but they're scared of the dollar amount that lawyers can run up on them.

0:32:27.3 DC: Yeah. So, so we have our, our philosophy is really based on three things. And it always has been it's, responsiveness, level of experience and flat fees. We've always charged flat fees. Now there are some miscellaneous projects where we do have to charge our hourly just because they're so outside the box that it's impossible to know what the amount of time is going to go into it. But you know, the vast majority of the time we're flat fee. So the doctor knows exactly what to expect. They're not charged for every second on the phone. And it's really just an all in thing. And also a lot of times we're happy to just chat with people and we're not like putting them on the clock. So we're definitely more of a big picture, firm that we're just we don't really nickel and dime the client. So it's just always been our philosophy.

0:33:16.9 DC: Awesome. Guys, that's actually why I brought him on the podcast because I feel like you guys need a resource of legal that really, supports you guys to go through this process. And David, I knew you guys were flat fee. I just wanted you to share it because I love that about your guys' firm. That's why I refer, I'm like people who need partnerships and contracts. I've got another doctor and she's trying to bring in an associate, but doesn't know like what to pay and what she can afford and how to make this good for her and not sell the firm. And I'm like, you just need somebody who can help you work through this. Who's seen it 100s of times to be able to write really good contracts. And I've found great contracts make great friends, um, and they just make it clean the whole way through. So I will ask one last question for you. And that is what would you say are some of like the big red flags or pitfalls you've seen, whether it's from selling to a DSO, whether it's from partnering, like I don't actually care which one it is, but what are some of like the big red flags, that people should look out for that you guys have seen with all the deals that you guys have done?

0:34:17.5 DC: I think the biggest red flag is the lack of investment in a team of professionals. I think that there's the red flags start being created when parties are misguided and a lot of times are misguided because they don't go get the help that they need from people on their team. And I think that it's really critical to have a team for two reasons. The first is because typically the doctor doesn't have the requisite knowledge to, to know what to do in certain situations. And I think the second is even if they did, like, let's say they're like a lawyer and an accountant and a dentist and every other thing known to what they would need to do, a consultant, they don't have the time. I mean, they only have so much time. And so no matter what, you definitely need teammates. And without those teammates to lean on, it can definitely make the transition very difficult. So the number one red flag that I see is that because I can't tell you how many deals I'm on where the other side doesn't have an attorney or they don't have a CPA and they're asking for something that's not industry standard and there's no one in their ear to tell them, yes, that is the norm or fight for them.

0:35:26.9 DC: If maybe our side, our client was being unreasonable or something. I mean, I think it's important just to have teammates that can help the doctor through. So that's the number one thing that I would say. And I think the second biggest pitfall that I see is what I just already talked about, which is doctors that aren't, they're trying to win. You know, I've said this, I say this when I lecture every single time I've said it on a million podcasts is that negotiations not about winning or losing. It's not, it's about getting more of what you want without the other side being below the status quo. It's not a game. You're not trying to beat the other person. It's about coming together to make a deal that works for everybody. And so I think if everybody's getting more of what they want and growing the pie and not like taking more of a portion of the pie, I think that's where deals are magical and the ones that aren't are where you have sort of like an unreasonableness and people are trying to win the negotiation. So I think having a team and I think the team keeps the doctor on track to not do that.

0:36:30.2 KD: Having a team and also, understanding that what's best for everybody typically is going to be best.

0:36:39.0 KD: Oh, such good advice there, David. I appreciate you so much. I appreciate that was like fun and educational for me. So that's one of the main reasons I started the podcast is to be able to interview, connect, learn from industry experts. So that way, one, I can be a better consultant and just educate myself. Like this is my CE guys hanging out with really cool people like you, David, to just better know how to do this and then who to recommend that I really, really respect, admire. I love what you guys do. I love the deals that you guys have got. So David, if people are interested, they want to connect like right now, I also kind of a little bit made this podcast for the three offices I was talking about and then everybody else listening. So people want to get in touch with you. They want some help. How's the best way to connect with you and your firm.

0:37:25.9 DC: So we're really good at being responsive. The phone number for our firm, it's 972-294-7531. And for myself personally, my email is [email protected]. So it's David @ C-O-H-E-N-L-A-W-F-I-R-M-P as in Paul double LL C.com. And anybody can email me directly. My cell phone number is 206-919-9060. I do give that out. I'm not afraid to do that. Uh, people are typically respectful for the most part. So I'm happy to do that. Um, but all those ways and we're always really responsive and we're excited to, to work with dentists, it's a passion of ours. And I appreciate you asking that.

0:38:15.1 KD: Yeah, of course. And guys, we'll have Alex pop that in the show notes for you so you can just scroll down and call him directly. To have a lawyer give their cell phone on a podcast is pretty impressive. And I think that that says volumes about you, your firm, your guys' ethics, the way you operate. So guys, I hope you had as much fun as I did on this podcast, David, I appreciate it. I am surely going to probably put you back on and just keep asking you all of my questions that I deeply want to know, 'cause it's such a unique world. And I feel like lawyers are so smart. And if you've got a great one that's in your corner, it can save you a lot of heartache, headache, millions of dollars. And so the fact that you're serving our community, you're very passionate about dentists, just makes me happy. So thanks for being on the podcast and all that you do for dentistry.

0:39:00.0 DC: Yeah. Thanks so much for having me. I was honored to be on it and I'm definitely a fan of the podcast. So just feel honored and was really happy and had fun. I think you put it perfectly as it was just fun to chat back and forth and anytime.

0:39:11.8 KD: Awesome. All right guys. Well, I hope you, if you are in the need of partnerships, DSOs, you're wondering, uh, those offices, shout out to you guys, you know who you are. And then future offices who I know are also looking for this as you're bringing on associates. I think our world is shifting heavily right now and to have a good lawyer in your back pocket that you can call. If I was listening to this podcast, I would be reaching out just to get my name and get connected with them. So I have somebody in my, like you said, on your team. So guys, as always, thank you all for listening and I'll catch you next time on the Dental A Team podcast.

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0:39:48.2 KD: And that wraps it up for another episode of the Dental A Team podcast. Thank you so much for listening and we'll talk to you next time.

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