Rob and Paul host Jason Deshayes, CPA, a seasoned certified public accountant with more than 17 years of experience providing tax, accounting, and consulting services to individuals, dental and medical practices and closely-held businesses.

In this episode, Rob and Paul chat with Jason about best practices and pitfalls with due diligence for a dental practice acquisition: the importance of early engagement with dental-focused advisors, analyzing cash flow, establishing expectations and knowing the parties and understanding the make-up of the practice that’s being sold. Every deal is different and there is no “standard treatment plan” when it comes to conducting due diligence!

Listeners who want to learn more about Jason Deshayes and Elliott Davis’ practice can visit https://www.elliottdavis.com/professionals/jason-deshayes/ or they can email Jason at Jason.Deshayes@elliottdavis.com.

Transcript:

Intro: Welcome to the Dental Amigos podcast with Dr. Paul Goodman and Attorney Rob Montgomery, taking you behind the scenes of the dental business world. All the things you didn't learn in dental school but you wish you had. Rob Is not a dentist and Paul's not a lawyer, but since rob is a lawyer, we need to tell you that this podcast is for informational purposes only and shouldn't be considered legal advice. Listening to this podcast does not and will not create an attorney client relationship as is always the case. You should formally consult with legal counsel before proceeding with any legal matter. Learn more about the Dental Amigos at www.thedentalamigos.com and now here are the Dental Amigos.

Rob: Hello everyone. I'm Rob Montgomery I'm joined as always by the head Nacho himself, Dr. Paul Goodman.

Paul: Great to be here, Rob.

Rob: It's good to see you Paul and welcome everyone to another episode of the Dental Amigos, the only podcast co-host it by a dentist and a lawyer. Today, we're joined by Jason Deshayes, a seasoned certified public accountant with more than 17 years of experience providing tax accounting and consulting services to individuals, dental and medical practices, and closely held businesses. Jason leads the accounting advisory team in Elliott Davis's, his Raleigh North Carolina office, and he's also a leader within that firms dental practice. His areas of specialty include outsourced accounting, business accounting and financial consulting, succession planning, individual financial consulting, charitable gift planning, and personal and business income tax. And prior to joining Elliott Davis, Jason was a senior manager in the firm services team for the Association of International Certified Professional Accountants. And he also previously served as vice president and partner of Butler and company CPAs and Albuquerque, New Mexico based accounting firm. I promise everyone listening that we will not be talking about the tax code during the show and instead though, we're going to talk about, uh, best practices for financial due diligence in a dental practice acquisition, as well as some areas where dentists go wrong with, uh, without due diligence. And now without further ado, here's Jason Deshayes, welcome Amigo. And thanks for being on the show.

Jason: Thanks for having me guys. I appreciate it. Excited to have this conversation with you guys.

Paul: Yeah. Awesome Jason. And, uh, we start with the hard hitting questions. Uh, you know, or you're down. If we went out for nachos where you are, you know, where would we go? What's your favorite place and what topping would you order and since your accountant and can we write them off as that go with that.

Jason: I thought we were going to talking about taxes here, man. Really not ready for that. We just moved to North Carolinaabout a year ago. I'm still used to New Mexico spice, so I'm, my favorite toping when I was in Albuquerque was adding green chile, which has a lot of flavor in the La Heat Nachos. Um, haven't found that here. Uh, here there's more of a rub for like barbecue pork nachos, which is really good. So I've, I've enjoyed that here. I always have red and green Chili. At my heart.

Rob: I like that spice. New Mexico is one of my favorite places in the country too. And My, the first time I was there, if it's like you go out for breakfast and the question Paul is red or green red or green red or green Chili, you know, and I'm a huge fan of, of the food there. But yeah, so that's interesting. So you go from really kinda like the cream of the crop in, in New Mexico when it comes to nachos to a very different style. So barbecue is kind of the thing there, but that's cool. That's the, the fusion right, of a southern barbecue.

Jason: but we, but Nachos are definitely a thing. So we uh, and my kids and my wife absolutely love them. So it's a regular common thing in our family.

Rob: Thank you for the support. And so Jason, before we get into some of the other less important topics, you used to be a, have a radio show. Is that right?

Jason: I did. So back in 2008 or so we had a talk radio show, a financial talk radio show, on the largest top radio station in New Mexico and it was every Sunday live. I think it was from five to six and we had a whole host of different topics. It was fun. We did it with a group of professional financial advisors and we talked about kind of how people manage their money. I will say I got a lot of this was I had the face for radio and the voice for news. I'm not sure that's changed at all in 10 years, but it was a really cool experience to talk with all bunch of different people about their areas of expertise. It's a great way to dive into some topics that you don't necessarily have to be 100% versed in, but you get a good exposure to it and really helps you just develop a better understanding of business and money.

Rob: I feel the same way. It's neat to talk to different people and to see what other people are doing and how they think and how they came at the same place. Even if you're in the same industry, we're all coming to it from different places as the dentist, the lawyer and the CPA on the podcast right now. So tell us Jason a little bit more about what you and your firm.

Jason: Well, Elliot Davis is one of the larger public accounting firms in the country and our geographic footprint is mostly in the southeast, but we've got clients all over the country. We do have a dental niche, so we have a team, which I'm a part of that focuses entirely on dental. It could be a range of services from tax and tax advisory to consulting and planning. A lot of what I focus on is on the outsource role where we act as their financial back-office for, you know, one dentist practices all up to a mini DSO that are outsourcing that component because as is not an easy thing to staff and find the right mix of people because generally you end up with India, 10% CFO, 20% controller and a 50%, um, staff person. But you can't hire for that for a fee that anyone would ever accept as an employee.

Jason: So it's a great way, again, really connected with our, um, our dentists. And, uh, it's just been a, it's been a fascinating place to be in and really get deep with some of our clients, not just talking about the financial car things, but we do do a lot of the due diligence. We, uh, help them as they expand and we talk about what was the time and they bring on an associate, what does that model look like financially? And, um, cause it usually comes out of their pocket first and then they have got worked into what that's going to, what they have to produce and when they have to collect on. And it's really a, uh, an honor to be a part of that because it's a very sensitive area of people's lives and they need someone they can trust that can kind of walk alongside them with that.

Rob: Yeah, that's great. I mean, and on the show here, Paul and I obviously we've had accountants on and we work with accountants on our, on a regular basis. And I A, I'm a huge fan of, of, of CPAs and, and what you guys do and it really is just the, the most integral role in most practice transitions and really any decision as you said, you know, we've talked about the importance of cashflow analysis on this show in the context of evaluating, uh, practice, evaluating a buy-in, evaluating whether to hire an associate, whether to drop a, an insurance plan. It's just, that's a recurring theme for us that, you know, and everybody that's listening, they're going to hear it again. You know, that it's just, it's crucial to, to have, uh, this information and to do that due diligence before you make a decision. Because otherwise it's just like picking what's behind door number two. And you know, you may or may not like the surprise that comes after.

Paul: It's also like Jason is important. I always say that you want to pay someone that you can run by. Does this make sense? Or you know, hire someone to say, have you lost your Nachos? Am I going to burn your Nachos one time this, I'm a handsome, energetic dentists' came in to one of his advisors, like, I'm going to purchase this fixer-upper practice and one of the cooler neighborhoods in Philadelphia and I want to do it. And I, you know, this is the only way I can do it. I'm among, you know, practice number survived. Very handsome and funny too. And funny. You know, I said, uh, I want to do this. I can build it up. All the things that you know, like you know, like you don't want to crush someone's dreams. But then somebody said to me, ah, that's me in the story. You know, this doesn't really make sense. So you're looking at the right way to be a lot of energy. That area's probably not going to transform overnight. And that that was rob and I'm just lucky because that one conversation really prevented me from going off and sort of wasting a lot of time, energy and effort and a, that's why it's just so valuable to, to have those people in your, on, on your team.

Jason: Well, in your, you've mentioned this before on the podcast, Paul, you're kind of married to these things, so he's just not easy to walk away from a, once you parked down that path and you, you purchased that, you usually have a loan attached to it. There's people now who you're supporting their lifestyle. You just can't say, well, that did work and then just walked. Yeah,

Rob: If you could, I would have returned something, but you know, they don't take them back. It's not Nordstrom. Right. You know, so that's so important. You know, these things are, you're getting intertwined with and you can't uninter twine yourself easily. So it's just important to say, do you want to keep taking these steps down this path? And I just think dentistry needs more of that message to, especially the dental students so that they think that it's, you know, a normal part of their growth process.

Rob: So Jason, tell us, how did you, how'd you get into the dental world?

Jason: So we, in my old practice in Albuquerque, we had a number of medical practitioners and dentists and those types and we spent a lot of time in there. And, um, there are always an area I appreciate working with because they, um, they had complexity. They usually would have, uh, resources because they were hires. And so they could do things that would enable us to make some interesting planning rather than just the same, oh, well, just change your withholding and, and go from there. Uh, and they really did not have the same business acumen, so they needed the help of someone who could coach them through things. And their businesses, uh, because they were trying to be dentists or urologists or whatever the case may be. And that's what they had the knowledge in. They, they weren't trained in business, they didn't have MBAs or accounting degrees or whatever.

Jason: Um, and so what happens is after we sold the practice, and I had all this built up knowledge, when, um, I ended up coming to La Davis and we had a need within our department to have some more advisory knowledge and really kind of focus in on a space. The dental space was just a logical one because there's so much opportunity in there right now with the change of practices. And there's, I have a heart for helping young dentists and practitioners who are trying to find their way in life and figure it out by practices and, and start them off, right? Because if they, if they get set up correctly, uh, and there's a lot of time, so on that front end, making sure the system is built well, they have such much better outcomes and I always like to be able to facilitate that. So I got excited when they needed.

Jason: Uh, let's kind of align with where we're going to drive our practice in. This was a no brainer for me. So it's been, it's been a, and uh, it's been really fun to interact with, you know, desk throughout the country. I've, we've got folks in San Francisco and Denver and, uh, New Mexico. Actually, it was funny when I saw that on there when I came over. Oh look, I know where they are. You know, that was back, uh, back in, back just down the street from my old house. So yeah, it's been, it's been a lot of fun.

Rob: Yeah. I have similar observations and experiences for me too. And I agree that the, it's, it's working with dentists, really. It's, it's the opportunity, we have the opportunity as professionals to support them and really add value, uh, to the transactions and to their businesses and really give advice that is impactful. And you can kind of see that, you know, it's different if you're representing big companies and you know, private equity groups. And it's sorta like what the work that you do for those types of clients to sort of just disappears into the ether. But, uh, you can really, uh, there's a direct, you know, connection and, and you can see the, the outcomes, uh, when, when you're working with somebody who is a, you know, a dental practice owner or somebody owns a, a group of small group of practices that you can make a difference in, you know, professionally, that's, you know, that's really fun.

Jason: Well, and you know that it's robbed. Like you're not just dealing with the practice owner, you're dealing with a family and you see the dynamics there and you're helping them through that. And you know, I've been doing this long enough where I've seen kids born and grown go through college and start their own lives. And, and that's a blessing to be that because you really are having multigenerational impact because this, these practices feed future generations too. And so that's, it's a, it's important to have the right person on there. And a lot of, I know a lot of CPAs or professionals will say, oh yeah, we, we have done to see, you know, that's, that's true. They have dentists as clients, but they treat them very generalist. They're very, you know, what they are. It's just another tax return that gets done. And this is, I think when your Dell focus is a very different model of how you interact with your, with your client base and everything.

Rob: I think it's so true. And you know, sometimes when know we're talking to potential clients who are giving a seminar or somebody, I'll say, well, there's no such thing as a dental CPA. There's no such thing as a dental, dental attorney. And like, well you're right, you know, you know, strictly speaking, but I think what you just said is, you know, it's an excellent point, Jason, that the more experience you have, you know, in the, in the industry, in the more things you see in the more reps that you get, it's just the better advice that you can give your clients. And you can help them, you know, put them in the position to succeed. Because you know, most things in life, you know, you learn from your failures. And I think a lot of times what we do as professionals that support dentist, you know, CPAs and lawyers is we can kind of help clients learn from somebody else's failures so that they don't have to go through those.

Rob: And you have those same failures. And you know, it's like if we do a hundred deals acquisitions year, you know, everyone's going to be a little bit different and everyone, it's just, it's just one more, one more experience that you have that if you don't do that a day in, day out, it's just a different level of service. I mean, as I say, you know, to, uh, to the younger attorneys here that are, that are coming up through the ranks, it's like the actual legal work that we do here. And we're not putting people on the moon with any of this. Right. You know? Uh, but you know, we have the benefit of experience and seeing, you know, how all this works out, how it, how it fits together, problems that arise to, to help people avoid that. And that's really, you know, for us. And, and, and you too, I'm sure that's really the secret sauce and that that is what makes a dental CPA or a dental lawyer and why there's value in that.

Rob: And so, you know, a lot of times if I have a new client, I'll say, you know, who are you working with for a CPA? And they'll tell me, and if it's somebody I know of, they'll say, great. And if it's somebody I've never heard of, I'll say, well, tell me a little bit more about that person. And they say, well, you know, they do, uh, they do have dental clients. And I said, does that mean that they do tax returns for dentists? Yeah, yeah, they do tax returns or density. Oh, well that's not really somebody that can help you with the due diligence to buy your practice just because they've done some tax returns.

Paul: I also can give you Rob, some insider information if you want to seem cool on the streets talking to dentists, because what's interesting is, you know, you're most likely dealing with a general dentist and you're deal with specialists occasionally. And you know, I do my own, I do my own verbal frequently asked questions of why people would want to hire a broker to sell their practice versus try to sell it on their own. And I was just doing this yesterday with a perspective seller, you know, why would you want to have a broker and pay a broker just so I can get extra Nachos? No, that's not the real reason. But, uh, you know, I would say, you know, I bring a lot of different buyers and you know, uh, even if you have that one buyer, we've seen scenarios where that one buyers after seven months drops out and then you lost seven months and you'd want to move in in a year.

Paul: So these are the why's, right? And, and you know, if you would talk, we're talking to a dentist, you guys could say, you know, um, I know you're a general dentist, you do crowns, you do implant crowns, you do fillings. But if someone came in and said, I want you to do a retreat on my second molar root canal, would you want to do that? And they would be, oh of course not. And I mean that's what you guys are doing all the time. You know, the, you know, the ins and outs of dealing with this sub focus of the things that go awry. And, uh, I kind of under, I mean there's a, it's a bigger picture question for accountants and attorneys, but I don't even know why they would accept doing some of this. Cause I feel like they would have a generalist cause they'd have to like read the book on it prior to doing the deals. So, you know, I don't know if that's something you guys could speak.

Rob: I'll let Jason take a crack at that first, then I have my thoughts too.

Jason: Well. So I think that what happens is there's, there's this, when you're in a generalist practice, and I've been in that situation long ago in the past, it's what happens is you have to treat everything like they're all similar. So you, you don't take the industry specific elements of it and you kind of look at, well, okay, well let's see what the tax treatment is, uh, for the asset allocation. Let's do this and let's, we'll do a mild cashflow that just says, can you pay the rent payment, uh, for the rent and for the, for the practice loan. So you end up just doing something and it's relatively low risk. And oftentimes the relationship you have with their client in that situation is very transactional oriented. If you're ever engaged in that process in the first place, sometimes you just get brought to the table at the end and you're like, well, here, you know, here's my tax stuff.

Jason: Can you, can you make a tax return for me? And they just do that because that's the mindset. And I say CPAs, we've historically been very compliance driven. So we're about trying to get returns done or again, not prepared for you. And that's really not what customers look for. They want real advice, needs discussions about strategy in business and not just okay once my next tax due date. Um, and so I think there's a lot of people who are very comfortable in that space, but they really have no desire to enter that advisory component where they're really coaching them on something, nor do they want to spend the time on the industry. Um, I spend a lot of time in the car because of my commute, but I probably listened to five to eight hours of dental podcasts every week. And so I'm just absorbing information all the time. And that takes d you gotta commit to it. Um, it's hard to do that when you're being a generalist trying to serve everyone relatively blankly the same.

Rob: Yeah. Yeah, for sure. And I think, you know, uh, I, I think that the, why do people even seek those people out or why would somebody that's a general Steven want to do it, Paul? I mean, I think it's just like, if you don't have the sort of the luxury of the specialization that we have and Jason has, you gotta pay the bills, you know? And so these people are happy to take the work on and you know, it's a job for them, you know? And, uh, like I said, I mean the actual legal work, the actual accounting work, none of this is, we're not putting people on the moon. And I said, you know, and so you can do, you can generate a service, you know, and it's like, you know, it's like the eight t and t commercial and it's just okay. Right. Good enough. Right. You know, but, uh, it's not, you know, the, uh, the gold standard, you know, as, as the a, as Jeffery and it's, they're referred to, you know, Eagles. Well, hopefully people go back and watch. We appreciate you being a fan and listening from the beginning, but you listen to different guests and, you know, they poignantly say, we wish we had this information. I wish I had this when I was doing it because there's advisers drilling missed a lot of red flags along the way by doing that. And it's really not impugning them. It's just saying that nobody really saw the red flags, the dentist, the advisor, anyone said go ahead and acquire this practice. And then things really went sideways where if I had seen and not, I'm not, you know, if I, if I had just been involved in looking at it, you know, I'd be like, this one part makes no sense. You know, they, they do 50% of their work is Ortho and you don't do any Ortho.

Rob: Someone should tell you that you shouldn't do that. Right. You know, not that they make $400,000 a year on $1 million in their overhead, 60% but their wife does like work that she's not paid for. I mean, I'm just kind of using some examples that might get missed. So, you know, that's the perfect segue, Paul, to to some more stuff, which is what you're really talking about there. Paul is his due diligence, you know, and, and I think I'd like to hear what Jason's thoughts are as far as you know, what really are best practices when, when, uh, when it comes to due diligence and due diligence. This is absolutely an area where a CPA with dental experience who is dental focused adds value. That if you know the industry, you know what to look for and you can provide a much, much better service than somebody that is just a, a generalist.

Rob: And you know what I say to clients and prospective clients, my initial conversations with them when they're talking about a transaction and they want to know kind of what, what they should do now and what's the most important thing and what they should be doing to protect themselves. And I say, let's make sure you have a good dental focus CPA kicking the tires here and looking at these numbers and, and like we can help you with certain due diligence things, but the due diligence that matters is not happening in my office. It's happening in the CPA's office and the difference, it's the difference maker thing. The two examples you have said Paul. And when people come to us after the fact and say, Oh, you know, I did a bad deal. Uh, it's, it's always the case that either they didn't work with a CPA at all and, or they, uh, they work with somebody that didn't have the right experience to, to be able to guide them. So, you know, with that Jason, tell us, uh, what are some best practices that a our listeners should be aware of when it comes to a due diligence for, for a dentist that's looking to purchase a practice?

Jason: Well, one of the key ones is early engagement. Um, that is so important in terms of getting the, the dental folks attorney and CPA is engaged early in the process before you get down to, well, here's, we've already negotiated terms and here's what it is, just tell me the pitfalls. There's a way of crafting the deals, understanding what's your gain to well, before any legal documents are drafted or any, you're too far down where you can't. I think as you've described before, put the genie back in the bottle, um, that you've already said, oh, we'll do this and that. It turns out that wasn't financially feasible. It's really critical to get those players engaged very early so that you can help coach that and do that analysis on the front end before you get too deep into agreeing to terms and um, and really understanding what you, what you're getting into. A lot of that gets down to the, at least from the CPA perspective, is cashflow and understanding where practice makes money, what kind of insurance mix they have, how much of it's fee for service, you know, what kind of workload everyone's doing. Uh, that's always a big one that I've seen in the, uh, in the transitions is that you've got, maybe I'm going to use Paul's terms, the uh, the sadness.

Jason: Yes. He's aged as they, they are working three days a week and then want to sell their practice. And what happens is they go, oh, well the revenue's low, but I can outgrow that. I can do that real easy. And so they start not listening to that the math doesn't work, but they're saying that door, I can earn my way out of that problem.

Paul: Okay.

Jason: And so it was a, we really need, you need to understand the makeup of the practice and what the, uh, who's doing what there, who's generating revenue and, uh, how much work everyone's doing because you may not have a team that can scale up and then you got to hire more, which has more costs. Uh, but all that's can be done early if you ask the right questions and get a good sense of what's, what the practice is currently doing and if there's any room for, for negotiating that up, uh, by making some operational changes. So I say, you know, first off is early engagement, second office cashflow.

Rob: I mean, me, to me, that's what you're just talking about is planning. And it's just so crucial. And I think, ah, Paul, you know, and, and I both see this, you know, that there are some times people are just overly optimistic of, you know, what they can do. And, and sometimes, you know, you can say like, I can work more, I can produce more. But, you know, sometimes it's just not possible.

Paul: Totally. I mean, you know, and then one of the things I can chime in as the a, I always wanted to be a commentator, like on sports. And I'm the only dentist here, not trying to brag, but, um, uh, you know, I would, you said Jason and Robin, I mean, it's just, it's just my insight into living this all the time personally as my, through my own practices and being naive and on, uh, unaware of Rob's terms, awareness that Dennis who says they can grow a practice like that there, there's a piece to that that is just not talked about enough that dentists working three days a week is actually probably doing a great job and for what he does and he knows all the patients. So there's just a process of meeting all those new people and trying to grow a practice that's underperforming. It's just, it's, it's nearly impossible. And a, I hear Dennis saying that all the time because they think, you know, I think they, um, they have a misconception as to what the current dentist is doing and they kind of, you know, criticize a mentally, oh, you know, he's not working so hard though. Really what he's doing is he's leveraging all the patient relationships. He or she has built over all these years.

Jason: [inaudible]

Rob: [inaudible] a little more complicated than a TV show in HGTV. Like, I think people were in the world now of people like, yeah, I saw that fixer upper show, you know, I'm just gonna, you know, do the dental practice equivalent, you know, and within, you know, whatever, whether they take like three weeks, you know, it goes from like, some looks like some like Shaq to, there's this until you have to pay $1 million for it. But like, I'll just do that with my dental practice. And, and I think, uh, obviously it's a little more complicated than that. And as you said, boobs and many other factors, you know, and I think a lot of people like to to say, you know, everybody wants to once a deal, you know, and so if I can buy something that's underperforming, you know, for cheap and turn it around and make it a lot more valuable than that's, that's better. And, but those, you know, to me, I'm curious what your thoughts are Jason. I almost think, I mean that's like a Unicorn in, in our world. You know, like you can do it, but you know, sometimes it's better instead of trying to hit the grand slam just to hit a bunch of doubles and hit singles all day and you know, by, you know, three or four years in, you may even better hearing all those singles than, than trying to hit a grand slam once.

Jason: Yeah, I agree. You fail on that one because I've never, I can't say I've found terribly many success stories where they took a, the shack life practice and turn it into some glorious palace. It just never really works that way cause there's too much emotional and physical energy. You have to put an off financial energy, uh, into those kinds of things that don't produce the kind of results you need for what you could have done had you gotten the, the performing practice that was a little bit more expensive but operated just fine and you'd have to make minor tweaks in the formula and you get that incremental profitability that really drives much better performance than investing days and weeks and efforts to try and make something work that probably never will work the way that you would dreaming it was going with.

Paul: And he's also such an important point, Jason, it's just not a good idea for your first one. And we talk about say, you know, if, if it's my third or fourth and I want to have this, you know, fix her up, or like a real estate project, maybe, maybe that makes more sense. We've had more costs asanas onto like, you know, eight practices, but it's just not your first one sets the tone for your entire career. And also, I mean, robbing you or, you know, you've chosen to work with dentist. I know you're lucky, but, uh, uh, you know, how many dentist ever owned more than one practice in their entire lives? It's a very small number, right? So if you live your life in the most, as I say, you know, make your first one your first thing that you do make total sense and then you can do your, your fix up dreamer one for the next one.

Paul: And also another thing, and I'll share this from my own experiences, is like, you know, people kinda treat it like real estate, right? But you don't have to live in the house that you're fixing up when you're doing real estate. When you're a dentist, you live there in that fixer upper with your emotions, like you said. And that's just something that people don't understand enough of unless they've done it. So talk to someone like a, a me or a Mark Costas or somebody and just, just not even from an advice standpoint, just say, what's it like to own more than one practice? And I'll be like, do you have a whole bottle of Bourbon? Cause we're gonna need it. Right. So, you know, that's, that's just my insight there.

Jason: Well, and when you think about your real estate analogy, you think about a lot of times in those situations you are not doing the work yourself to rehab it. It's a fixer upper, but you're hiring contractors to help do that stuff. You, you're outsourcing a lot of that. And the same thing works in the practice acquisition. And plus you're also spending a lot of time on the front end cause you gag in inspections, appraisals, all these things that you need to do just like you would do as in dental practice. It require you to spend a lot of time on the front end trying to make sure it's right. And then you're still going to probably need some help if you get your fixer up or from outside sources to make that work because you just can't put the bandwidth in to do it yourself. So that's going to happen.

Rob: Yeah. Yeah. No, it's, that's, that's a good point I think to people. To your point, Paul, that you know, especially with your first practice, if you do a bad deal, uh, in your first practice, there's not going to be a second practice or not for a long time. Yeah. You know, it's not like a, you could say like, yeah, this thing is kind of clicking along in the somewhat mediocre way. I haven't been able to turn it around the way I thought it would, so I'm just going to go to the bank now and uh, borrow some more money and buy another practice. Bank looks at that practice and they're like, well, you know what? We're not so sure we went to lend you money for number two because number one's not looking so good

Paul: and the abuse is such a good point. The other thing is, you know, you do this for the house. Somebody else might see it with big eyes who think they can fix up a house. But with a dental practice you have to spine another licensed dentist to buy it. And whether you use a broker yourself, you always have to explain the why. So if you bought a practice that you didn't like, you're like, could you buy my practice? Why I hate it. Well that's not going to be, that's going to be an easy way to sell it. Right. So we will, you messaged me on Facebook, can I sell the practice? I don't like and buy a new one. I'm like, no, it doesn't work that way. This is not, you know, um, a department store. So it's just a critical part and I just see your shared some really good, uh, gems there. Uh, Jason, I just started hope our listeners are, are embracing as they go along their practice journey.

Rob: So Jason, what a, is there any other things that kind of big picture, best practice, uh, items in, in due diligence that, that you can think of?

Jason: Well, you know, I think I'll, I'll knowing all the parties in the mix too, because you've got your, maybe you've got retiring dentists, that is his, he also owns the real estate and understanding that makeup and knowing who the parties are inside who are related, whether it's a spouse, children, best friends from college or someone so's daughter, understanding those relationships is really critical because you either get to work with them or you get to replace them. And I think that's where, uh, I've seen, and, and not just in Dell, but in law of any acquisitions there is, if small businesses is, there's these dynamics that work for that practice. And you do need to spend some time getting the lay of that and then tearing it apart and saying, okay, well if I take out these people, this is it still work. If I take out this arrangement, does it still work?

Jason: Do I want to have the Pearson I bought the practice from being my landlord for the next 20 years. Um, where they, you know, based on my tone, are they going to be similar? Who am I gonna like work with or I'm going to be having to bail out of this relatively quickly and spend more my finding a new, a new home for the practice. So I, you know, you think of that it's all math, right? You think it's formulaic, uh, financial compliance stuff here, there's so much about relational dynamics and kind of how things fit together. That's really important to on the front end because if you establish that and you're, you have a awareness of that, you accept that, you know, you've, you can kind of say, yeah, I can go with that or not, but if you don't do it and you wait until eight months after the deal's done and you gotta go rehome people, it disrupts the practice of very hard later. Um, so I just think, you know, identify those people and those relationships early and then figure out whether you can work with them or not.

Rob: I think that's, and that really kind of spills over into some of the things that we end up looking at too. And I think this is something that people need to understand that this is where, you know, personalized, customized consulting comes in, whether it's a CPA, a, a lawyer or a consultant, you know, that a lot of times, you know, we'll have conversations with people and they say like, well, just give us the template agreement. Like there's no such thing in our annual contract yet. Standard. Yeah. Just put the names in and press, you know, press print. Because I mean a lot of brokers will do that, that are preparing, uh, preparing agreements for people. And that's where the problems come in. You know? And when it comes to the financial due diligence, I mean, I think what a lot of people kind of stop or think they can stop at, uh, well I'm paying 70% of gross, therefore it's a good deal.

Rob: Uh, well not, not necessarily. And you know, because there are all these other things and you know, other due diligence factors, but then there are also these sort of non numerical issues that you need to get your arms around. And if you are the dental focused CPA who's looked at a bunch of deals, who works with a lot of practices, you can identify those things and see kind of what they, how they translate into, you know, problems down the road. Issues that, as Jason said, can impact and disrupt the business because it disruption in the practice is a disruption in the, in the cash flow. And then, and that's, and that's really what this is all about.

Paul: It's a good point. I want to give you guys before I forget some more, I'm a Maya consulting. You'll get a bill at the end of, had I talked to dentists, the bills that buy me Nachos. That's okay. Because you can say to a dentist this would you, what would you think of a dentist who just gave out standard treatment plans for crowns? I said, I just give people the standard treatment plan and I look at it and say, this is the standard plan, but this front tooth that we, he's given a standard plan of a, of a gold crown. So you're gonna Start Your career as a rapper now because you know, hey, this, and they would get that. And that's a good way to talk to them. Jason, rob, because what would you think of a dentist who's gave out standard treatment plans for crowns and a front tooth was treated how it was standard planned to have a gold crown.

Paul: If it works right, it doesn't, not work. And a dentist could pick through that in a second. I'd say rob, you know, uh, unless you're gonna or Jason, unless you're gonna, you know, go on, go on tour. I don't even know the new rappers names, but uh, I can't even know. [inaudible] yeah, he did. He right now he's a mogul, right? PD does everything. I love very admire that guy. Rappers from our age are all just billionaire millionaires here. Their mobile time to be mobile. It could be described as a mogul, but that's a key way. You can go back to them. Say you wouldn't, what would you think of a dentist? They did that and they would totally get that in their world because you know, there's been people say, I just kind of this, you know, standard associate contract from rob and I'm like, no, to protect yourself.

Paul: There isn't a standard contract. It's for my office and I'm not going to. It's like, I don't know what the, it's like, it's like giving someone who just started driving a car they can't handle, right? Like I'm doing them a disservice and I just think they need to, to learn in dental schools, they go through it, that all these relationships in your business life are just as critical, if not more critical than your clinical relationships. Because I say this, Jason, I know you've, you've learned the dental law, the dental lingual, but you know, you know the, we send stuff to labs who make our crowns, right. That's a huge deal to a dentist, right? Huge relationship. I have a great relationship with my lab. If someone came to me and said, oh, just change your lab tomorrow. I mean it would be a huge decision, right? If we wanted to do it and Dennis will spend 10 times more on that than their business decisions when meanwhile, both labs could be good and really not disrupt your business. But the business decision could throw you off into a place where you can't get back from. Yeah.

Rob: Well I think it's important for people to realize too that if these certain factors, these non-economic factors are not right. You know, they're, you can't fix that with a contract. You know, like if you've got a bad relationship, there's no like agreement that can repair that. Or if you have like just a bad setup with some of the examples that Jason said in a transition, there's nothing we can put in in the document that's going to fix that. Right. These agreements only kind of give people the, you know, a ticket to a lawsuit down the road if something's not right, you know, it doesn't have this like, well, you know, it was a bad relationship. And then Robin, his team did this agreement. And then right after that, like the magic, you know the good news, I bet for other, cause someone asked him, my dental knowledge is there a day I will have a PPO office. Now I can turn into a fee for service practice. What can I do? And I just put a Gif of Harry Potter because that's all they could do. It's like, I'll give you another thing for dentist. He'd be like, Oh, if I make you, if you're paying made a patient a crown cause they go to

Paul: Rick's or would that be a problem? Right? So you guys are making good crowns or you're doing good things for people, but what happens out there in the game or the real world is what matters.

Rob: Yeah, I think so. Jason, I think we've kind of alluded to some of these, but are there any specific things that you see that are kind of common sort of missteps or things that go wrong or mistakes that dentists make when they're with the due diligence process?

Jason: Well, I see some where they this more commonly than I care to admit, but where they will kind of hand wave the financials. Oh yeah. What does he use? What they, what the seller is giving us. And you know, I'm a data, a lot of that is this commingled mess of transactions that are discretionary in nature and some that are buried deep of, you know, how, who they're paying so-and-so for and they're just not good. So they don't take the time to let someone like us go through and kind of rip it apart a bit and say, well wait, that's not, that's not good cashflow. That's going to go away. That's a lot more than you probably want to. Is this even correctable? And that, that happens a lot. A where, where the financials are just an a mess. When we win, when they get them for due diligence and they'll put a lot effort say, well, don't, don't spend too much time piecing those together. We just want to just use the numbers that they gave you and accept them. That's not going to worldly work longterm. Um,

Paul: and then I think that problem, that problem gets amplified. If you have a broker involved who's also in their ear at the same time saying, yeah, this is fine, these numbers are, don't worry about it. It's fine. It's absolutely fine. Yeah, you can show it to your CPA, but you don't really need to, they're only going to find problems with it. It though we look closely and hopefully not have you ruin your life. Don't do that part. Right. Come on, come on, keep going. But what other, what are some other things, Jason, that you, it's a good one.

Jason: You know, I think that, uh, St expectations early, especially in transition where you've got, um, situations where you're going to have the, uh, exiting dentist operate with you for some period of time, establishing what that's gonna look like ahead of time. That's not financial metric. Uh, you can very easily find what they're going to be compensated at, but really seeing how that relationship's gonna work. Uh, I've seen that go very poorly in a lot of practices where, um, pay enough in lawsuit situations because one person to expect them to do one thing and they ever verbalize that and put it in writing and the other person did whatever they were used to doing, um, when they own the practice and it just goes just terrible. Um, and I think that's, you know, again, should be easy to do if you have the conversation with a friend. But I get, I see a lot, the problem I see the most is trying to rush through these things. Like you have to get the deal done because if you don't, it will never be cut. It will, it will consummate later. Uh, the deal will go away somewhere else. We'll get, get the practice before you do.

Paul: There are three other, there are three other buyers interested in this practice. You know, don't rock the boat too much here.

Jason: Yeah. And I, and that's where I see where people rush through the situation and they've, they've got the deal struck effectively. And, um, we've seen it recently where we've had ones where uh, they didn't really articulate what was going to happen in the deal and the way they had crafted it with triggered hundreds of thousands of dollars tax, uh, inadvertently. And that was you had an on try on do that part. Um, we've seen him in situations where, um, the, there's not terms that they know the lease wasn't really well documented and you don't know if they're going to be able to stay in this space because no one talked about it or they were crafted the deal as a stock purchase or an asset and an asset purchase simultaneously, which didn't make sense. There's this, all of those things where they rushing, rushing, rushing, and they've got maybe an illiquid person on the other side, the, the sellers side and they're just pushing through very basic legal contracts or the financials are just kind of shoddy and they're just rushing because the deal can't possibly wait two weeks to make sure it's good. And you isolate this thing cause as lot harder. I think you mentioned this before, rob, it's a lot harder to do these things retrospectively. You guy get them done before the deal commence could get going rather than, um, after the fact thinking you can restate the past.

Paul: You sent rob up for his best joke about the lease part B, the dental office. Rob, tell, tell our listeners, you know, if you, if you, if the lease without an office, you can't have a dental office. You said dental. I love that. Yeah. So the thing that's become mobile dentistry, if not, you can do that, but it's hard to put six ops and a in the back of a van for sure. Yeah, I mean that, that's crucial. We, we actually had deals where we were still represent the, where we represent a landlord in a practice transition, which is kind of funny because it's not usually the side that we're on, but where we have a dentist that sold their practice and held the real estate. Now the practice is flipped from, from DSO to DSO. And you know, it's amazing that, you know, it's like the day before we're getting these requests from people on just routine stuff like you know, landlord waivers and you know, releases and things on the assignment and it's like, you gotta be kidding me.

Paul: You're closing tomorrow and you're asking us this today. You know, it's like, I mean, I don't, Jason, you have any small humans that live in your house? Rob's are pretty robbed. A daughter is very competent, she's wonderful. But I've got two that are super incompetent. They're 10 months old and almost five. And it's like when someone says, Hey, are you going to, we're gonna make it to Rob's at seven 30 and I yell up to my almost five year old, are you ready? And I say, all right techs, rob, we're going to be there. And I walk up there and like she's unfamiliar with what ready is, right. There's no clothes. There's a base. And I text rob like we're not going to be there for a while. And that's what happens with these dentist. And I feel like I'm talking to Daphne sometimes cause people will call me for buyer coaching, which is, I'm do some limited oral, uh, exam PA stuff.

Paul: You guys only know what that means by basically kind of, you know, we'll talk with the dentist, even make sense. Get them to people like you guys. I really enjoy it. But sometimes people message me go, I'd like to do your buyer coaching to find out about this practice. I said, okay, that sounds good. They go, we're going to close in four weeks. I go, oh Geez. I'm like either don't use me at all or be ready to, to unwind it. And I actually feel bad for them because they've just been sort of a a, I don't know what the right term is. I mean they'd been led, misled the whole way. And um, it's hard to walk that back. Sorry. I'm totally agree with you.

Jason: I do have, I have two small humans, uh, almost six year old and a three amputee. One. I've got one on the way. Um, that, yes, it's the exact same situation. It's like this, wait, no, you can't do that. Um, I had one time, years ago, a client who in a conversation just randomly said, Oh yeah, I bought a practice.

Paul: Wait, what?

Jason: You did what? And it was, you know, four months before. And they were like, I'm like, what do you mean you just bought a practice? Like we, we've talked in that four months, we talked for plenty of time before. And it's just, they just sometimes think that they don't, they don't need to have that coaching, but then they, and these deals are easy to, you know, yeah. You get someone that arrives paperwork and you get alone and life is good. Um,

Rob: but that's the thing, like with like the deals like these, you know, and you know, everybody's heard me say this, but you know, lenders talk about how low default rates are with dental practices and dental practice loans and leases. And it's so true. And you know, so you can do something like that and probably not to fall, you know, but it's not, uh, it's definitely not putting yourself in the position to succeed by doing that. And there's a whole, there's a whole lot of real estate between, you know, not defaulting and, and succeeding wildly.

Jason: Yeah. You can make it, you can make the monthly payment on your mortgage, but still live like paycheck to paycheck and eating beans and weenies because, but you still, you didn't default on your mortgage.

Paul: Yeah. These are the, these are the three words that never, these are the three words that people say in a professional, personal or any situation where you know the thing coming after, it's not going to be so good. We're gonna make it work. Right? So one of our, what that means where at a restaurant and we don't have enough stuff to get our kids through, but we want the Margarita is like, we're going to make it work. Like the other side of that, there's some stuff that's going to stray, right? Like I might be bribing Daphne, she might be eating candy for dinner. So I'm just saying like when Dan and Dennis though, you'll laugh because sometimes we have procedures in our office where we have a crown on somebody who's gone on vacation. This happens, it's not the best fitting crowns of the worst. And we go, you know what, I'm going to make it work. And a dentist knows when you say that that you know, it's not the ideal way to, for something to happen. [inaudible]

Rob: I love it. It's the at t and t you know, ad campaign now, you know, it's just okay. You know, and I actually, I've been putting that in some of my presentations now, a couple of those segments, cause I think it's hilarious. You know, I think anytime, you know, a dentist is watching, you know, TV and they see that one of those at t and t commercials on, they should really think about what, you know, think about that in the context of the business of their practice. And are they doing it? What they do? Are they doing it great? Are they doing it, you know, like the guy that's never done a tattoo before. Yeah, exactly.

Jason: Well and I, I feel like if you, if you take the time to set up your system, right, and so before you, you know, got, you've gone through and you've gotten it vetted by your CPA and attorney the deal, you bless that. And then what happens is when you're in ray close, all you're doing at that point is say if the and the rest of the system steps so it just works and the effort and the mental space that you don't have to spend later trying to fix it or piece it back together just makes so much more sense. And I, we've done that with some clients, uh, recently where they, we've gotten them from the get go. And so we've set the practice there. In one case it was a startup and that we have right from the get go and man, that thing just hums and he's gained the focus and he's killing it because he's really focusing on his craft, not trying to, you know, cut corners on costs and, and not having certain things outsourced or not being afraid to call the attorney and get them involved. He focuses on doing really good work and he's doing financially doing really well in the process because he knows when to leverage out and not think Paul's term is dentists cheap things in Tennessee.

Jason: That's right. Yeah. It's so critical to really build the system right from the get go. Cause is the compound, the effect of good decisions on the front end, uh, is significant and a medical and a dental practice.

Rob: Yeah. I mean you, you can't overestimate the cost of disruption right. When, when the comes, you know, and it's just, it's just the, it's a magnitude that I don't think people, people realize, you know, and, and we see it, the Ed, the people that are set up right with, with the right consultants and the right systems in place. They do, as you said, they hum. You know, and there are other people that are just still trying to figure it out every day, you know, everyday reinventing the wheel. And, you know, not only is that not, uh, not good from a financial standpoint, man, that just drains you. You know, like to go in every day and just try to solve another problem that you are not trained, educated or experienced it, you know, how like why would you want to do that? I always say it's like, whether it's like you go and solve a problem, like whether, but you even know this weather existed.

Rob: You're like, oh, it rains bricks today. I didn't know. I didn't know. Wow. As a new thing. And that's just very difficult on a, on a new business owner or any business owner. Hey Jason. Thanks. Uh, thanks so much for, uh, for taking the time. It's been, uh, been great chatting with you on the podcast and we've, we've talked before so it's good to, to, to share some of our dialogue the three of us have all had with, uh, with our listeners. Uh, if people want to get in touch with you and learn more about you and your firm, how can they do that?

Jason: Uh, probably best ways or check us out on our website, which is Elliot davis.com or are you shooting me an email? It's Jason.deshayes@lliottdavis.com

Rob: All right, and that'll be up on the show notes. Of course, if people want to refer to that, you shouldn't write that down while you're driving. If you're listening to this podcast now, they will be up on the show notes and you'll be able to get in touch with Jason and thanks again for taking the time. Jason, thanks for listening to another great