57: Interview with Brian Colao, Attorney, DSO Success

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Hello, everyone, and welcome to another episode of DSO Secrets. I'm your fearless host, Emmett Scott. And I'm so excited today to have a guest here with me, Brian Kaleo from dicoma. Brian, what's your official title at dicoma?

Yeah, I'm a director of the DSO Industry group at dicoma. Emmett. Really excited to be here, by the way.

Yeah, thank you for being on. So you've been in this space for a long time?

25 years. We're not getting any younger, either you or me. Because the sad part is I've seen you in the space a lot of the time I've been in the space, so it's getting kind of depressing. Yeah.

I mean, to be in a 25 years. What's fun about having you on is you've seen the evolution, right? You've seen the genes and you've seen, you know, all the pain it's gone through and kind of where it's at today. So I'd really love for our listeners to talk through some of that and then give them some very specific tactical solutions because each of them are at different stages trying to solve things. And if we can keep them out of some of the traps that you see every day. I mean, you're hired basically to get people out of traps that they've walked into or, you know, maybe no fault of their own that they've been pegged into.

Well, a lot can be learned from the past in this industry. It really can. You know, a lot of folks don't want to talk about the past. They want to talk about all the exciting multiples being paid and everything going on. And we can talk about that too. But a lot can be learned by the past and be happy to walk through some of that today.

Great. Well, this is DSO Secrets, so we're going to be authentic here. It's not all just high multiples and everything. We, we know that It's a lot of hard work and there's a lot of mistakes to be made and we want to help people avoid them. So, yeah, why don't we start kind of from the beginning. Mostly to give people context of you, but also to help them understand where this industry started. Some are just graduating from school. They're so excited to get going and they don't know exactly all of the hoops and issues that have been jumped through to get to this point.

Well, yeah, no, so we are right now, Emmett. We're DSO 3.0 now. We can talk about that in a little bit. But it started at DSO. DSO 1.0. DSO 1.0 was in the mid to late 90s. It was orthodontic. DSO. The goal. It was founded by some orthodontists in Atlanta that wanted a company where doctors were managing doctors. They were going to be able to find replacement orthodontists. When the orthodontist wanted to retire. They were going to provide a whole bunch of services. And it sounded like, you know, a little bit like today. And it was really good idea. The problem is it was individual dentists. They didn't have the capital necessary to roll this out. They had to go to Wall Street. They did an ipo. If you did an IPO and you look, I think it was Orthodontic Centers of America, you can, you can look it up.

Sounds sexy so far.

Yeah. No, no, it was good. Except the problem is what I always tell people are there are three really big keys to this business. You got to get along with your affiliated doctors. You got to put patients in the seeds and you got to follow the regulation. Unfortunately, they fell down really badly on 1 in 3. The practices were successful. They put plenty of patients in the seats, but they did not get along with their affiliate doctors. It was almost, you know, from the very start, just a couple months into the average affiliation. It was real sour relations and didn't follow the regulations. And I actually think one of the big reasons they didn't get along with their doctors is they didn't follow the regulation. I mean, they tried to. They didn't provide a lot of services to the affiliated dentist. And they charged, I believe was percentage based fee. It was 23% of revenue in some cases. It was a little bit different structure, but anywhere from 20 to 27% of their gross revenue had to be paid. Unlike today, the management company got paid first and not last. At one point I was involved in this litigation many, many years ago. It ended up being litigation and you know, to fast forward, take some of the suspense out of it. There was litigation, there was a bankruptcy. Some officers of the company were indicted. It really became a very messy situation.

You just destroyed the sexiness. For me, that doesn't sound.

Yeah, no, no. Right, Yeah, I just. That's a buzz kill right there. Like whatever excitement you were feeling has now rapidly, you know, sort of come to an end. But, but there's good lessons to learn. It's great to, for a couple minutes anyway, talk about it. So, you know, they didn't get along with their affiliated Doctors, unlike the DSOs today that provide a whole suite of comprehensive non clinical support services. I think at one point they had a valuation expert come in and said, you know, you guys are charging the average million dollar practice 23%, which is 230 grand in fees a year. You're providing 10 grand if that's. They had a website, you know, maybe I can't remember what else they had beyond a website, but it was really minimal stuff that they provided. But they were charging, you know, a very large fee. All of their doctors revolted, got unhappy. It ended up getting delisted from the stock exchange. I think they're on the nasdaq. They got delisted at one point they had, you know, I was involved or was overseeing something like 30 or 40 lawsuits. And I was not the only one involved. I mean, there was something like, you know, just, just a educated guess, 70 or 80 different lawsuits that all went into it. Ultimately they got delisted from the stock exchange, they filed bankruptcy and it was very, very problematic situation. And that was the failed, you know, first generation. What can we learn? Well, what we can learn is you got to get along with your doctors first and foremost. You have to follow the regulations. Percentage based fees can be problematic if you're not providing services. So it was a tricky situation. And that was Generation 1.0. Generation 2.0 came out in the early 2000s. Learned a lot from Generation 1. The main lesson they learned is they got along with their doctor instead of having an adversarial relationship with their doctors. They Generation 2.0 made doctors often shareholders of the DSO. The doctors were happy as could be to be a part of the venture. The shortcomings of 2.0 though is they still didn't tighten up the regulations. There still was a little too many non dentists controlling clinical things or doing things they're really not supposed to be doing. And that led to a lot of regulatory action. Interestingly enough, the regulatory actions were not initiated by the doctors. The doctors were now happy. They were a part of the venture. They were not the ones running to court or proceedings. It was the regulators on their own kind of cracking down. And there were a lot of forced outcomes where the regulators came in to the generation 2.0 dsos. By the way, to my knowledge, they're almost all here today. I mean, we're not going to name them on this show because they're all really doing well today. Back at the 2.0 stage, they all sort of had some problems, but they cleaned it up, continued to get along with their doctors, continued to really put patients in the seats, and then cleaned up the regulatory issues. And these 2.0s are now thriving as generation 3.0. But what we could learn from 2.0 is you still got to follow the regulations. Even if your doctors love being a part of your organization, like being there. If you don't follow the regulations, you're vulnerable to whistleblower complaints, disgruntled employees, regulators just coming in and auditing. So, you know, that sort of had to be straightened out. One thing that was a huge feature of 2.0 that is still in the market today, but there's a lot more diversification is single branding. You had a lot of DSOs that had one single brand name. And while that's great and streamlined from marketing standpoint, what we've learned is if you have a problem, you know, in one state and you've got one name, it could bleed over to the whole organization. You know, if you get in the papers, something happens and you only have one name, you know, that that can cause bleed over. So a lot of the DSOs today, when we get to 3.0, are diversifying. They have many different trade names, many other things, you know, that, that I think, I think it's wise. I think it's wise to do that. So transition.

One thing I'd say about 2.0, kind of having entered in that space or during that time too, is you had like a civil war going on as well. Right. So internally, those who, the dentists who were joining these 2.0 DSOs were, as you said, very happy. Those on the outside, with the recession that happened and frankly with technology and the distraction that was happening for patients, I think perceived that their patient flow that had dropped off was all because of DSO seeing patients. We know a lot more data now that that's not true. But I think you had that internal civil war and like you said, with them having not trued up some of their regulatory compliance pieces, it really left a door open for them to be attacked. I think, too, there was still kind of that 1.0 hope that I could just roll a bunch of stuff up and without maybe doing as full of due diligence that's needed on the compliance side. And then if I combined enough EBITDA together, sell it off before the other shoe dropped, and the other shoe dropped a little faster than some of these guys were planning, or they were left holding something that now they were having to manage, that was pretty messy.

The interesting thing, anybody that follows the DSO industry knows a lot of these companies turn every three to five or six years with owners. So when I said a lot of the 2.0 are still doing very well in the market as a 3.0, they couldn't be further apart because the 2.0 that we're talking about, that had problems that might be two, three PE owners ago. So they have completely new management. Maybe the name is the same and the company is still in existence, but in terms of how they operate, it's a completely different operation. I always get those questions sometimes, you know, from dentists or people that listen say, you know, you said they've cleaned it up, but it's the same company. How do we know? No, it's like night and day. Because if we're talking about issues that occurred in 2003-2004-2005-2006, today, in 2019, that could be two or three PE groups ago, two or three management teams ago. So it's almost, other than the name, like a completely different organization. And that's how we segue into 3.0 and the characteristics of 3.0. They're going to do all three things really well. They're going to get along with their affiliated doctors, they're going to put patients in the seats and they're going to follow the regulations. And the fourth thing they're going to do. This was not a big deal for 1.0 and 2.0, but it's critical today because they're going to attract and retain talent. There is a shortage of quality dentists in this marketplace. I mean, there may have been a little bit of an issue back in the 90s or early 2000s, but you really didn't see it creeping in today. You can't attract and retain talent, you can't survive in the marketplace, or you're not going to thrive, you're going to stagnate. So what 3.0 does well is they get along with their doctors, they put Patients in the seats, they follow the regulations and they know how to attract and retain talent. And that's what 3.0 does. And they're diversified. Very few organizations today just have one single trademate. They may have one that's a iconic brand that's been around for 20 years, but they're also diversified. You know, they'll have some other. They'll have some other brands as well as you think.

That's such a great perspective of the history, as you think through the different stages and now being in 3.0, what, what place do you think or what size would you say that a dentist or a business guy partnered with a dentist or really needs to start thinking about utilizing a service like yours? You know, is it a single practice? Is it two? Is there another metric? Is a number of locations? You know, when do they need to start thinking in terms of. All right, I want to be that 3.0 DSO. And so obviously, you know, I would say kind of thinking through it myself, number one, getting along with people and having a structure that does that no matter what your size, you need to be building that kind of culture. But as you start getting a little bit more intense on the others, does it start day one? You know, walk us through some of that in your mind.

Yeah, I mean, I mean, from our, you know, as, you know, Emmett, because I've known you a very long time, you know, we're sort of the leader in the space in terms of total volume. I mean, volume. And I've got 39 attorneys over here, I supervise, and we can service all size groups from the lifecycle. You know, anybody that's sort of a startup, you know, DSO to a mature organization with hundreds of offices, you know, we'll service everything in between. Sometimes people will say, oh, no, I saw you, you know, speaking in front of 500 people. You can't handle me. I'm one office now. I got 39 folks. I got somebody that'd be great for a single office, if that's what you're doing. So the question becomes when, which was a great question that you asked. When is the appropriate time to utilize these types of services? And what I tell people is when you've made the decision that going to be a dso, even if you only have one or two offices and you have a plan and you're going to implement that plan, the earlier the better. Just because you call us when you're two offices does not mean you're committing yourself to some giant legal bill or something. But, you know, often what I Found over here is, you know, if people are willing to call us at the early stages sometimes, I mean, it shocks me at the beginning, you know, if they were willing to pay, you know, I'm just making this up close, you know, five or six hundred dollars, which not everybody can afford, that no matter how big an office you are, you could save yourself hundreds or tens of thousands of dollars later in having to clean it up if you don't. And some people say, we don't want to call early, you know, we're not ready for that. But then they go and they get three or four or six offices and now they're making pretty good money. And now they say, well, I'm going to call Brian or call Dykeman now because I'm big enough and, you know, certainly we can help them and we're happy to do it. But I look and I say, gosh, if you guys had just called me two years ago, you know, you could have saved yourself a ton of hassle that we're going to have to go through right now. So to me, you almost can't be too soon. We love meeting new people. I've got 39 folks over here. Even if you're not ready to use us now, I just love making the. And it's true. Sometimes, you know, people will ask me about. Somebody will call me, I'll have a nice half hour call. They'll tell me about their organization. It is my pleasure to meet some folks, and then they may not call me for a year or two. And when they do, sometimes it's a very big, significant project when they do So. I like meeting folks and growing together. But, you know, when, you know, whenever you've decided you're going to do a dso, you need to think about this. Or I can tell you there are very few guarantees in this world. But if you don't think about it, I can tell you with 100% certainty we're going to have to clean stuff up. On the back end. I've not seen a single. I mean, this is an incredible statement almost to make, but I haven't seen a single situation where somebody didn't think about it on the front end expanded, and then on the back end we looked at it and said, wow, everything's perfect here. This is great now. I mean, almost every case we got to go back and then backfill or retrofit or do some other things.

So one of the things that I've heard you say is dentistry is surprisingly complex. You know, if you've been an entrepreneur like I have in other industries. And then you come into this. I've said this on other podcasts. We're talking about an industry that's healthcare. We're talking about an industry that's consolidating. So not all the enterprise resources are readily available. A lot of them you have to build yourself. And then I've heard you say that, you know, there's 22 or more regulatory bodies that we're trying to all comply with as well. Is that accurate?

Yeah, I mean, right. More. I think there's more than 22, but I mean, that that's a very good, you know, sort of ballpark, just to give the. I mean, even if it was 22, that's bad enough. I think we're like almost 30. But yeah, you really have to pay attention to this stuff, you know, and the reality is, if you're a small solo office, these things kind of apply to you. But you're small enough, you're going to be under the radar. But once you start really scaling up and starting to open up multi offices and really become a presence in your community, you're not going to fly under the radar anymore. You really got to clean these things up. I'd like the solo practitioners to clean them up, too, but just the reality is they can probably get away with it. Once you get some type of critical mass, you're a real easy target and you got to clean this stuff up.

If you were going to bell curve, because you see like a huge spectrum of, you know, outlier issues and so. And so sue and so and so over whatever. Right. But if you're really going to bell curve, some of the issues out there that really fall into kind of a consistent thing that we all could be more conscious of and solve, whether that's around documentation or employee relations or whatever. What's something that you think, man, this could be solved with a little bit of education?

Yeah. You know, there's about six or seven issues, and I'm happy to even talk about them today. You know, that get you 80% of the way there and some offices, you know, if I've got client and it's really messy situation, I'll say, look, we're going to shoot for these six or seven. We're going to get you to 80%. Even if I'm concerned about 20%, the likelihood of having a big trouble on this. 20% is not. Is pretty small. So let's get you to 80%, because sometimes, you know, just to be frank about it, getting from 80 to 100 can be diminishing returns. And if they're minor, immaterial issues, some circumstances you can live with a little bit of what I call gray area stuff. You know, I don't want anybody to be blatantly non compliant, but there might be some gray area stuff. You can say, look, this is minor. If somebody asks us to clean it up later, we can.

But it's a risk. It's a risk management.

That's right.

Right. That's the maturity.

No one's 100%. I hate to say that I've devoted my entire career to compliance, but I got to be. You said we've got to be authentic on your show. I'm not going to come on your show and make stuff up. You know, if we can get 80% in most situations, you're going to be really good. You may have from time to time issues. They're completely manageable, they're not going to be a big deal. And 80% looks like this. Billing has got to be right, collection's got to be right, marketing and advertising has got to be right. If you do any patient finance program, that's got to be right. And from a DSO standpoint, your structure has got to be correct, your business agreements got to be correct. And you've got to at least have a compliance plan in place. Even if in certain instances, you know, there are what I call ordinary course deviations. Nobody's perfect. You generally have to have a plan. And on the labor and employment stuff, you got to have a tight chip. You got to have a tight chip on. You know, if you've got independent contractors and they should be employees, you can't have that. If you've got people that are exempt but they should be hourly, you can't have that. You got to have a system for people keeping track of their hours. You got to make sure people are getting lunch breaks or rest breaks. It varies a little bit from state to state, but generally you got to give them lunch breaks and rest breaks and other things. And if you don't do that, that's kind of a problem. If you've got alternative work week, the orthodontists are famous for this. They'll work four 10 hour days instead of five, eight hour days and take Friday off. I wish I could do that. My career, I got to find a way to do that. But there's certain labor requirements you've got to comply with. So if you can do what I just said, like everything, that's about 80% of it. And we could, you know, we're not going to today, but, you know, if it was an intellectual exercise, we could spend hours on the other 20%. Honestly, if you can get to 80%, you're going to be in good shape in most.

And I, you know, we didn't plan this, and I've never heard you give that list before. That is such a great list, though.

Yeah.

I mean, I think about our own journey and getting all of those things right. And that really is, you know, comprehensive. I think a lot of people, when they think about dso, they're thinking about the document structure. So I want to spend a little bit of time there. You know, I've always been concerned that if people do their documents too early, that they can get themselves in an uncompliant place because the accounting gets a lot more complex once those documents are in place. What's your thoughts on that? I mean, we talked about, you want to do it early, but I also want to give the right perspective that it's not just about the documents, it's also about having the right structure.

Yeah. I mean, the way we do it, you know, I think you're right in general, like, I can't agree to it as to us, because as you know, and this will be no surprise, I think, you know, I think we're the best in the industry and we've got streamlined solutions. But I don't disagree with your premise that some people have gotten into trouble. And I don't want to make this an infomercial. You know, hey, call me and it'll all be okay. But all I can say is in our documents, we have them set up for any stage or a part of. And we often have exhibits that deal with cash flow. So if you're at one place where you've got two offices, your cash flow exhibit is going to be very different than if you've got 50 offices or 100 offices and the changes that need to be made over time. Let's say Emmet called me on day one when you had two offices and I stuck an exhibit in place. When you get 15 or 20, we'll just change out the exhibit. It's not like, oh, my God, we got to rewrite all your agreements and start over. It's sort of like, no, you've grown. Things have changed a little bit. Let's spend a couple hours on this exhibit only. Slap on the new exhibit, sign the amendment, two, three page amendment, and we're out of there. So if it's set up right, and that's the other thing, I mean, that does kind of dovetail into my right. If you set it up correctly in the beginning, we can make all kinds of changes along the way with very minimal effort. If you don't set it up in the beginning. Yeah. Then you could be faced with situations, oh, gosh, we got to throw these documents. We got to start over. Yeah. I mean, you don't ever want to be in that situation.

Yeah, I think that that's huge. It sounds like the documents themselves. Would you say this to Brian? They've evolved where the documents have gotten better than they were back in 1.0 and 2.0. So you're ability to grow.

I hate to do it, but I can't resist. I gotta be. We're gonna be authentic. Our documents have gotten better. And you're absolutely correct. I can't tell you the folks out there that are using old doc. Sometimes people will come into my office for a consult and I'll say, bring your documents. Let's go through them together. And I'll look, I'll say, yeah, I remember these. These were exhibit A in the court proceedings years ago that got invalid. Oh, my God, these things are still around. You know, it's like running around. There's a Studebaker. Oh, there's an old Gremlin. You know, I still see them out there. So, yes, our documents have gotten better. And I don't even say not. There's other firms that do a good job and their documents gotten better. But there's a lot of old dinosaur stuff out there that you got to be really careful about.

Mm. So, yeah, you'd want to be careful if somebody, let's say, was using second, third generation, or maybe they've left, you know, a firm like yours and. Or they, hey, I got some dicoma documents. And then we just kind of redid them. And I can get them for you for a lot cheaper. Right. You just have to be careful because Consolidating. Right.

And I feel very strongly about it. I'll say this on your show. I have plenty of work. I love going on these shows because I love talking to you. I'm not trying to pressure anybody. You know, we're delighted to help if you do call and it works for you, but I'm not here to do an infomercial or tell people they gotta call me or, you know, but I will, I will say this. I'm getting a little concerned with some folks in the marketplace that, you know, this industry is exploding. You know, you go to the conferences with me, there's lots and lots of opportunities, a lot of people doing deals, a lot of, you know, money to be made, quite frankly, in the industry. And some attorneys out there that have never been in this space before suddenly ran some spreadsheets and said, wow, look at all these people. We got to get involved in this. We can make the money. And it offends me because they don't know what they're doing. It doesn't offend me. If somebody competes in the marketplace and they know what they're doing, hey, I'm happy to have a debate about who's better or who you should use. And that's, that's fine. At least nobody, Emmett, is getting hurt by that. Three law firms, and they all know what they're doing and the consumer is going to pick whoever they want. Nobody's getting hurt. Doesn't bother me. What bothers me is the folks that have jumped on the bandwagon and they try to undercut prices. And the reason they'll do it, quite frankly, is they'll have a Generation 1.0 document. It's a form somewhere that they got online or they got it from somebody else. And they'll sit there and they'll. All they're going to do is fill in the blanks on that form, on that form, and you're going to be stuck with the consequences. Everything you said, Emmett, about suddenly you pulled out that form and now you've grown from two or three offices, 15 or 20, and now it doesn't work anymore or you're in a cash management situation that's bad. And you've got to. Now you got to pay your accountant plus your new lawyers. You can get yourself in very bad situations. The other situation that really frightens me lately, it's the sell side work. It's funny, some of the sophisticated buy side work we do, you, you know, if you're not competent, you just can't do it. When somebody says, what's your structure going to be? Oh, I don't know. What is your, what are the tax. Oh, I don't, you know, I don't know. Somebody that's not competent probably wouldn't. Just wouldn't work out. Like if you said, brian, hey, build a rocket to Mars. I could not do it. Like, it's not like I would get trapped in orbit. I just couldn't even build the thing. We wouldn't even get more than 2ft off the ground or something. On the buy side, you do see that. But on the sell side, you know, you can sign whatever documents the buyer sticks in front of you. So I see a lot of people on the sell side getting into big trouble because their lawyer from the country club that they played tennis with or golf with says they can do it. And they do. Here's the frightening thing, Emmett. They get the deal closed. Why do they get the deal closed? Because they sign whatever the buyer sends over. And when they call the buyer, what buyer is not excited when an incompetent lawyer calls over there and says, hey, can you explain these agreements to me? Oh, sure. I'd be delighted to tell you why you need to sign all these things. You want me to flag on the dotted line everywhere you need to sign. And they do, and they sign it and the deal closes. And these lawyers can run around and say, we closed the deal, but they just sold their client up the river. And that. I feel very passionately about that. That's the thing that really concerns me in the marketplace. People that are able either to pull out a form and technically say they've done a DSO or technically say they've sold to a DSO or to a private equity group and they didn't fundamentally understand what they were doing and they did a disservice to their client. That's the thing that bothers me. Not competition from competent firms. Know what they.

Okay, so here's a tough question. You've been on all sides of this Rubik's Cube. Depending upon where your opponent has been, they might say, wow, you're very pro DSO, right? Because you've been protecting DSOs and getting structures. Others might say you're anti DSO because you helped a dentist break up a DSO group. What would. How would you brand yourself on those type of perspectives?

Myself, I mean, the way I brand myself is there was one answer for me, and that's compliance. And it's been that way for 25 years. And we don't, you know, at DiComa, we don't. Some folks have, you know, made some remarks over the years like, oh, they do all kinds of work. We're just the PE group, or we're just the DSO group, or we're just the individual dentist group. And, you know, people can say whatever they want to say, say it's a free country over here. We're not North Korea or something. But to me, perspective that's being missed is if you're not on all sides of the issue, you. There are issues that you miss. You know, when we do. We do just as much sell side as we do buy side so the interesting thing is when we're on the sell side and the buyer struggling with something, often we can jump in and say, hey, let's lend our perspective. We all want to get to a closing. You're telling us you're going to have this tax issue or there's some other problem with what we're doing, hey, we can probably come in and help you. And I've had a few buyers say, God, can you help us after this deal? You're better than our buy side counsel. Same thing. When we're on the buy side and the seller is struggling, we do almost more sell side work than anybody else. And we could say we can help. We understand the issue you're struggling with. Your lawyer might not even understand it, but we do. And we can come in here and find a way to do a fair deal. Because what I always tell people is, no matter what side I'm on, you've got to do a fair deal for this reason. This is not a situation where people exit. If you're selling a McDonald's franchise, I'm selling it to the new franchisee and I'm going to be out of there. Yeah, I guess it's, you know, the laws of the jungle. Whatever you can get away with, you know, don't do it. I mean, don't break any laws. But other than that, whatever you can get away with, if, you know, you sign favorable documents and you exit, you've left the buyer with a pile of garbage, so be it. No worry. That's for franchises and other things. But here the dentists are going to stay on for three, five, six, seven years. These folks are going to partner post closing. So you've got to be fair. If you do an unreasonably, a deal that's unreasonably favorable to one side or the other, you're going to have real problems post closing. So one of the things that we say, my advice doesn't change. I mean, I have one set of advice typically. I mean, it's tailored to the individual situations. One set of advice for how you got to do things. Do a fair deal. It's something I say, no matter whether I'm on the buy side or the sell side, we've got tons of solutions. If I'm doing a dso, it's be compliant. Okay. It's not like, oh, Brian's with dso, so he's gonna like, break all the rules. Oh, now he's with the tenant, so you know, he's gonna make them follow all the rules. No, no, we're going to be compliant. And I often get consulted no matter what side I'm on. You know, I've been on a lot of calls where I'll represent the buyer and the seller will be listening really carefully, or I'm on the sell side, and the buyer's side will say, hey, we need to put DSO documents together. Post closing, you help us, we want to make sure maybe it's a really good M and a firm that's got no problem doing the deal. But when it comes to the DSO stuff, they're like, hey, can you help us put these agreements together that both our clients are going to sign post closing? Because that's, you know, my view is you have to have compliant DSO documents and you have to have a fair deal whether you're on the buy side or the sell side. I don't change that. Regardless of whether I'm on the sell side or the buy side or I'm representing the DSO or I'm representing the entrepreneur. Dennis, I don't really change my views. And I think that's why I often get consulted across the aisle regardless of, you know, what side I'm on. But the one thing I will say is, had I not had the opportunity to be on buy side, beyond sell side, be on entrepreneur, dentist, beyond DSO side, beyond private equity side, beyond the lender side, beyond the borrower side. If I didn't have all of that perspective, I think my knowledge base would be a fraction of what it is today. Because I've been on all of those sides. I feel like I can empathize with everybody. With the borrower, with the lender, with the buyer, with the seller, with the dso, with the entrepreneur, seller with the private equity group. And it really helps us to help people because in the end of the day, I don't think, Emmett, you know, we want to be adversarial to each other here. Everybody's got to protect their rights. But in the end of the day, we want to do deals, we want to grow the industry, we want to help people, we want to be compliant. The enemy, you know, to me is non compliant, actually, the regulators and governing bodies. It's not the other side on these deals.

That's just such great feedback. And I think it aligns very much with where you started this, which was just explaining the 1.0 to 3.0 world. And your analogy on the McDonald's transaction, I think is spot on. This is not a transactional industry. There's too much human component and relationship necessary for long term success. And I think those who've tried to shortcut that and maybe treat this like a transactional industry long term have really struggled and maybe continue to struggle wherever they utilize that mindset. So I love what you're saying because it is authentic, which is at the end of the day, if you think that kind of being the same smartest one in the room and really getting the other other guy and getting something that's kind of way beyond market and so forth isn't going to come back and bite you at some point, then you just haven't been around long enough. Right?

Not in this space. I mean, it does not work in this space where you're basically, you know, I'm careful when I use the word partners because non dentists have to be careful that they're not doing clinical stuff. They can't partner clinically, but on the business side they absolutely can partner. And this is a partnership from that standpoint. And you're going to be in bed with these folks for three, five years, sometimes more. And you got to get along. Everybody's got to protect themselves. I understand that. But you've got to put conditions in place where folks are happy to be in partnership with each other. Post closing it can't be adversarial. I mean, I've even seen it where people have been, they sometimes will get a law firm that is not in this space. I have a deal right now like that where they're not in this space and they're fighting over commas and periods and every last thing is becoming World War Three. And sad thing is what I've noticed is they're getting their client. They're sowing the seeds of distrust in their client. And I worry we are, it looks like we've kind of crossed the finish. We're just about going to close this. But on this deal that I've course I'm not going to mention, I'm worried that the seller now distrusts buyer because of how their counsels behaved. And I'm real worried about it. I mean, these people are going to have to be in business for three to five years afterwards. And I'm worried you're causing the relationship to get off to a bad start.

Yeah, that's just such great perspective. And I think again, the theme that I've heard and I think for our listeners to take away whether you're ready to do a bunch of legal pieces and that's the constraint you're running into today or not, the thing you can take from this podcast is build Quality, build relationships build for the long term, any kind of short term, quick move thinking is probably going to catch up with you. Right. And it's not worth in the your risk management world to play that game very long because you may lose everything that you created.

That's that. I mean, I can't say it better than you just did, Emmett. And I've seen, I mean the only thing I can say is I have seen it. I mean you're saying that and somebody could possibly say, well that's nice that you said that, Emmett, but give me a couple examples. Now I can't give examples because of confidentiality, but I can say I've seen it. I have seen it day in and day out where somebody has done taking shortcuts at the beginning. And maybe, I mean the good news, I'd like to think when they can call, when they call me, I'm often able to prevent the whole enterprise from just going under. But let's just say this. Something that would have been a five grand problem at the beginning can easily, without batting an eyelash be 150 grand problem on the back end. Where I go to somebody and I say good news and maybe the news ain't that good, but it's better. You're not, you're not going under. We've saved the thing, you know, we're going to be able to find a path out of here. But while it would have been five grand to fix it in the beginning, it's going to be 150 grand now by the time we're through with fines and penalties and legal fees and other things. You know, I see that all day long and it's a shame because most of the time it was preventable on the front end.

Brian, you've been super generous. You've given us a history of the industry. You've given us a clear path to think through and start organizing some of these projects. You know, we're not going to be able to, I love your six to eight, you know, core items. They're not going to be able to solve all of them tomorrow, but we could definitely organize them and start taking them on one by one. Especially the one that maybe line of sight. We're already noticing some noise happening there, little concerns, you know, if we're getting into payment plans. Oh, I didn't think about, there might be regulation around that maybe I'm making a phone call, starting to get a little bit more educated on things I need to think about, you know, the documents. Ooh. You know, I Did get these done five, ten years ago. Do I need to have them reviewed? You know, my attorney was my brother in law, you know, really nice guy, maybe doesn't know the spaces as well as I thought. You know, should that, should those be reviewed? So I think all of those are just good thoughts for our listeners to, you know, prioritize within their own mind. Is there, is there anything else, you know, that you really would want them to know? I mean, you've already given us so much, but is there any other piece that maybe they just need to be thoughtful of?

Well, relationships with your partners. I mean this, this is a subset of what we're talking about. But I recently saw this come up and it just, it's interesting. Whenever folks schedule me for these, you know, interviews, which I love doing, it's, it often can be, you know, a product of what I've got that week or two because I, there's just so many examples that keep coming up. And what I have right now is a situation where a group practice owner, very successful group practice, again, will remain anonymous, wants to sell, but hadn't looked at his operating agreement in years and hadn't seen what his relationship is with your partners. For anybody listening in, your shareholder agreement or operating agreement will govern your relationship with your partner. And it's very important document. You should update it as frequently as you expand because you know what you thought your objectives were when you quickly, you know, had one office years ago, maybe different for two or three or four offices. The reason I'm mentioning it now is this gentleman wants to sell and he's got a really good offer and he thought, you know, I'm the majority owner, hey, we're just going to market. And I said terrific, I'm excited, let's go to market. But like, you know, let me see your stuff so I can kind of review it. And he sent it over to me and turns out he needs, even though he is like a 72% owner or something like that, he needs 100% approval, which is rare. If I'm drafting documents, the majority can drag the minority along. You know, this isn't an M and A seminar, but generally that's the way I do it. If you're the majority, you're going to be able to make those decisions. Not all documents are drafted that way. And his he needed 100%. So now he's got this attractive loi where really life changing money is going to come in. And now we realize he can't do the deal without the consent of his Partners, his relationship is okay with them, but they're always looking to gain an advantage. And as soon as, you know, we raised this with them, they're now, you know, I was going to use the term extort, maybe that's too strong. But they now have hold up value and now they're able to come in and say, I know we only have what, 29%, but you're going to need to pay us as 5050 or we won't do the deal. I mean, all sorts of things like that can happen. And you know, the funny thing is that that's not necessarily, you know, eso specific, but that's your relationship with your partners. And we see lots and lots of instances where people don't update their operating agreements. I've seen situations where there's no operating agreement. Well, so give some free advice. What happens then? Well, it defaults to the statute in your state. Your state has a default corporation statute that says if you're too lazy put your documents together, we've, you know, set out what's going to happen. And it's just general lowest common denominator stuff, a lot of which you probably don't want to agree to, but now you're stuck with if you don't have your own documents in place. So that's something else that, you know, I'm dealing with that issue this week, in fact. So it's something else that I think is worth noting. You got to, because, you know, you have to understand your relationship with your partners or it can hurt you, you know, going forward.

Man, that is. That was a great nugget to leave with because I think most clinicians especially probably know their insurance agreements better than they know their operating agreements. And you know, to your point, I just want to emphasize this. So many people think that owning 51% or more kind of gives them ultimate power towards the universe. Right? And it really just doesn't work that way. I mean, the reality is somebody who owns 1% could contribute way more than the 1 who owns 99. That operating agreement is everything. And so starting to educate ourselves more about operating agreements, how to utilize them fairly and effectively for what your ultimate vision is. We're going to have to have a whole podcast just on that because there's no.

It's fun. It's at least fun for me to talk about. I hope it is for the viewers also. If nobody listens, then maybe we won't do it, but it's fun for me.

So, Brian, if people do have more questions, probably most of them are very specific to their situation. They'd love to just get more information. So first of all, you know, website, where should they go? And then if it's, if it's more than just kind of general, who should they be calling and so forth.

So yeah, so if you just want to learn about, you know, who is this guy with Emmett and everything, it's dykemadso.com is our website D Y K E M A d s o.com that just generally has got, you know, it has my contact and everybody else on my team, all 39 attorneys. I was talking about talks about our group. It's got real interesting stuff about our year end, you know, our once a year conference. You've been there, Emmett, you know, that's all on there and that's just general. If you need to get a hold of me and I'd be delighted to speak with you. It's bco b c o l a oma.com and usually I tell people, reach out to me. They say, I know you're the director and you're busy, but it helps me. Even if there's a better qualified person that's going to actually do your project. I know enough as you know, Emmett to be dangerous about everything. I mean every possible thing. I'm not necessarily an expert on every possible DSO thing, but I know enough to be dangerous about it. So if somebody calls me with particular issue, I can say, oh, that's a tax question, really good. Call this person. Or that's actually a labor and employment question. I know the issue, let's get the answer. Call this person. So I say reach out to me and I'm happy of course to set up a call with you and then I can figure out the right place to get you help. Sometimes it's an accounting question or an operational question that we don't even do. But I know the person in the industry to call that can help with that problem. So I'm usually a good place to start and I'll get you pointed in the right direction.

That's super helpful, thank you and I appreciate you pointing out because again, a lot of times we get hyper focused on the DSO documents themselves. But the reality is we've got all this other noise that we're dealing with. And let me just point out again for our listeners like they should feel very proud at whatever level of success they've achieved at this point. This is a complicated industry and there's lots of moving parts. And I think you've just shown how complicated it is. I Don't say that as discouragement. I say that, you know with pride, that those who've been slugging it out and solving, even at a single doctor location, the reality of getting patients in, giving them clinical care, keeping alignment with associates, and then for those who've scaled beyond that, you know, that's not a small achievement. And they, they need to be thoughtful of these other pieces so that they don't go back.

I mean, I mean, did you watch the football games yesterday? I mean, this is a Monday we're doing this. If you watch the football games yesterday or you watch Monday Night Football, these are some of the greatest athletes on earth that should be nothing but proud of what they're doing. But last I checked, they got a whole bunch of coaches down there in the corner sitting there giving them advice. And that's what I say. Of course you should be proud of your organization and every last thing that you accomplished. But that doesn't mean you can't benefit greatly from coaching and expertise and other things. So nothing that we do here should ever be construed as being disrespectful or critical of these wonderful organizations. But we're here to coach. We're here to bring them to the next level, I think.

Yeah. That's awesome feedback. Well, I appreciate it. For those who want to continue this conversation, have additional questions, comments, come over onto our Facebook site at DSO Secrets. And until next time, keep smiling. Brian, thank you so much.

Thank you, Amit.

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