61: The Clinician and The Biz Person

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Hello everyone and welcome to another episode of DSO Secrets. I'm your fearless host, Emmett Scott. And today I'm going to talk about one of those things that's so foundational, that's so critical to get in place from the beginning that if you don't, I can almost guarantee that everything else will end up blowing up and will not work no matter how hard you try. And that thing is the partnership between what we'll call the clinician and the business person. Now when I say clinician, I think everyone knows who I'm talking about. Anyone with that license, who's going to be the doctor owner, who's going to lead the clinical vision. Now the business person could be a lot of different people. It's, it could be that friend who's got that entrepreneurial vision who's telling you he can help you, or she can help you take this to the next level. It could be the sister in law or brother in law, the cousin, the gal you met at a conference who you can just tell is brilliant, who has some experience, who's maybe helped somebody else scale their business. Maybe she's been great in doing back office front office training and is excited to get into the DSO game. Maybe it's that practice manager who's very entrepreneurial that you have a lot of faith in that can help get you to that next level. It's that practice consultant, that practice consultant that's helped grow your practice maybe into 1, 2, 3, 4 different practices. And now you're just excited to take it to that next level. Have that passive income. It's the MBAs out there gotten out of school or they have experience in private equity, whatever it might be. Maybe they've been doing investment banking. Now they're going to help you to scale your business. Even at large scales. It's insurance companies and other acquirers who are making investments. All of these people, I'm calling the business people, all Right. These are the ones that are helping you, as the clinician, get to the next level of having scale, having passive income, getting out of being chairside. They're selling the dream, they're selling the vision, and they're going to be your partner. If the alignment between the two of you, or if it's the 10 of you, whatever it might be, is not perfect, it'll create a crack in the foundation that will eventually crumble, whatever you've built, no matter how magical, how amazing. And I've seen this time and time again, and oftentimes people come to me when maybe it's just gotten too far or, you know, the relationship has crumbled too far, that there's really nothing that I can do. And let me tell you where I think the issue starts from the beginning. And I'm going to mostly address everything to the business people out there so that their mindsets can be in the right place. But as clinicians, as you're thinking through this, I want to give you confidence on places and talking points that you need to push back. Because to me, if this alignment does come together perfectly, now you've got a foundation that you can build on because times are going to get tough and we'll talk about that. But you can't avoid the dark tunnel. There's just math issues associated with building a business. There's risk associated with it. There's friction points that externally and internally are going to happen. But if the business person, the clinician are fully aligned, then we're able to move forward. Now, another business person I just thought of is it could be another clinician that's kind of taking on the business roles as well. No matter what it is. Let me just say alignment is critical here. So let me give you like, nine different things that I thought of that are just absolutely critical to have in this part of the relationship. And again, most of this is mindset for the business person. Number one, remember that the clinician is letting the business person into their house. We are driving their Ferraris. In most states, we cannot own the entity structure in order to have dental practices. And so I love thinking of this as someone handing me the keys. As Dr. Evans or any doctor partner that I partner with has handed me the keys to their Ferrari. I'm driving their Ferrari, I'm supporting their vision. Absolutely critical to have that mindset. As soon as you maybe think that, hey, look at, I've looked at this spreadsheet. I've looked at the vision, I've looked at the inefficiencies of their operations. I'm taking over. This is my Ferrari. Now you're gonna start creating a crack that's gonna blow up on you later. Number two, I think it's critical to remember that if the clinician says the game is over, it's over. Or at least it's gonna be a much smaller game. What do I mean by that? Well, if the clinician gets burned out, if they just don't think it's worth doing this anymore, scaling is just getting too hard. If they're getting overwhelmed, if they're tired of all the debt that they're having to take on all of these things, and they say, I just can't do this anymore. You're done. There is nothing that you can do. Now. You could pull a Ray Kroc maybe you have ownership of the leases, you kick them out, and then you put a new clinician in there. But you need a clinician owner partner. That's going to scale with you. And the story of, hey, the last guy, I burned him out. So now we've got a new one coming in. It's just going to be a hard sell. And so I think you want to try to get it right the first time. So thinking of this as a clear partnership where you're always supporting, supporting the clinician to ensure that they're excited and that they have everything they need to reach that next vision is critical to this splitting equity. I always get questions about how the equity should be split. Let me give you a principal business people out there that I love to work off of, and that is you want the clinician to wake up every morning and think, should I have given more equity to my business partner? You do not want them to think the other way around. Man, did I give them too much. If the clinician feels like they got a great deal and every day they're feeling that and they're excited about the future, then the dream continues. But if they start feeling shaky about that outcome, then your dream could be over. And what you're trying to accomplish and the impact you're trying to have with patients and staff, it could just be all done. Let's be really clear here. Clinicians have lots of options. I mean, one of the simplest ones is just go back to a single location or work as an associate and be super effective, bring in a good income, pay off all their bills, and continue to build an empire outside of dental and real estate or some other investments. These things are always going through their head. Should I be doing more practices or should I just simplify down? So we want to make sure they're always in a place where they feel like they're ahead of the game. All right, here's a fourth one. Always make sure that you separate compensation from distributions and be clear on what represents what. Now, I see this between dentists all the time. Sometimes they partner together and they're going to share distributions. Let's say 50, 50. And that works out maybe in the beginning, okay, they're sharing expenses, they're sharing distributions, but then one of them wants to take some time off, or spouse gets sick and they have to take some time off, and they're still getting the same 50% distributions, but the other one's in there working, grinding this out. There's a lot of ways you can do this wrong. It happens in small business all the time. And the easiest fix to it is to be really clear what the compensation is for activity, for work that's being done versus what's the compensation for ownership, which is the distribution. And I see less and less people making this mistake, but I just want to put it out there to make sure that you're getting paid to the extent possible, to the extent that the cash flow allows, that you're accruing or clearly stating, hey, I'm getting paid for doing this business activity, you're getting paid for doing this clinical activity. And then whatever the distribution is, the distribution is. Now, to the extent that the clinician starts to do business activities, I'd always try to be as generous as you can. That might be point number five. Anytime you can, pay the DOC for any business time they spend, and then pay them for their chair time, too. Overpaying them anytime you can is a good principle. Again, we want to keep them engaged and be a dso, a dental support organization. Now, at some point, it might be early on. In fact, if you're growing fast, it will be early on. You're going to hit the dark tunnel. If you want to know more about that, you can look up the podcast on what the dark tunnel is. But really, in summary, it's that point where you have to add more resources. And basically, you have to move backwards in order to move forward. You have to build out the platform, hire different people who are expensive in order to get the leadership you need to move to the next level. Remember that the dark tunnel is 10 times harder for the clinician than it is for the business person. Why is that? Well, because the clinicians in there, they're grinding it out, no pun intended, and doing all the work to really build the business. At least that's what they feel in their mind as they're sitting chairside trying to do the production, trying to do the treatment planning, ensuring they're bringing value to the patient. They're kind of like the brick maker and you look like the brick stacker, and you're also deciding how big the house is going to be. And so the clinicians sitting there working, thinking to themselves, are they kind of overspending my money? Are they trying to build something too grandiose? Could we do this in a simpler way? Now you, as the business person are thinking, this industry doesn't have any resources. I can't get half of what I need to make good decisions and to lead the business. And so there is this push and pull around trying to grow this thing through the dark tunnel. And I just think it's so critical that we're sensitive to that fact and realize how much pressure the clinician or clinicians might feel in trying to get past that and bring enough value to the patients so that they can bring in enough production so that you as a business person can turn around and spend it all on platform to get to the next level. And so you can imagine that this starts to open up a lot of questions in the clinician's mind, is this worth doing? Now, they may not say you're being evil and you're wasting all of this money, etc. They may just say something like this, I can't do this anymore. It's just too overwhelming. It's too hard, it's too much stress, it's too much pressure. Another thing to remember is oftentimes most of the debt is in the clinician's name because they can walk in and get a bank loan so much easier than the business people can do. And so they've got these debts payments, they've got the daily labor, and they often just see you're building this Taj Mahal that they're trying to fund with a lot of stress. You know, remember this, this is maybe point number seven or eight. Every day they wake up, the clinician wonders if their license will be taken away. You know, they're not natural entrepreneurs oftentimes, and they're feeling the risk of that. And even if they are entrepreneurs, they've got this Achilles heel that a dental board could say, what you're doing is too dramatic, you know, it's not right, etc. And they could take their license away. And then everything stops for them. All the hard work, all the schooling Everything they've invested, now they can't even be a clinician anymore. That's a lot of risk that they wake up worrying about. If they're doing Medicaid, they're definitely waking up with that. They've got the regulators they're thinking of there, but being sensitive to that. That's why those first points of making sure you really put juice in the engine, make sure that they have everything that they need. Support wise to be excited to get through the dark tunnel, to take on the risks that they might feel are inherent to this is super important. Important. They also have the pressure of their peers. You know, I don't see this as much, but if, if you're in certain forums, especially in the dental forums, I'd say only in the dental forums, most of their peers are still saying how evil it is to have a business person helping you, especially if you end up calling that business person or your entity structure a dso. Now I think a lot of that's crumbling and looking ridiculous, but the reality is is they hear that mantra on a consistent basis. And so they ask themselves, am I doing something wrong? Especially if some of those other things are combining. And so being sensitive, that I think is super important. All right, here's the last point and the most important of all. Be a dso. Be a dso. Be a dental support organization. When you feel the pressure from outside things, remember one thing and your job is to support the clinician. If you're doing that, if you're being a dso, you're taking care of your most important customer. I don't care what happens on the board level, private equity level, investors, whatever you might be feeling, if you'll come back and say, what do I need to do to take care of my most important customer, my partner, the clinician, then you'll always be in a good spot. Don't outrun your coverage. If you try to go ahead of the clinician, if you say, oh, they just don't understand what needs to happen here, let me go out there and I'll make sure that this gets done, et cetera, especially if it has to do with clinical things, you're setting yourself up for complete failure. I've seen this at a one on one friend based partnership level. I've seen this on a massive level with private equity and other investors making these mistakes and it doesn't work. I have not seen someone successfully pull it off. So it all really comes back to, for me, being a dso, being really thoughtful, empathetic towards the clinicians. This means providing the leadership so that they can see a clear path to success and then giving them all the support that they need. I think if you follow these principles, and I'd be interested if you have other ones that you see out there, whether you're the business person or you're the clinician, things that you think are critical to have in place in that foundation. Because once you've locked arms, now you're ready to go to war together. Now the realities of the business are gonna beat on you like no other. You're gonna get stronger together. You're gonna build an awesome organization because of that alignment. So you don't want any slivers of light between your partnership. Wherever possible, continue to work through those, have really good conversations, and you'll be on a foundation that you can build for success. All right, I'd love to have more conversation around this, so come over onto our Facebook site at DSO Secrets, and until next time, keep smiling.

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