WEBVTT

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Welcome to Dental Unscripted.

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Where Mike Dinsio and Paula

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Quinn break down the

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practice ownership journey,

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one episode at a time.

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Starting up, buying,

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and running a successful dental practice.

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What up, what up, guys?

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Welcome back to another

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episode of Dental Unscripted.

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As you guys know, this is Michael Dinsio,

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one of the co-hosts of the program.

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And I,

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if you guys are big YouTube followers,

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I'm sitting in my living room,

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so the sound is not my

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weird podcast booth that I sit in.

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uh but that's just how

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today's going um and so

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here we go uh so yeah

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today's I'm super excited

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about today because we are

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um me and a friend of mine

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that's uh big into the

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accounting world I refer a

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lot of clients over to

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we're gonna uh digest

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everything that goes into

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the allocation schedule

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when buying a dental practice.

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And so we're going to break

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this kind of this idea,

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this topic of allocation schedule.

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But first,

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before we do that little housekeeping,

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And before I bring on my guest,

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I'd like to invite you guys

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over to the Dental

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Unscripted channel if you

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haven't already done that.

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So I've talked to a lot of

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you on the phone that are

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followers of the program

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and you haven't done that.

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Do it.

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We will stop publishing on

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Dental Acquisition

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Unscripted and we will stop

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publishing on Startup Unscripted soon.

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So please jump over there.

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to Simply Dental Unscripted, the channel,

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because we're just bringing

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both brands and both channels into one.

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And we are going to be

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talking all things start, all things buy,

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and also how to run a

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dental practice as well.

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So please join us over here, like, comment,

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subscribe, all the things.

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okay without further ado

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let's bring in morgan

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hammond uh morgan is has

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been working with me for

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many many years on lots and

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lots of deals he's a wealth

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of knowledge um morgan

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welcome to the program man

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how you doing thanks

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michael thanks for having

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me it's good to see you again

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Yes, sir.

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Yes, sir.

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Why don't you tell us a

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little bit about your firm?

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I know you guys just went through Emerge.

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Congratulations again.

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I mean,

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you guys started a fantastic

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accounting firm and just

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brought in more resources,

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which is exciting.

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But why don't you give

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everybody like a breakdown

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of what you're doing today

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and what the company is all about?

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Yeah, you bet.

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We started in twenty ten as

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HD accounting group.

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And so we've been at it for

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fifteen years supporting

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dentists who own their

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private dental practice,

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very much a niche firm.

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And as we've grown and scaled, you know,

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we decided we were at a

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point where we wanted some

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additional resources in the

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form of technology and staffing,

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which is always important

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and accounting and tax.

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And so.

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We recently combined with a

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top-twenty firm, Eisner Amper,

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and they have organized us

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in our dental-specific subsidiary,

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Eisner Advisory Group Dental Advisors.

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I'm the partner in charge.

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I have all my team.

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We're still doing our same core services,

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which is the monthly accounting,

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the profit advising, and the tax planning,

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only now we get to offer so

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much more and have a more

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comprehensive experience for our clients.

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As an example, this morning,

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We just sent an announcement out.

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We can do cost segregation studies now,

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and we already have.

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That went out at nine this morning.

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We already have like three

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doctors that are saying, hey, look,

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we want to talk.

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So we can add a lot of value

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as part of Eisner Amper now.

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So it's been just a natural

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progression as part of our journey,

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but it's still very specific niche,

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private dental practice owners only.

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That's our world.

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I mean, just cost seg,

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picking cost seg up is huge

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for the listeners.

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It's huge.

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Yeah.

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And the price point's great, too.

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I mean,

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it's just it's we're super excited.

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And so we're just getting

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started with that.

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But it's been it's been really,

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really wonderful.

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I love it, Morgan, man.

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Congratulations on that success.

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The first question I asked you was,

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is the fee structure going to change?

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Is the service going to change?

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That's always the big question.

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My clients that we sent over

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just more recently, the answer is no.

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Same people, same service,

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same responsiveness.

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We all have the same tools.

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We just get to add a lot more to it.

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That's awesome.

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That's awesome.

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Well, let's get into this topic,

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allocation schedule,

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because it feels like every

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day I have to kind of get in and I'm like,

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look, I'm not a CPA.

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I just know enough to be dangerous.

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And I thought, well,

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let's get a CPA on the

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program and let's just kind of

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diagnose this kind of issue

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the first thing the first

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thing to hit what is it

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what is it what is it yeah

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as you know you're you're

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heavy into the transition

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space we're not in the

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transition space we

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certainly advise on it and

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um when it gets to to this

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particular topic so the the

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first point of negotiation

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is the price of course

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And then once that price is agreed to,

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then we have to decide, okay,

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how are we going to

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allocate that price among

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the various assets that are

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being purchased?

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Because these are all asset

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purchase agreements.

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So broadly speaking,

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there is the used equipment.

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There is the patients.

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there's a promise not to compete.

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And then we might, you know,

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generally it doesn't get too granular,

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but you know,

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you might break it down to

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some supplies and sometimes

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they might say, well,

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this is medical equipment

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and this is furniture,

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but I kind of group those

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as fixed assets.

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So there's,

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there's generally like four or

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five main categories where

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that purchase price will get allocated.

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And I've even seen website

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thrown in there too.

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Sometimes you can get as

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granular as you want.

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I, you know, I think of it,

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Honestly, Michael,

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if you break it down and

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you and I both know,

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there's two main categories.

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It's the fixed assets and

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it's the goodwill.

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Just so you know,

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the promise to not compete,

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that should never be more

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than five thousand bucks.

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It should just be a nominal amount,

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but it's usually just the

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assets and the goodwill.

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Morgan, can I ask you, like,

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why do some people get more

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granular on the topic?

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Like what,

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what's the purpose of chunking

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this thing up?

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Cause you're right.

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It's like, okay,

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there's the equipment and

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then there's the goodwill

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and that's really it.

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So why do they,

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why do they do that with the goodwill?

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Oh, well, with the goodwill,

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it's very important.

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And we'll talk about that

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consideration with the seller.

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But if people want to get

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granular into the website

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and I've got these supplies

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and you've got to buy, you know,

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I don't think it serves

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much of a purpose.

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It doesn't really have a

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material impact on the taxes.

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And so when you see an

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agreement put together by, I think,

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somebody who does a lot of

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dental transitions, you don't see it.

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broken down like typically

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it's yeah it's four or five

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categories well I have seen

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brokers get more grand and

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I'm like why are we doing

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this but I I felt like they

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had a reason for it but not

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not really so if we think

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about it and I um there's

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two two perspectives and

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they're very different

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there's the the seller

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perspective and the buyer perspective

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And within each of those roles,

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there's competing objectives, right?

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So what's the buyer,

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what's good for the buyer

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is the opposite of

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typically what's good for the seller.

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So I think maybe we start

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with the seller because-

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So wait, let me recap.

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So so the allocation schedule,

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just kind of throwing it

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out and just making this

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super simple is you got the

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purchase price.

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Let's just say a million bucks.

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And we have to define how

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much of this million

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dollars of the purchase price,

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whatever it is.

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is broken up into hard assets,

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which is the equipment, and not so hard,

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soft assets,

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which is what we all call is goodwill,

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right?

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Intangibles, you bet.

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Intangibles.

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And the other thing we might

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want to throw in here, Michael,

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is that this is an asset

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purchase agreement.

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They're almost all asset

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purchase agreements.

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So when you buy a dental practice,

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you're not buying that dentist's company.

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You're buying their stuff, right?

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And you're going to put

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their stuff in your own

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brand new company.

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And you're going to start day one as your,

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whatever,

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whatever PLLC or PC you set up

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for yourself.

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So you're just buying their assets.

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And that's why it's an asset

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purchase agreement and why

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we're allocating those assets.

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So versus, versus, and I know,

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but just for the audience

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versus a stock sale, right?

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A stock sale,

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which is a horrible deal for the buyer.

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And you should never do that

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because you can't,

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a stock sale is not

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deductible for the buyer because,

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And then you're on the hook

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for all prior liabilities of the seller.

00:09:56.222 --> 00:09:57.222
So if they didn't pay their

00:09:57.263 --> 00:09:59.303
payroll taxes from years

00:09:59.344 --> 00:10:01.705
ago and didn't disclose it,

00:10:01.725 --> 00:10:02.664
it's still your problem.

00:10:03.544 --> 00:10:06.206
So you almost never see a stock sale.

00:10:06.865 --> 00:10:07.725
I don't either.

00:10:08.105 --> 00:10:08.726
I don't either.

00:10:09.326 --> 00:10:12.548
So can you say that a little

00:10:12.587 --> 00:10:13.707
bit more simple?

00:10:13.768 --> 00:10:16.509
So everything that we touch

00:10:16.548 --> 00:10:17.969
and I honestly don't think

00:10:18.009 --> 00:10:19.590
I've ever done a stock sale.

00:10:20.450 --> 00:10:22.150
stock sale is you're buying

00:10:22.650 --> 00:10:23.991
the other dentist company

00:10:24.131 --> 00:10:26.092
so if it was abc family

00:10:26.133 --> 00:10:28.014
dental llc you're buying

00:10:28.033 --> 00:10:29.254
their stock certificates

00:10:29.575 --> 00:10:30.815
and saying that is now my

00:10:30.855 --> 00:10:33.136
company okay the problem

00:10:33.157 --> 00:10:35.197
with buying stock it's just

00:10:35.217 --> 00:10:35.957
like buying stock on the

00:10:35.998 --> 00:10:36.778
stock market you can't

00:10:36.818 --> 00:10:37.958
deduct that it's

00:10:38.038 --> 00:10:39.179
non-deductible so the

00:10:39.279 --> 00:10:40.701
allocation schedules moot

00:10:40.721 --> 00:10:41.740
point with this doesn't

00:10:41.780 --> 00:10:43.081
matter you're taking their

00:10:43.101 --> 00:10:44.241
balance sheet you're also

00:10:44.261 --> 00:10:45.322
taking all their liabilities

00:10:46.263 --> 00:10:49.884
Yeah, liabilities, taxes, all the thing.

00:10:50.666 --> 00:10:51.926
But I have heard of some

00:10:52.427 --> 00:10:54.508
stock sales before when like very,

00:10:54.587 --> 00:10:57.208
very unique situations, right?

00:10:57.490 --> 00:10:59.350
The only time I've heard of

00:10:59.410 --> 00:11:00.571
it and seen it is if

00:11:00.630 --> 00:11:02.032
somebody's selling a piece

00:11:02.111 --> 00:11:02.852
of their practice.

00:11:04.306 --> 00:11:05.206
And so they want to sell

00:11:05.226 --> 00:11:06.368
maybe fifty percent of the

00:11:06.408 --> 00:11:08.269
stock if they have an existing S Corp,

00:11:08.629 --> 00:11:09.970
which that Michael's a

00:11:10.029 --> 00:11:11.691
whole separate podcast.

00:11:13.211 --> 00:11:15.313
So adding a partner is a whole, whole,

00:11:15.714 --> 00:11:17.816
whole new topic to visit about.

00:11:17.836 --> 00:11:17.875
OK.

00:11:18.735 --> 00:11:21.317
But so I will just call it

00:11:21.378 --> 00:11:22.818
ninety nine percent of the time.

00:11:23.480 --> 00:11:24.780
It's an asset purchase.

00:11:24.941 --> 00:11:27.783
You're buying the doctor's assets.

00:11:27.802 --> 00:11:28.683
You're buying their their

00:11:28.703 --> 00:11:30.125
fixed assets and their tangible assets.

00:11:30.144 --> 00:11:30.825
You're going to put them in

00:11:30.865 --> 00:11:31.686
your own company.

00:11:31.985 --> 00:11:32.686
Perfect.

00:11:32.966 --> 00:11:33.246
Yes.

00:11:34.105 --> 00:11:37.446
So because the show has

00:11:37.485 --> 00:11:40.307
gotten more broad over the years,

00:11:40.767 --> 00:11:42.768
it's not just buyers that are listening.

00:11:44.347 --> 00:11:45.708
If I helped you or if you've

00:11:45.729 --> 00:11:47.249
been listening for five years,

00:11:48.049 --> 00:11:50.070
I'm getting calls today,

00:11:50.890 --> 00:11:52.270
my younger docs wanting to

00:11:52.331 --> 00:11:54.932
sell to DSOs or, hey, look,

00:11:55.052 --> 00:11:56.613
ownership's really not for me.

00:11:57.332 --> 00:11:58.033
I think I just want to sell

00:11:58.113 --> 00:11:59.293
and go back as associate.

00:11:59.313 --> 00:11:59.933
Totally fine.

00:12:00.874 --> 00:12:01.715
Let's start.

00:12:01.794 --> 00:12:03.576
Let's hit both buyers and

00:12:03.615 --> 00:12:05.836
sellers because Morgan,

00:12:06.177 --> 00:12:07.857
you might be helping sellers.

00:12:08.538 --> 00:12:10.259
I primarily help buyers buy,

00:12:10.320 --> 00:12:13.061
but let's let's hit the buyers first.

00:12:13.341 --> 00:12:14.402
Let's hit the buyers first

00:12:14.422 --> 00:12:15.062
and then we'll talk.

00:12:15.102 --> 00:12:16.604
And I think it's important

00:12:16.624 --> 00:12:17.903
whether you're a buyer or seller,

00:12:17.984 --> 00:12:19.205
it's always helpful to know, hey,

00:12:19.225 --> 00:12:20.546
where's the other side coming from?

00:12:20.645 --> 00:12:21.606
That's right.

00:12:21.667 --> 00:12:22.687
What's keeping them up at night?

00:12:23.168 --> 00:12:23.888
That's right.

00:12:23.927 --> 00:12:25.129
So for the buyer,

00:12:25.548 --> 00:12:27.389
this is the key is a key concept.

00:12:28.890 --> 00:12:30.231
On an asset purchase agreement.

00:12:31.299 --> 00:12:31.961
As the buyer,

00:12:32.101 --> 00:12:33.845
you get to deduct a hundred

00:12:33.884 --> 00:12:35.206
percent of the purchase price,

00:12:35.447 --> 00:12:36.009
no matter what.

00:12:38.605 --> 00:12:39.287
Say that again,

00:12:39.466 --> 00:12:41.368
because that's something I

00:12:41.447 --> 00:12:44.850
say on every deal and it

00:12:44.909 --> 00:12:47.892
needs to just sink in.

00:12:47.932 --> 00:12:50.092
They oftentimes hear that

00:12:50.153 --> 00:12:52.195
just because the hard

00:12:52.294 --> 00:12:55.196
assets are lower in value,

00:12:55.557 --> 00:12:56.817
that they're not going to get right.

00:12:57.738 --> 00:12:58.918
I'm missing out.

00:12:58.958 --> 00:13:00.879
And so, and this is the,

00:13:01.580 --> 00:13:02.760
as a new business owner,

00:13:02.821 --> 00:13:04.261
also an important key concept,

00:13:04.601 --> 00:13:06.123
you always get to deduct.

00:13:06.841 --> 00:13:08.881
a hundred percent of every

00:13:08.922 --> 00:13:09.922
business expense.

00:13:10.442 --> 00:13:13.462
It's just a matter of timing of how soon.

00:13:13.543 --> 00:13:14.263
Yes.

00:13:14.322 --> 00:13:15.604
So that that's where you

00:13:15.644 --> 00:13:16.504
start as the buyer,

00:13:16.644 --> 00:13:17.924
no matter what you get to

00:13:17.965 --> 00:13:20.965
deduct the whole price in all cases.

00:13:24.547 --> 00:13:24.807
Yeah.

00:13:24.907 --> 00:13:25.407
So,

00:13:25.466 --> 00:13:31.188
so when Morgan says that it's twenty

00:13:31.229 --> 00:13:32.129
percent equipment,

00:13:32.688 --> 00:13:34.809
eighty percent goodwill.

00:13:34.929 --> 00:13:35.029
OK.

00:13:38.094 --> 00:13:40.174
The buyer the equipment that

00:13:40.215 --> 00:13:42.376
twenty percent you get to

00:13:42.397 --> 00:13:45.139
deduct that Either right

00:13:45.178 --> 00:13:49.280
away or over five years

00:13:49.422 --> 00:13:50.802
That's the choice so as an

00:13:50.842 --> 00:13:52.023
example medical equipment

00:13:52.062 --> 00:13:53.644
is ductable five years or

00:13:54.544 --> 00:13:55.525
You can say everyone's

00:13:55.546 --> 00:13:56.225
heard of section one

00:13:56.245 --> 00:13:57.287
seventy nine that says

00:13:57.386 --> 00:13:58.427
let's let's just deduct it

00:13:58.447 --> 00:14:01.289
all right now the goodwill

00:14:02.059 --> 00:14:02.700
Eighty percent of the

00:14:02.720 --> 00:14:03.860
purchase price that that

00:14:04.080 --> 00:14:05.301
must be deducted straight

00:14:05.341 --> 00:14:08.581
line over fifteen years.

00:14:08.640 --> 00:14:09.760
So that's why you'll you'll

00:14:09.821 --> 00:14:11.142
hear people say, well, as a buyer,

00:14:11.182 --> 00:14:13.922
you want a high amount to fix assets,

00:14:13.961 --> 00:14:15.001
you can deduct it all right

00:14:15.042 --> 00:14:17.062
away and then you can you

00:14:17.082 --> 00:14:18.342
can have your let's just

00:14:18.363 --> 00:14:19.182
say you'll have your party

00:14:19.202 --> 00:14:19.883
a little bit earlier.

00:14:20.102 --> 00:14:20.302
Right.

00:14:20.322 --> 00:14:21.763
You only get the tax deduction once.

00:14:21.783 --> 00:14:22.423
Do you want it sooner?

00:14:22.442 --> 00:14:23.104
Do you want it later?

00:14:23.764 --> 00:14:24.663
But you still get to deduct

00:14:24.683 --> 00:14:25.624
the whole thing no matter what.

00:14:26.264 --> 00:14:28.784
So it's just timing the fixed assets.

00:14:29.085 --> 00:14:30.085
It's more accelerated.

00:14:30.465 --> 00:14:31.164
You can do it now.

00:14:31.844 --> 00:14:34.285
goodwill over time for

00:14:34.446 --> 00:14:39.048
fifteen years okay so so in

00:14:39.188 --> 00:14:41.650
in reverse morgan in

00:14:41.711 --> 00:14:44.893
reverse here so you get to

00:14:44.913 --> 00:14:46.134
write off the whole thing

00:14:46.254 --> 00:14:47.154
it's just how long do you

00:14:47.174 --> 00:14:49.235
spread it over time right

00:14:49.255 --> 00:14:50.256
it's kind of like a loan

00:14:50.277 --> 00:14:52.158
the more you spread a loan

00:14:52.197 --> 00:14:53.438
payment out the smaller the

00:14:53.479 --> 00:14:54.480
payment is the

00:14:55.120 --> 00:14:57.322
So that's essentially that amount,

00:14:57.701 --> 00:14:58.602
if it's goodwill,

00:15:00.323 --> 00:15:02.005
that smaller amount is the

00:15:02.025 --> 00:15:03.667
write-off every year.

00:15:03.807 --> 00:15:04.988
That's what I heard.

00:15:05.368 --> 00:15:05.688
Correct.

00:15:08.171 --> 00:15:09.150
So just to say it again,

00:15:09.171 --> 00:15:10.971
because I think you may

00:15:10.991 --> 00:15:12.192
have broke out if that was

00:15:12.232 --> 00:15:14.514
on my side or your side.

00:15:14.553 --> 00:15:14.693
Yeah.

00:15:15.195 --> 00:15:17.475
So for hard assets, it's how many years?

00:15:17.535 --> 00:15:19.777
And for goodwill, it's how many years?

00:15:19.817 --> 00:15:21.038
So there's a schedule.

00:15:21.317 --> 00:15:23.058
It depends on the type of hard asset.

00:15:23.099 --> 00:15:24.019
The biggest one,

00:15:24.038 --> 00:15:25.000
the most consequential is

00:15:25.039 --> 00:15:26.220
the medical equipment.

00:15:27.301 --> 00:15:29.001
The accelerated, the rules,

00:15:29.022 --> 00:15:29.662
the accelerated

00:15:29.682 --> 00:15:30.863
depreciation is five years

00:15:31.182 --> 00:15:31.962
for medical equipment.

00:15:31.982 --> 00:15:32.342
Okay.

00:15:32.482 --> 00:15:32.724
Okay.

00:15:33.934 --> 00:15:36.557
Or you can say, tell you what,

00:15:36.657 --> 00:15:37.778
let's forget that five years.

00:15:37.798 --> 00:15:39.340
That's what section one-seventy-nine is.

00:15:39.440 --> 00:15:40.360
That says, you know what?

00:15:40.400 --> 00:15:41.441
You bought this used equipment.

00:15:41.480 --> 00:15:42.601
Let's deduct it all this year.

00:15:43.202 --> 00:15:44.163
Let's just take it all right now.

00:15:45.565 --> 00:15:46.926
So it could either be

00:15:46.966 --> 00:15:48.807
instant or spread out in the short term.

00:15:49.888 --> 00:15:50.708
And then whatever's

00:15:50.749 --> 00:15:52.009
allocated to Goodwill is

00:15:52.110 --> 00:15:55.472
straight line over fifteen years.

00:15:55.552 --> 00:15:55.852
Okay.

00:15:56.333 --> 00:15:56.533
Okay.

00:15:56.553 --> 00:15:57.695
So as short as five years

00:15:57.715 --> 00:15:58.655
with hard assets,

00:15:59.852 --> 00:16:01.633
And then as short as fifteen

00:16:01.673 --> 00:16:02.673
years on Goodwill.

00:16:02.693 --> 00:16:02.774
Yeah.

00:16:03.793 --> 00:16:04.553
Okay.

00:16:04.573 --> 00:16:04.754
All right.

00:16:04.833 --> 00:16:06.394
So the other thing I want to

00:16:06.754 --> 00:16:09.916
comment on is when we kind

00:16:09.956 --> 00:16:11.235
of separate topic,

00:16:11.296 --> 00:16:13.696
but similar when we're

00:16:14.557 --> 00:16:16.657
evaluating or coming up

00:16:16.677 --> 00:16:19.638
with true profit of a dental practice.

00:16:20.625 --> 00:16:22.248
This is an interesting little thing.

00:16:22.427 --> 00:16:23.850
Everybody always asks me

00:16:23.909 --> 00:16:27.514
about depreciation and amortization,

00:16:27.554 --> 00:16:30.339
right?

00:16:30.399 --> 00:16:32.981
So can we hit that real quick?

00:16:33.001 --> 00:16:35.905
Because isn't it, it's related here,

00:16:35.946 --> 00:16:36.407
is it not?

00:16:36.687 --> 00:16:38.067
So that's what we call,

00:16:38.107 --> 00:16:39.850
we put that what we call below the line,

00:16:40.070 --> 00:16:40.210
right?

00:16:40.250 --> 00:16:41.410
So if we're talking profit

00:16:41.451 --> 00:16:42.631
margin on a practice,

00:16:43.513 --> 00:16:45.094
that's before you look at

00:16:45.634 --> 00:16:46.995
depreciation amortization.

00:16:47.095 --> 00:16:48.736
So we do not factor that in.

00:16:48.756 --> 00:16:49.616
If we're analyzing a

00:16:49.697 --> 00:16:50.977
practice for profitability,

00:16:52.119 --> 00:16:53.059
the depreciation and

00:16:53.120 --> 00:16:54.301
amortization is not part of

00:16:54.321 --> 00:16:54.922
that discussion.

00:16:54.961 --> 00:16:56.743
That's the owner's tax situation.

00:16:57.524 --> 00:16:58.323
Same thing with like the

00:16:58.443 --> 00:17:00.326
owner S-corp salary, that's irrelevant.

00:17:01.326 --> 00:17:03.268
So if the practice collected

00:17:03.307 --> 00:17:04.128
a million dollars,

00:17:05.105 --> 00:17:06.185
and has a forty percent

00:17:06.226 --> 00:17:08.126
profit margin before owner

00:17:08.166 --> 00:17:09.967
comp before depreciation

00:17:10.047 --> 00:17:11.228
before amortization I mean

00:17:11.248 --> 00:17:12.008
there's four hundred k in

00:17:12.048 --> 00:17:16.088
profit for the owner so we

00:17:16.148 --> 00:17:17.388
don't we do not factor in

00:17:17.409 --> 00:17:18.910
depreciation and you know

00:17:18.930 --> 00:17:20.230
you'll hear the term ebita

00:17:20.250 --> 00:17:20.809
and that's what they're

00:17:20.829 --> 00:17:21.609
talking about their

00:17:21.829 --> 00:17:22.830
earnings before interest

00:17:22.851 --> 00:17:23.750
depreciation amortization

00:17:24.010 --> 00:17:24.931
because it doesn't matter

00:17:25.131 --> 00:17:26.230
like whatever the seller

00:17:26.751 --> 00:17:28.451
whatever their whatever they chose

00:17:30.224 --> 00:17:31.204
to depreciate their assets

00:17:31.224 --> 00:17:32.226
because you do get a choice

00:17:32.266 --> 00:17:32.885
whether you want to do

00:17:32.945 --> 00:17:34.586
bonus or section one same line.

00:17:34.945 --> 00:17:36.366
That's irrelevant to how the

00:17:36.406 --> 00:17:38.106
practice is performing financially.

00:17:38.126 --> 00:17:41.528
That's just the owner's good

00:17:41.548 --> 00:17:42.189
deal write-off.

00:17:42.648 --> 00:17:44.409
It's just kind of another line.

00:17:44.709 --> 00:17:46.109
It's not an actual bill.

00:17:46.170 --> 00:17:47.430
It's their strategy,

00:17:47.490 --> 00:17:48.730
the seller's strategy.

00:17:52.971 --> 00:17:53.412
But

00:17:54.383 --> 00:17:56.144
is it true that goodwill is

00:17:56.203 --> 00:17:58.025
related to the amortization

00:17:58.585 --> 00:18:01.287
is that a true statement or

00:18:02.067 --> 00:18:04.208
because depreciation is uh

00:18:04.709 --> 00:18:05.729
yeah the relation and

00:18:05.808 --> 00:18:10.612
amortization yeah go ahead

00:18:10.632 --> 00:18:11.612
depreciation you'll hear

00:18:11.673 --> 00:18:13.173
depreciation more related

00:18:13.212 --> 00:18:14.473
to like a fixed asset

00:18:14.493 --> 00:18:15.615
because it depreciates like

00:18:15.654 --> 00:18:17.055
it's worse less over time

00:18:17.496 --> 00:18:19.676
or amortization over a

00:18:19.737 --> 00:18:20.517
period of time they're

00:18:20.537 --> 00:18:21.397
really referring to the

00:18:21.438 --> 00:18:23.239
same thing they're non-cash deductions

00:18:24.252 --> 00:18:26.414
So let's say you're

00:18:26.714 --> 00:18:28.135
deducting your goodwill

00:18:28.195 --> 00:18:29.057
over fifteen years.

00:18:29.076 --> 00:18:30.057
You get to year ten,

00:18:30.698 --> 00:18:31.298
so you still have the

00:18:31.358 --> 00:18:32.358
practice at that time,

00:18:32.900 --> 00:18:33.680
and you still have your

00:18:33.800 --> 00:18:37.063
one-fifteenth tax deduction

00:18:37.103 --> 00:18:37.522
on the goodwill.

00:18:37.542 --> 00:18:38.723
That didn't cost you any money.

00:18:39.244 --> 00:18:39.664
No.

00:18:39.704 --> 00:18:41.346
You spent that cash ten years ago.

00:18:42.047 --> 00:18:44.628
But is amortization goodwill

00:18:45.690 --> 00:18:47.611
and depreciation hard assets?

00:18:49.231 --> 00:18:50.913
Yeah, that's a good way to think about it.

00:18:51.795 --> 00:18:52.575
But it's the same thing.

00:18:52.976 --> 00:18:54.135
It's a deduction.

00:18:54.496 --> 00:18:56.396
They're both deductions.

00:18:56.416 --> 00:18:56.978
That's perfect.

00:18:57.077 --> 00:18:57.317
Okay.

00:18:57.798 --> 00:18:58.077
All right.

00:18:58.137 --> 00:18:59.878
So I wasn't really planning on going there,

00:18:59.919 --> 00:19:01.559
but since we had an account on the phone,

00:19:01.579 --> 00:19:03.101
you might as well go there, right?

00:19:05.142 --> 00:19:05.402
Okay.

00:19:05.442 --> 00:19:07.482
So back to the buyer's perspective.

00:19:09.614 --> 00:19:11.355
So essentially now we've got

00:19:11.394 --> 00:19:14.176
our asset groups, Goodwill, hard assets.

00:19:14.817 --> 00:19:16.057
We've got the schedule now

00:19:16.097 --> 00:19:18.359
that you've laid out seven or five years,

00:19:18.420 --> 00:19:19.861
seven years, fifteen years,

00:19:19.881 --> 00:19:20.780
depending on what the

00:19:20.820 --> 00:19:21.842
accountant wants to do.

00:19:21.862 --> 00:19:23.682
And that's your job for them.

00:19:24.284 --> 00:19:25.624
Let's talk about like.

00:19:27.265 --> 00:19:28.806
I mean, what's the bridge there,

00:19:29.047 --> 00:19:29.987
any other things that

00:19:30.007 --> 00:19:31.327
you're thinking about as

00:19:31.367 --> 00:19:33.068
far as like the buyer goes and what they.

00:19:33.088 --> 00:19:34.750
So this is what I think

00:19:34.769 --> 00:19:35.570
about for the buyer,

00:19:35.730 --> 00:19:37.152
and I think to really understand

00:19:38.191 --> 00:19:39.372
like where to go for the buyer,

00:19:39.452 --> 00:19:40.554
you do have to have some

00:19:40.594 --> 00:19:41.355
knowledge of where the

00:19:41.394 --> 00:19:43.136
seller is coming from.

00:19:44.018 --> 00:19:45.500
And so I'll just touch

00:19:45.559 --> 00:19:46.621
briefly on the seller's

00:19:46.661 --> 00:19:48.002
perspective because that's

00:19:48.042 --> 00:19:50.566
going to inform my advice to the buyer.

00:19:51.886 --> 00:19:52.867
So for the seller,

00:19:53.930 --> 00:19:55.731
when they go to sell a practice,

00:19:56.712 --> 00:19:58.555
that's a significant taxable event.

00:19:59.934 --> 00:20:01.175
And the first question every

00:20:01.215 --> 00:20:02.057
seller is going to have is

00:20:02.116 --> 00:20:04.359
how do I minimize the tax bill?

00:20:04.779 --> 00:20:06.122
And the answer is there's

00:20:06.142 --> 00:20:08.503
really not much you can do

00:20:08.523 --> 00:20:10.605
because they owe gain,

00:20:10.987 --> 00:20:13.430
they owe income tax on the gain realized.

00:20:14.490 --> 00:20:15.932
And the gain is the

00:20:15.991 --> 00:20:17.233
difference between what the

00:20:17.273 --> 00:20:18.214
buyer's paying them

00:20:19.425 --> 00:20:21.007
and what's called their tax basis.

00:20:21.346 --> 00:20:22.667
And their tax basis is what

00:20:22.688 --> 00:20:23.867
they originally paid less

00:20:23.887 --> 00:20:25.048
what they took in depreciation.

00:20:25.449 --> 00:20:26.130
Well, let's not get crazy.

00:20:26.150 --> 00:20:27.609
We're getting crazy.

00:20:27.730 --> 00:20:28.550
Simple example.

00:20:28.770 --> 00:20:29.631
Simple example.

00:20:30.231 --> 00:20:32.073
Let's say somebody buys a CEREC machine,

00:20:32.873 --> 00:20:33.333
okay, a hundred,

00:20:33.393 --> 00:20:35.954
a hundred and fifty thousand.

00:20:35.974 --> 00:20:37.895
And let's say they choose to

00:20:38.175 --> 00:20:39.777
depreciate the whole thing right away,

00:20:39.936 --> 00:20:40.217
right?

00:20:40.797 --> 00:20:42.258
I'm taking section one seventy nine.

00:20:42.278 --> 00:20:43.098
I'm writing that whole thing

00:20:43.159 --> 00:20:43.659
off this year.

00:20:44.798 --> 00:20:46.218
So if they buy it for one

00:20:46.258 --> 00:20:47.479
hundred fifty K and they

00:20:47.499 --> 00:20:48.398
take one hundred and fifty

00:20:48.439 --> 00:20:49.659
thousand in depreciation,

00:20:49.699 --> 00:20:50.680
their tax basis is zero.

00:20:50.700 --> 00:20:53.019
Right.

00:20:53.119 --> 00:20:54.240
If they bought bought it for

00:20:54.260 --> 00:20:54.941
one hundred fifty and

00:20:54.980 --> 00:20:56.480
accelerated over five years

00:20:56.520 --> 00:20:57.480
and that's going to be over

00:20:57.540 --> 00:20:58.902
time and maybe by year two,

00:20:58.942 --> 00:20:59.721
it's I'm just pulling

00:20:59.741 --> 00:21:00.382
numbers out of the area,

00:21:00.402 --> 00:21:01.061
but it's down to like one

00:21:01.082 --> 00:21:01.663
hundred thousand.

00:21:02.682 --> 00:21:03.742
So if their tax basis,

00:21:03.803 --> 00:21:05.002
if they depreciated fifty,

00:21:05.042 --> 00:21:06.804
their tax basis is now one hundred.

00:21:06.864 --> 00:21:07.003
So.

00:21:08.045 --> 00:21:08.846
That's the math.

00:21:09.086 --> 00:21:09.306
Right.

00:21:09.385 --> 00:21:10.666
And so whatever you get paid.

00:21:10.727 --> 00:21:11.667
So back to my example,

00:21:11.688 --> 00:21:12.568
they bought the CEREC.

00:21:13.249 --> 00:21:15.109
One hundred fifty K. Let's

00:21:15.130 --> 00:21:15.691
say they kept it.

00:21:16.010 --> 00:21:17.291
They deducted the whole thing right away.

00:21:17.332 --> 00:21:18.333
Tax base is zero.

00:21:18.653 --> 00:21:19.874
Two years and they say, you know what?

00:21:19.894 --> 00:21:20.574
This isn't for me.

00:21:20.653 --> 00:21:21.555
I'm going to sell it used.

00:21:22.756 --> 00:21:23.916
And so they sell it used for

00:21:24.076 --> 00:21:24.656
eighty thousand.

00:21:26.338 --> 00:21:26.538
Well,

00:21:26.659 --> 00:21:28.619
if their tax basis is zero and they

00:21:28.660 --> 00:21:29.701
sell it for eighty thousand,

00:21:29.721 --> 00:21:30.602
they just pick up eighty

00:21:30.622 --> 00:21:32.423
thousand in ordinary income.

00:21:32.522 --> 00:21:33.943
It's called depreciation recapture.

00:21:33.963 --> 00:21:35.085
They got to pay income tax on it.

00:21:35.942 --> 00:21:37.202
So the same thing applies in

00:21:37.222 --> 00:21:38.284
the aggregate when you sell

00:21:38.364 --> 00:21:39.945
a dental practice, right?

00:21:40.026 --> 00:21:40.645
And you look at that

00:21:40.665 --> 00:21:42.327
allocation and let's keep it real simple.

00:21:42.367 --> 00:21:42.587
Michael,

00:21:42.607 --> 00:21:43.949
we've got the million dollar practice.

00:21:43.969 --> 00:21:44.910
We got two hundred K to

00:21:44.950 --> 00:21:45.891
equipment and eight hundred

00:21:45.911 --> 00:21:46.530
K to goodwill.

00:21:47.853 --> 00:21:49.233
If the tax basis on their

00:21:49.273 --> 00:21:50.914
equipment is fifty thousand.

00:21:52.416 --> 00:21:53.538
And the purchase price has

00:21:53.617 --> 00:21:55.239
two hundred allocated to equipment,

00:21:55.278 --> 00:21:59.242
they just picked up one hundred and.

00:21:59.262 --> 00:22:00.983
Fifty K of what they have to

00:22:01.023 --> 00:22:01.805
pay income tax on.

00:22:02.480 --> 00:22:03.441
You can't change it.

00:22:04.041 --> 00:22:05.642
There's no there's no hiding from it.

00:22:05.942 --> 00:22:07.002
There's nothing that can be done.

00:22:07.663 --> 00:22:08.583
So for the seller,

00:22:10.023 --> 00:22:12.144
where we get into competing objectives,

00:22:13.125 --> 00:22:14.464
the same thing applies on the goodwill.

00:22:14.925 --> 00:22:15.905
If it's a startup,

00:22:16.546 --> 00:22:18.067
there is no basis in goodwill.

00:22:18.767 --> 00:22:20.268
They owe gain on eight

00:22:20.288 --> 00:22:22.587
hundred thousand in that example.

00:22:23.249 --> 00:22:25.068
But the difference is the

00:22:25.128 --> 00:22:27.069
gain on goodwill is taxed

00:22:27.130 --> 00:22:29.351
at favorable capital gains tax rates.

00:22:30.874 --> 00:22:31.875
So if they're in the thirty

00:22:31.914 --> 00:22:33.275
seven percent tax bracket,

00:22:33.315 --> 00:22:34.536
the gain on equipment is

00:22:34.576 --> 00:22:36.217
taxed at thirty seven percent.

00:22:36.237 --> 00:22:36.317
Yeah.

00:22:37.698 --> 00:22:38.778
The gain on the goodwill is

00:22:38.818 --> 00:22:39.898
taxed at twenty percent.

00:22:41.619 --> 00:22:41.980
So.

00:22:43.240 --> 00:22:45.442
The only way the seller can

00:22:45.583 --> 00:22:47.564
influence and lower their

00:22:47.644 --> 00:22:50.265
tax bill is to push for a

00:22:50.345 --> 00:22:52.066
lower allocation to equipment,

00:22:52.987 --> 00:22:53.886
because that means a

00:22:54.047 --> 00:22:56.709
smaller percentage of their taxable gain

00:22:57.798 --> 00:22:59.799
is taxed at that high

00:23:00.059 --> 00:23:02.220
marginal tax rate so it

00:23:02.279 --> 00:23:04.080
doesn't dramatically alter

00:23:04.121 --> 00:23:05.480
the tax bill but it does

00:23:05.540 --> 00:23:07.922
influence it so that's why

00:23:08.221 --> 00:23:09.642
I you know our clients have

00:23:09.662 --> 00:23:12.742
heard me say the allocation

00:23:12.803 --> 00:23:13.903
is a bigger deal for the

00:23:13.962 --> 00:23:15.022
seller than it is for the

00:23:15.063 --> 00:23:17.503
buyer yeah and and I you

00:23:17.544 --> 00:23:18.864
know I think the buyers at

00:23:18.884 --> 00:23:20.484
the at the time like

00:23:22.263 --> 00:23:23.244
I think at the time that the

00:23:23.285 --> 00:23:24.585
buyers get to the place

00:23:24.625 --> 00:23:25.945
where you pick them up,

00:23:26.747 --> 00:23:28.268
looking at allocation

00:23:28.307 --> 00:23:29.748
schedule and they're

00:23:29.788 --> 00:23:31.308
getting ready to close and

00:23:31.769 --> 00:23:32.650
you're talking to them

00:23:32.690 --> 00:23:33.530
about accounting and

00:23:33.570 --> 00:23:35.231
bookkeeping services and

00:23:35.832 --> 00:23:37.292
they're just exhausted, right?

00:23:37.313 --> 00:23:38.413
They're exhausted.

00:23:38.432 --> 00:23:40.394
They just got their butts kicked.

00:23:40.414 --> 00:23:41.634
That's how they feel, right?

00:23:43.155 --> 00:23:44.438
They tried to negotiate the

00:23:44.478 --> 00:23:45.719
price they may have lost.

00:23:46.400 --> 00:23:50.202
We started chipping away at the ARs.

00:23:50.242 --> 00:23:51.765
We won a little bit there.

00:23:51.825 --> 00:23:52.766
Then they started getting

00:23:52.846 --> 00:23:54.688
into the work in progress

00:23:54.748 --> 00:23:56.388
and all the little things.

00:23:56.409 --> 00:23:57.549
And then the lease,

00:23:57.589 --> 00:23:58.510
the lease starts kicking

00:23:58.530 --> 00:23:59.352
them in the shorts.

00:23:59.392 --> 00:24:01.013
And by the time they get to you,

00:24:01.034 --> 00:24:01.554
they're like,

00:24:02.234 --> 00:24:03.695
I just want to win somewhere.

00:24:03.715 --> 00:24:04.156
Right.

00:24:06.816 --> 00:24:08.758
And then there you are like, well,

00:24:08.778 --> 00:24:09.157
you know,

00:24:09.939 --> 00:24:12.602
you get a little benefit to

00:24:12.701 --> 00:24:15.663
juice the hard assets and

00:24:15.964 --> 00:24:17.486
then they lock on to that.

00:24:17.766 --> 00:24:20.608
The truth is, this is a big,

00:24:20.648 --> 00:24:22.490
big deal for sellers and a

00:24:22.530 --> 00:24:25.093
very little deal for the buyers, right?

00:24:25.733 --> 00:24:26.114
It is.

00:24:26.413 --> 00:24:28.856
And so to kind of circle this back around,

00:24:29.758 --> 00:24:32.242
For the buyer, just keeping that in mind,

00:24:32.282 --> 00:24:34.467
the more you push them on

00:24:34.748 --> 00:24:36.131
bumping up the fixed assets

00:24:36.310 --> 00:24:38.174
so you can have your bigger deduction now,

00:24:38.576 --> 00:24:39.557
you're driving up the

00:24:39.617 --> 00:24:41.080
dollars on their tax bill.

00:24:41.872 --> 00:24:44.712
You're literally on the seller's tax bill.

00:24:45.053 --> 00:24:46.513
And it's going to be a big tax bill.

00:24:46.534 --> 00:24:48.654
It's sometimes shocking for the seller.

00:24:49.234 --> 00:24:50.855
You're driving up the actual dollars.

00:24:51.856 --> 00:24:53.416
So you just have to be mindful of that.

00:24:53.477 --> 00:24:55.817
And we're not in the transition space,

00:24:55.877 --> 00:24:56.199
Michael.

00:24:57.199 --> 00:24:58.859
You've already counseled

00:24:58.900 --> 00:25:00.180
them through this process.

00:25:00.220 --> 00:25:01.201
And by the time they're

00:25:01.280 --> 00:25:03.021
asking me about allocation,

00:25:04.762 --> 00:25:05.942
I will tell them, look,

00:25:06.103 --> 00:25:07.723
it comes down to a meeting of the minds.

00:25:08.626 --> 00:25:10.048
let's say that the the

00:25:10.728 --> 00:25:12.128
seller you they've arrived

00:25:12.148 --> 00:25:14.150
at like fifteen percent to

00:25:14.190 --> 00:25:17.111
equipment and I I'll I'll

00:25:17.211 --> 00:25:18.912
ask the the dent to say I'm

00:25:19.132 --> 00:25:20.092
you know they're looking at

00:25:20.132 --> 00:25:21.212
hiring us as their

00:25:21.232 --> 00:25:22.212
accountant after they're in

00:25:22.252 --> 00:25:23.413
ownership and I'll say well

00:25:24.114 --> 00:25:25.013
how do you feel about that

00:25:25.074 --> 00:25:26.035
practice you know do you

00:25:26.055 --> 00:25:26.815
see yourself there do you

00:25:26.875 --> 00:25:28.056
like it does it check every

00:25:28.096 --> 00:25:30.096
other box does it feel good

00:25:30.777 --> 00:25:33.198
if so like you may not want

00:25:33.218 --> 00:25:35.019
to jeopardize the deal over allocation

00:25:35.674 --> 00:25:37.096
Because you still get to

00:25:37.135 --> 00:25:38.316
deduct the full purchase

00:25:38.355 --> 00:25:39.576
price no matter what.

00:25:40.096 --> 00:25:41.517
And the other thing, Michael, is this.

00:25:41.576 --> 00:25:43.998
Let's say they're buying a

00:25:44.057 --> 00:25:46.538
practice and this buyer has

00:25:46.659 --> 00:25:48.078
maybe a more expansive

00:25:48.098 --> 00:25:49.279
skill set than the seller.

00:25:49.740 --> 00:25:50.779
And so some of the stuff

00:25:50.799 --> 00:25:51.720
that was being referred out,

00:25:51.740 --> 00:25:52.701
they're going to start doing.

00:25:53.020 --> 00:25:54.641
That's production they're not paying for.

00:25:55.162 --> 00:25:56.342
They're going to make more money.

00:25:57.791 --> 00:25:58.492
And they're going to make

00:25:58.653 --> 00:25:59.874
way more money than they

00:25:59.894 --> 00:26:00.954
made as an associate.

00:26:02.296 --> 00:26:04.518
And so if even though maybe

00:26:04.557 --> 00:26:05.778
a higher percentage of that

00:26:05.878 --> 00:26:08.020
goodwill gets pushed off

00:26:08.040 --> 00:26:09.261
for the next fifteen years,

00:26:09.482 --> 00:26:10.804
when you're making more money,

00:26:12.285 --> 00:26:13.806
those tax deductions become

00:26:13.865 --> 00:26:15.468
worth more when you're in

00:26:15.508 --> 00:26:16.449
higher tax bracket.

00:26:16.628 --> 00:26:18.830
So it's not all bad having

00:26:18.931 --> 00:26:20.332
some of that hanging out in the future.

00:26:20.773 --> 00:26:22.454
I didn't even think about that.

00:26:22.535 --> 00:26:25.096
So if the plan is for you to

00:26:25.196 --> 00:26:27.298
make more money in the future,

00:26:28.078 --> 00:26:30.280
it's great to defer some of

00:26:30.320 --> 00:26:34.343
those tax write-offs to the future.

00:26:36.084 --> 00:26:40.166
And I will say this, as an ex-banker,

00:26:40.768 --> 00:26:42.148
you usually pay your loan

00:26:42.328 --> 00:26:45.431
off in eight to ten years on average,

00:26:45.451 --> 00:26:45.631
right?

00:26:47.027 --> 00:26:48.208
Those were just statistics

00:26:48.228 --> 00:26:49.248
when I was a lender.

00:26:49.347 --> 00:26:52.069
So in eight to ten years,

00:26:52.130 --> 00:26:53.671
when you don't have that

00:26:53.750 --> 00:26:56.132
loan payment and you don't

00:26:56.172 --> 00:26:57.212
have that interest

00:26:57.232 --> 00:26:59.394
write-off anymore that we

00:26:59.453 --> 00:27:02.174
all love to take advantage of,

00:27:02.194 --> 00:27:03.796
that allocation schedule

00:27:03.816 --> 00:27:05.017
could be the difference maker.

00:27:05.116 --> 00:27:06.198
So I didn't even think about it.

00:27:06.577 --> 00:27:07.817
Yeah, it doesn't, you know,

00:27:07.897 --> 00:27:09.578
people get very excited

00:27:09.618 --> 00:27:11.000
about Section one seventy nine,

00:27:11.140 --> 00:27:12.701
which again, just to recap,

00:27:12.740 --> 00:27:14.301
all Section one seventy nine is, is

00:27:14.971 --> 00:27:15.132
Hey,

00:27:15.152 --> 00:27:16.593
the rules are if you buy medical

00:27:16.633 --> 00:27:16.973
equipment,

00:27:17.013 --> 00:27:18.213
that's depreciated over five

00:27:18.233 --> 00:27:21.096
years or section one, seven, nine.

00:27:21.116 --> 00:27:21.537
Forget that.

00:27:21.576 --> 00:27:23.198
Let's just deduct it all right now.

00:27:23.979 --> 00:27:25.099
And so if you're making, say,

00:27:25.119 --> 00:27:26.099
your practice profits,

00:27:26.160 --> 00:27:27.681
four hundred grand and you

00:27:27.721 --> 00:27:29.643
buy that CEREC and that's

00:27:29.663 --> 00:27:31.324
one hundred fifty thousand

00:27:31.364 --> 00:27:32.365
dollar deduction that like

00:27:32.404 --> 00:27:33.546
that's that feels pretty good.

00:27:33.685 --> 00:27:35.366
Like I'm having that party like right now.

00:27:35.606 --> 00:27:36.347
And you're going to have

00:27:36.367 --> 00:27:37.689
very favorable tax rules that year.

00:27:37.729 --> 00:27:39.829
But but let's just say, OK, we do that.

00:27:40.750 --> 00:27:42.211
But you're, you know,

00:27:42.251 --> 00:27:43.173
two or three years from now.

00:27:44.113 --> 00:27:45.815
Maybe we're not making four hundred.

00:27:45.935 --> 00:27:47.698
Maybe we're making seven hundred.

00:27:48.740 --> 00:27:49.401
You're going to be at a

00:27:49.461 --> 00:27:50.741
higher effective tax rate.

00:27:50.923 --> 00:27:51.963
And if you still had some of

00:27:51.983 --> 00:27:53.526
that CEREC deduction hanging out,

00:27:54.126 --> 00:27:55.990
that tax benefit is

00:27:56.089 --> 00:27:58.113
actually worth more money.

00:27:58.153 --> 00:27:59.674
So it's not always...

00:28:00.596 --> 00:28:02.037
It's not always a bad thing to,

00:28:02.178 --> 00:28:03.057
to push those off.

00:28:03.077 --> 00:28:05.059
I love, I love what you said there.

00:28:05.119 --> 00:28:06.721
So everybody always talks

00:28:06.740 --> 00:28:08.262
about section one, seven, nine,

00:28:08.282 --> 00:28:09.683
when you go to the trade

00:28:09.703 --> 00:28:11.705
shows and like right now,

00:28:11.786 --> 00:28:14.228
the Invisalign is, or a line,

00:28:14.307 --> 00:28:15.868
I should say a line tech is

00:28:16.288 --> 00:28:16.950
coming out with this

00:28:16.990 --> 00:28:18.250
Illumina and they've got

00:28:18.290 --> 00:28:20.093
some sweet deal and everybody's,

00:28:20.573 --> 00:28:21.614
this is the rage.

00:28:21.653 --> 00:28:23.615
And like a hot minute ago, like,

00:28:24.135 --> 00:28:25.557
It was something else was the rage.

00:28:25.577 --> 00:28:27.259
There's always going to be a rage.

00:28:27.440 --> 00:28:29.162
And then the salespeople

00:28:29.362 --> 00:28:33.586
always love to talk about this.

00:28:33.787 --> 00:28:34.387
Section one.

00:28:35.429 --> 00:28:37.070
And you're right.

00:28:37.151 --> 00:28:38.633
Everybody gets super excited about it.

00:28:38.673 --> 00:28:42.317
So what's the longest you can stretch?

00:28:43.077 --> 00:28:44.478
Because everybody talks about how,

00:28:44.778 --> 00:28:45.317
like you said,

00:28:45.337 --> 00:28:46.499
let's have a party and not

00:28:46.538 --> 00:28:47.798
pay any taxes this year.

00:28:48.358 --> 00:28:50.720
By putting it all in one year next year,

00:28:51.500 --> 00:28:54.039
I tend to think let's bank it over time.

00:28:54.099 --> 00:28:55.680
So how long can you stretch

00:28:55.799 --> 00:28:56.740
one seventy nine out?

00:28:57.141 --> 00:28:58.461
It depends on what you're buying.

00:28:58.580 --> 00:28:59.941
But again, medical equipment,

00:28:59.961 --> 00:29:00.560
it's five years.

00:29:01.082 --> 00:29:01.942
There's no discretion.

00:29:02.281 --> 00:29:02.961
It's hard rules.

00:29:03.162 --> 00:29:04.521
It's like it's like the goodwill.

00:29:04.582 --> 00:29:05.362
It's fifteen.

00:29:05.602 --> 00:29:07.303
There's no there's no option A,

00:29:07.363 --> 00:29:08.623
B and C. It is what it is.

00:29:09.113 --> 00:29:10.153
But you could do all of it

00:29:10.193 --> 00:29:11.375
in one year or you could

00:29:11.395 --> 00:29:12.317
divide it by five years.

00:29:12.938 --> 00:29:14.358
In the year of acquisition,

00:29:14.940 --> 00:29:15.621
you have a choice.

00:29:15.661 --> 00:29:16.280
You could say,

00:29:16.761 --> 00:29:19.605
let's take half now and then

00:29:19.664 --> 00:29:20.286
deduct the other.

00:29:20.306 --> 00:29:22.028
But whatever's left over is five years.

00:29:23.829 --> 00:29:25.813
You cannot say, hey,

00:29:25.972 --> 00:29:26.973
let's just start with five

00:29:26.993 --> 00:29:28.035
years and we'll get to year two.

00:29:28.095 --> 00:29:29.036
Then let's take the whole thing.

00:29:29.056 --> 00:29:29.176
No.

00:29:29.257 --> 00:29:29.356
No.

00:29:30.088 --> 00:29:31.269
The year of acquisition,

00:29:31.309 --> 00:29:32.571
you can choose to take all

00:29:32.612 --> 00:29:33.833
or a portion of section one

00:29:33.853 --> 00:29:34.834
seventy nine and then

00:29:34.874 --> 00:29:35.976
whatever is left over,

00:29:36.135 --> 00:29:36.997
if there's anything left

00:29:37.076 --> 00:29:38.759
over is five is five years

00:29:39.298 --> 00:29:41.582
and it can't change after that.

00:29:41.942 --> 00:29:44.285
OK, so so so for simple math,

00:29:44.805 --> 00:29:46.748
I've got two hundred thousand dollars of

00:29:47.798 --> 00:29:48.598
Hard assets.

00:29:48.719 --> 00:29:51.040
The allocation schedule,

00:29:51.060 --> 00:29:52.661
it was a million dollar practice.

00:29:54.021 --> 00:29:55.403
Let's say it's eighty twenty.

00:29:56.363 --> 00:29:58.104
Eighty percent was goodwill.

00:29:58.163 --> 00:29:59.744
Twenty percent was hard assets.

00:30:00.305 --> 00:30:01.645
So I've got two hundred grand.

00:30:01.685 --> 00:30:02.885
If you're following my math,

00:30:03.946 --> 00:30:06.028
the very first year of the acquisition,

00:30:06.067 --> 00:30:07.548
I didn't know that half of

00:30:07.587 --> 00:30:08.608
the two hundred could be

00:30:08.628 --> 00:30:10.230
written off the first year

00:30:10.269 --> 00:30:12.891
to be a hundred grand.

00:30:12.990 --> 00:30:14.132
And then you would divide

00:30:14.192 --> 00:30:17.133
the other hundred grand left over five.

00:30:18.314 --> 00:30:19.515
It has to be over five for

00:30:19.555 --> 00:30:21.436
medical equipment.

00:30:21.477 --> 00:30:22.278
So, OK,

00:30:22.298 --> 00:30:23.719
so twenty grand a year and then

00:30:23.740 --> 00:30:25.661
that would be the schedule, essentially.

00:30:26.582 --> 00:30:28.564
Yes, it's accelerated.

00:30:28.584 --> 00:30:29.424
So it's not linear.

00:30:29.464 --> 00:30:31.626
It's accelerated to geek out.

00:30:31.646 --> 00:30:32.528
It's double declining

00:30:32.548 --> 00:30:35.971
balance depreciation.

00:30:36.672 --> 00:30:38.634
So it's not linear on the equipment.

00:30:38.693 --> 00:30:38.795
Now,

00:30:38.835 --> 00:30:40.455
the goodwill is straight line over

00:30:40.516 --> 00:30:41.136
fifteen years.

00:30:41.403 --> 00:30:44.144
okay okay but in theory like

00:30:44.305 --> 00:30:45.726
give or take that's kind of

00:30:45.766 --> 00:30:47.086
how people should think in

00:30:47.146 --> 00:30:48.907
general yeah okay but

00:30:48.948 --> 00:30:51.009
here's to to um go back to

00:30:51.028 --> 00:30:53.390
what you said you know okay

00:30:53.430 --> 00:30:54.851
we're you know it's your

00:30:54.971 --> 00:30:56.632
end the equipment's on sale

00:30:57.413 --> 00:30:58.313
and if you hear anything

00:30:58.353 --> 00:30:59.013
like well you don't want to

00:30:59.054 --> 00:31:00.394
miss out on section one

00:31:00.454 --> 00:31:02.556
seven like you never just

00:31:02.715 --> 00:31:04.037
for for all practice owners

00:31:04.096 --> 00:31:06.377
out there you never miss

00:31:06.478 --> 00:31:08.799
out on anything it's all just timing

00:31:09.660 --> 00:31:11.300
You know, if you don't get it this year,

00:31:11.441 --> 00:31:12.340
you get it next year.

00:31:12.801 --> 00:31:13.842
You never miss out.

00:31:14.762 --> 00:31:15.123
And again,

00:31:15.182 --> 00:31:15.962
if you're going to make more

00:31:16.002 --> 00:31:16.782
money next year,

00:31:18.003 --> 00:31:20.065
the tax benefit is more dollars.

00:31:20.144 --> 00:31:21.326
It's actually worth more.

00:31:21.385 --> 00:31:24.846
So I don't get wound up about that.

00:31:24.886 --> 00:31:25.488
The other thing,

00:31:25.607 --> 00:31:27.528
just a very key concept of

00:31:27.548 --> 00:31:29.509
section one seventy nine is

00:31:29.588 --> 00:31:31.009
just ordering the equipment

00:31:31.130 --> 00:31:32.211
doesn't doesn't count.

00:31:32.330 --> 00:31:34.692
It has to be placed in service,

00:31:34.731 --> 00:31:35.852
which means delivered and

00:31:35.872 --> 00:31:36.752
in a ready condition.

00:31:37.913 --> 00:31:39.114
So it has to be installed.

00:31:39.153 --> 00:31:40.394
It doesn't mean you have to have used it,

00:31:40.414 --> 00:31:41.515
but it has to be installed

00:31:41.634 --> 00:31:43.335
to be deductible in that tax year.

00:31:43.976 --> 00:31:44.776
And the other thing that

00:31:45.236 --> 00:31:46.195
people can sometimes get

00:31:46.236 --> 00:31:47.675
confused about is, okay,

00:31:47.836 --> 00:31:48.817
what if I get a loan?

00:31:48.856 --> 00:31:50.396
Does that spread the tax deduction out?

00:31:50.416 --> 00:31:51.416
Or what if I pay cash?

00:31:52.178 --> 00:31:53.998
Your method of payment is irrelevant.

00:31:54.637 --> 00:31:56.659
If you buy a piece of

00:31:56.699 --> 00:31:57.719
equipment and it's placed

00:31:57.759 --> 00:31:58.999
in service that tax year,

00:32:00.219 --> 00:32:01.559
that's when you can depreciate it,

00:32:01.619 --> 00:32:02.460
whether you do the whole

00:32:02.480 --> 00:32:03.400
thing or spread it out.

00:32:04.000 --> 00:32:05.540
Whether you got a loan or paid cash,

00:32:05.601 --> 00:32:06.540
it is irrelevant.

00:32:08.375 --> 00:32:12.557
that uh that's really good

00:32:12.597 --> 00:32:13.939
like we this is exactly

00:32:13.959 --> 00:32:15.619
what I wanted out of this

00:32:15.740 --> 00:32:18.361
episode um just as kind of

00:32:19.102 --> 00:32:22.163
a fun little bonus and

00:32:22.202 --> 00:32:23.463
since we're since we're

00:32:23.523 --> 00:32:24.704
into it and we've kind of

00:32:24.744 --> 00:32:25.724
funneled it all the way

00:32:25.744 --> 00:32:28.046
through hard assets yeah

00:32:28.086 --> 00:32:30.647
you mentioned startup yeah um

00:32:31.916 --> 00:32:33.196
Because I do have a lot of

00:32:33.237 --> 00:32:34.377
startup listeners and

00:32:34.417 --> 00:32:36.117
they're listening to this as well,

00:32:36.657 --> 00:32:37.439
potentially.

00:32:38.159 --> 00:32:39.919
How does cost segregation,

00:32:39.939 --> 00:32:41.039
because we mentioned in the

00:32:41.059 --> 00:32:41.660
beginning episode,

00:32:41.680 --> 00:32:44.760
how does that play into this strategy,

00:32:45.221 --> 00:32:46.060
if at all for an

00:32:46.161 --> 00:32:47.560
acquisition or a startup?

00:32:47.980 --> 00:32:50.501
So cost seg is for when you

00:32:50.521 --> 00:32:51.342
start talking about real

00:32:51.382 --> 00:32:52.823
estate and let's think commercial,

00:32:53.563 --> 00:32:55.324
non-residential commercial real estate.

00:32:55.983 --> 00:32:57.824
So you buy your practice,

00:32:57.923 --> 00:32:58.824
build your location.

00:33:01.148 --> 00:33:03.869
When you purchase

00:33:04.130 --> 00:33:06.070
non-residential commercial real estate,

00:33:06.471 --> 00:33:07.612
that gets depreciated

00:33:07.672 --> 00:33:11.034
straight line over thirty nine years.

00:33:11.054 --> 00:33:11.794
That's a long time.

00:33:12.348 --> 00:33:14.490
Thirty nine years is thirty nine years.

00:33:14.770 --> 00:33:16.551
So that's a very small tax deduction.

00:33:16.652 --> 00:33:18.834
So one question I get often, Michael,

00:33:18.854 --> 00:33:21.055
as well, you know, from a tax perspective,

00:33:21.075 --> 00:33:23.116
should I buy or should I lease?

00:33:23.176 --> 00:33:24.257
And I tell people, look,

00:33:24.497 --> 00:33:25.837
it's like the tax should

00:33:25.877 --> 00:33:27.460
not move the needle on that decision.

00:33:28.000 --> 00:33:30.221
You only want to buy real

00:33:30.261 --> 00:33:31.903
estate if you want to be in

00:33:31.923 --> 00:33:33.144
the commercial real estate

00:33:33.183 --> 00:33:35.805
space and you want to own real estate,

00:33:35.924 --> 00:33:37.066
invest in what should be an

00:33:37.086 --> 00:33:38.027
appreciating asset,

00:33:38.126 --> 00:33:39.448
realizing there is risk.

00:33:40.401 --> 00:33:41.521
know a good buddy of mine

00:33:41.541 --> 00:33:42.702
bought he bought his real

00:33:42.742 --> 00:33:43.703
estate it was a good move

00:33:43.743 --> 00:33:46.506
for him it was a a bank

00:33:46.546 --> 00:33:47.826
building he converted into

00:33:47.846 --> 00:33:48.807
a dental practice it's

00:33:48.867 --> 00:33:50.890
beautiful michael six

00:33:50.950 --> 00:33:52.250
months into it the city

00:33:52.270 --> 00:33:53.290
came and made him repave

00:33:53.392 --> 00:33:55.212
the parking lot that was

00:33:55.232 --> 00:33:56.253
two hundred fifty thousand

00:33:56.294 --> 00:33:58.596
he's like what I wasn't

00:33:58.655 --> 00:34:00.557
planning on that so that I

00:34:00.576 --> 00:34:01.238
mean those are the things

00:34:01.258 --> 00:34:01.857
you gotta think about when

00:34:01.877 --> 00:34:02.699
you own the real when you

00:34:02.778 --> 00:34:03.599
own it it's your problem

00:34:04.429 --> 00:34:05.529
So there's risks involved.

00:34:05.549 --> 00:34:06.631
So you only want to own

00:34:06.651 --> 00:34:07.490
commercial real estate if

00:34:07.510 --> 00:34:08.351
you want to be in the

00:34:08.371 --> 00:34:09.112
commercial real estate

00:34:09.152 --> 00:34:09.972
space and you want to

00:34:09.992 --> 00:34:11.114
invest in what should be an

00:34:11.134 --> 00:34:11.954
appreciating asset.

00:34:11.994 --> 00:34:12.894
That's why you own real estate.

00:34:13.255 --> 00:34:14.056
Don't do it for tax

00:34:14.076 --> 00:34:15.637
write-offs because your

00:34:15.717 --> 00:34:17.277
mortgage interest and your

00:34:17.378 --> 00:34:18.998
one thirty ninth depreciation,

00:34:19.059 --> 00:34:20.139
if you compare those to

00:34:20.159 --> 00:34:21.320
what your lease payment would be,

00:34:22.681 --> 00:34:24.503
and lease payments fully deductible,

00:34:25.443 --> 00:34:26.324
it's not a huge,

00:34:26.485 --> 00:34:27.965
it's not a big enough difference,

00:34:28.065 --> 00:34:28.985
in my opinion,

00:34:29.387 --> 00:34:30.867
to be a significant decision,

00:34:31.688 --> 00:34:32.728
factor in decision making.

00:34:33.750 --> 00:34:34.990
But let's say we go down that road.

00:34:35.010 --> 00:34:35.451
We say, you know,

00:34:35.510 --> 00:34:38.193
I really want to own my spot.

00:34:38.293 --> 00:34:40.134
And you purchase it,

00:34:40.153 --> 00:34:42.456
you either do a ground up, build it,

00:34:42.635 --> 00:34:45.757
or you substantially remodel it.

00:34:46.157 --> 00:34:48.539
So again, whatever the cost is,

00:34:49.436 --> 00:34:50.577
whatever dollars you spend

00:34:50.697 --> 00:34:52.478
on the improvements, not the land,

00:34:52.818 --> 00:34:53.757
but the improvements,

00:34:54.617 --> 00:34:56.498
you get to deduct the whole price.

00:34:56.538 --> 00:34:59.398
It's just a matter of time.

00:34:59.438 --> 00:35:00.739
You get to deduct a hundred percent.

00:35:00.958 --> 00:35:03.019
So what a cost segregation study is,

00:35:03.659 --> 00:35:05.320
is that's when engineers go in,

00:35:05.360 --> 00:35:06.320
it's a very specialized

00:35:06.360 --> 00:35:08.099
work and they break it down.

00:35:08.119 --> 00:35:09.081
They look at every,

00:35:09.601 --> 00:35:12.800
every dollar you spent and

00:35:12.840 --> 00:35:16.242
they look to substantiate and reclassify

00:35:18.023 --> 00:35:22.547
those expenditures to fix

00:35:22.608 --> 00:35:25.391
assets as opposed to real

00:35:25.431 --> 00:35:28.313
estate improvements to take

00:35:28.353 --> 00:35:29.655
it from a thirty nine year

00:35:29.675 --> 00:35:31.076
depreciation schedule to

00:35:31.115 --> 00:35:33.157
maybe down to a five or seven.

00:35:33.277 --> 00:35:33.938
Essentially,

00:35:33.998 --> 00:35:36.360
it's like slicing up the asset

00:35:38.182 --> 00:35:40.003
so that you could find

00:35:40.864 --> 00:35:42.523
things within the building

00:35:42.543 --> 00:35:44.664
that could be depreciated sooner.

00:35:44.784 --> 00:35:46.804
And a good example of that would be,

00:35:47.824 --> 00:35:48.865
I hear this one a lot,

00:35:48.965 --> 00:35:51.186
I bought a building and I

00:35:51.226 --> 00:35:55.827
bought cabinetry and dental cabinetry.

00:35:56.666 --> 00:35:57.847
And so let's get dental

00:35:57.887 --> 00:35:59.847
cabinetry accelerated,

00:35:59.947 --> 00:36:01.387
not on thirty nine years,

00:36:01.429 --> 00:36:04.228
but on five or seven years, right?

00:36:04.329 --> 00:36:05.228
Or five years, rather.

00:36:08.253 --> 00:36:10.375
So what a cost seg study does,

00:36:10.554 --> 00:36:13.056
it does not create new tax deductions.

00:36:13.376 --> 00:36:15.918
It just accelerates them so

00:36:15.938 --> 00:36:17.117
that you can have them now

00:36:17.197 --> 00:36:18.398
because you likely will not

00:36:18.498 --> 00:36:19.920
own that building for thirty nine years.

00:36:20.420 --> 00:36:21.300
Right.

00:36:21.380 --> 00:36:23.380
Now, here's the other thing, Michael.

00:36:23.760 --> 00:36:26.402
Let's say somebody doesn't

00:36:26.443 --> 00:36:28.684
do the cost seg and say, well,

00:36:28.704 --> 00:36:30.264
I just didn't think about it or just,

00:36:30.425 --> 00:36:30.605
you know,

00:36:30.625 --> 00:36:31.764
was on the to do list and just

00:36:31.804 --> 00:36:32.244
never did it.

00:36:33.806 --> 00:36:34.385
Not the end of the world.

00:36:34.405 --> 00:36:35.927
Let's say five years, five,

00:36:35.947 --> 00:36:37.467
seven years later, they go to sell.

00:36:38.038 --> 00:36:38.938
They sell the building.

00:36:40.139 --> 00:36:41.940
Well, whatever your cost is.

00:36:42.460 --> 00:36:42.601
Right.

00:36:42.621 --> 00:36:44.461
Let's say they paid eight

00:36:44.501 --> 00:36:46.364
hundred thousand for the building.

00:36:48.025 --> 00:36:48.625
And let's say, you know,

00:36:48.644 --> 00:36:50.085
they forgot to do the cost seg.

00:36:50.126 --> 00:36:50.686
And so they're just

00:36:50.726 --> 00:36:52.027
depreciating one thirty ninth.

00:36:52.168 --> 00:36:52.307
Right.

00:36:52.327 --> 00:36:53.128
And whatever time left,

00:36:53.148 --> 00:36:54.108
let's say they've

00:36:54.148 --> 00:36:55.690
depreciated two hundred thousand.

00:36:57.090 --> 00:36:58.052
So they paid eight hundred.

00:36:58.172 --> 00:36:59.452
They depreciated two hundred thousand.

00:36:59.472 --> 00:37:01.213
They have six hundred K tax basis.

00:37:02.311 --> 00:37:03.211
And then they turn and they

00:37:03.291 --> 00:37:04.913
sell it for nine hundred thousand,

00:37:05.152 --> 00:37:07.054
turn a nice, handsome hundred K profit.

00:37:07.713 --> 00:37:08.653
They will owe capital,

00:37:08.693 --> 00:37:09.855
long term capital gains.

00:37:11.215 --> 00:37:12.635
On the difference between

00:37:12.675 --> 00:37:13.695
nine hundred and six hundred.

00:37:14.295 --> 00:37:15.657
So the reason I give you

00:37:15.677 --> 00:37:16.536
that example is if they

00:37:16.577 --> 00:37:17.777
didn't take the cost seg,

00:37:18.498 --> 00:37:20.438
their their tax basis is higher.

00:37:20.858 --> 00:37:21.858
They're going to pay less

00:37:21.898 --> 00:37:23.219
capital gains when they

00:37:23.280 --> 00:37:24.039
sell the practice.

00:37:24.059 --> 00:37:24.760
Right.

00:37:24.780 --> 00:37:26.081
You don't lose anything.

00:37:26.161 --> 00:37:27.260
It's all just a matter of time.

00:37:27.956 --> 00:37:28.597
Interesting.

00:37:29.016 --> 00:37:30.798
The IRS gets what they want to get.

00:37:31.018 --> 00:37:32.000
They get paid.

00:37:32.039 --> 00:37:32.960
When and how.

00:37:33.300 --> 00:37:34.961
Right.

00:37:34.981 --> 00:37:35.483
That's cool.

00:37:35.503 --> 00:37:36.423
All right.

00:37:36.764 --> 00:37:36.983
Wow.

00:37:37.284 --> 00:37:38.726
Great episode, Morgan.

00:37:39.266 --> 00:37:40.827
We went almost forty minutes

00:37:40.887 --> 00:37:42.568
here on a lot of different things.

00:37:43.289 --> 00:37:43.949
At times,

00:37:43.989 --> 00:37:47.873
it probably got a little detailed

00:37:47.914 --> 00:37:48.594
and granular,

00:37:48.634 --> 00:37:50.556
but I think we did a great

00:37:50.596 --> 00:37:52.237
job of explaining

00:37:53.367 --> 00:37:55.668
really how you should

00:37:55.688 --> 00:37:57.210
approach this from a seller

00:37:57.250 --> 00:37:58.831
and buyer's perspective we

00:37:58.851 --> 00:38:00.972
looked at what it is how it

00:38:01.012 --> 00:38:02.913
works depreciation versus

00:38:03.072 --> 00:38:04.994
amortization we looked at

00:38:05.034 --> 00:38:08.016
one section or section is

00:38:08.036 --> 00:38:10.338
there any other tricks tips

00:38:10.378 --> 00:38:12.478
that you would have maybe

00:38:12.579 --> 00:38:15.800
post close uh for buyers or

00:38:15.880 --> 00:38:18.101
sellers to kind of end cap the episode

00:38:19.007 --> 00:38:20.548
know if we just if we just

00:38:20.588 --> 00:38:22.030
circle back to okay

00:38:22.150 --> 00:38:24.572
allocation you know what

00:38:24.612 --> 00:38:25.673
what what is that that

00:38:25.713 --> 00:38:27.574
meeting of the minds and so

00:38:27.755 --> 00:38:30.757
I I think you know a seller

00:38:31.838 --> 00:38:32.438
one of the one of the

00:38:32.458 --> 00:38:33.380
bigger challenges of the

00:38:33.420 --> 00:38:34.721
seller is just is breaking

00:38:34.740 --> 00:38:36.762
down the tax liability and

00:38:36.802 --> 00:38:37.804
helping them with that with

00:38:37.864 --> 00:38:40.965
buyers um it is it is less

00:38:41.005 --> 00:38:42.827
consequential for them and

00:38:42.927 --> 00:38:43.969
I think they'll soon find

00:38:44.068 --> 00:38:44.628
once they get into

00:38:44.688 --> 00:38:45.449
ownership they're going to

00:38:45.469 --> 00:38:46.110
have a whole lot more to

00:38:46.130 --> 00:38:47.652
think about than that little

00:38:48.172 --> 00:38:48.532
You know,

00:38:48.992 --> 00:38:50.353
four or five percent difference

00:38:50.393 --> 00:38:52.492
that gets moved to a fifteen percent,

00:38:52.833 --> 00:38:53.773
you know, I'm sorry,

00:38:53.793 --> 00:38:55.173
a fifteen year amortization.

00:38:55.253 --> 00:38:57.114
So in the in the big picture,

00:38:57.534 --> 00:38:59.335
I think it's kind of a

00:38:59.375 --> 00:39:00.956
short lived concern for the buyer.

00:39:01.675 --> 00:39:03.056
And they got they have such

00:39:03.076 --> 00:39:05.097
an amazing journey in front

00:39:05.137 --> 00:39:06.896
of them in practice ownership,

00:39:07.436 --> 00:39:08.617
higher income potential.

00:39:09.697 --> 00:39:11.059
uh you know working to to

00:39:11.099 --> 00:39:11.998
build because the practice

00:39:12.039 --> 00:39:13.380
itself you know should be

00:39:13.400 --> 00:39:14.719
an appreciating asset that

00:39:15.119 --> 00:39:16.561
allows the dentist to enjoy

00:39:16.760 --> 00:39:18.202
high income have some

00:39:18.222 --> 00:39:19.461
control over their life and

00:39:19.621 --> 00:39:20.581
hopefully have a nice high

00:39:20.603 --> 00:39:21.682
quality life if they put it

00:39:21.702 --> 00:39:23.923
all together so um I'd say

00:39:23.963 --> 00:39:24.824
it's just it's the

00:39:24.963 --> 00:39:27.505
allocation it's just a step

00:39:27.585 --> 00:39:29.126
in the process as they move

00:39:29.166 --> 00:39:30.947
into practice ownership and

00:39:30.967 --> 00:39:31.967
it's one like you said it's

00:39:32.027 --> 00:39:33.327
one of the last ones before

00:39:33.367 --> 00:39:34.188
you're at the finish line

00:39:34.599 --> 00:39:35.679
Totally.

00:39:35.699 --> 00:39:37.900
Morgan, how do you guys help?

00:39:38.460 --> 00:39:40.001
When do you want to be brought in?

00:39:40.561 --> 00:39:41.920
I always give an opportunity

00:39:41.940 --> 00:39:43.922
for you guys to just, you know,

00:39:43.942 --> 00:39:44.942
we could put something in

00:39:44.981 --> 00:39:48.523
below your firm and, you know,

00:39:48.543 --> 00:39:49.664
you guys do.

00:39:49.744 --> 00:39:52.885
We love working with doctors

00:39:52.925 --> 00:39:54.905
that are that are our first time owners,

00:39:54.945 --> 00:39:56.706
whether that's a startup or

00:39:56.766 --> 00:39:57.646
a practice purchase.

00:39:57.686 --> 00:39:58.947
We've supported hundreds of

00:39:58.987 --> 00:40:00.748
doctors in both over the

00:40:00.768 --> 00:40:01.588
last fifteen years.

00:40:02.648 --> 00:40:04.748
I have always uh helped them

00:40:04.889 --> 00:40:05.869
along the way I don't

00:40:05.949 --> 00:40:07.429
charge for that we're we're

00:40:07.469 --> 00:40:08.469
not in the in the

00:40:08.509 --> 00:40:09.630
transition space we don't

00:40:09.670 --> 00:40:10.989
we don't negotiate deals we

00:40:11.010 --> 00:40:12.070
don't we're not we're not

00:40:12.110 --> 00:40:14.010
involved like you are but

00:40:14.130 --> 00:40:17.110
what we do always is if

00:40:17.150 --> 00:40:18.670
somebody is looking to if

00:40:18.690 --> 00:40:19.851
they're buying a practice

00:40:20.251 --> 00:40:21.532
the time to get us involved

00:40:21.572 --> 00:40:22.652
is I'd say at least thirty

00:40:22.692 --> 00:40:24.253
days prior there there's no

00:40:24.432 --> 00:40:26.373
like earlier is better um

00:40:27.338 --> 00:40:28.639
And I'm always happy to be a

00:40:28.739 --> 00:40:30.119
second set of eyes over the

00:40:30.159 --> 00:40:32.900
seller financials, just to let them know,

00:40:32.960 --> 00:40:34.722
hey, is there anything concerning?

00:40:34.782 --> 00:40:36.083
Is it sort of within the

00:40:36.143 --> 00:40:37.623
norms that we see every day?

00:40:38.505 --> 00:40:39.364
And then if they do want

00:40:39.405 --> 00:40:40.005
some help on that

00:40:40.045 --> 00:40:41.365
allocation and they decide

00:40:41.405 --> 00:40:42.266
we're a good fit,

00:40:42.347 --> 00:40:43.547
I'll help them with that as

00:40:43.608 --> 00:40:44.847
well and come to that

00:40:44.887 --> 00:40:45.728
meeting of the minds.

00:40:46.329 --> 00:40:47.751
And ultimately our goal is

00:40:47.791 --> 00:40:48.931
to support our doctors and

00:40:48.992 --> 00:40:51.012
ownership and help them with their,

00:40:51.193 --> 00:40:52.335
it's the easy button for

00:40:52.355 --> 00:40:53.715
their monthly accounting.

00:40:54.195 --> 00:40:55.137
We give them that our

00:40:55.177 --> 00:40:56.778
practice profitability analysis,

00:40:56.818 --> 00:40:58.820
help them make sure they're

00:40:58.860 --> 00:41:00.061
realizing that appropriate

00:41:00.101 --> 00:41:01.643
financial reward that they

00:41:01.663 --> 00:41:02.864
have in mind when you own a

00:41:02.903 --> 00:41:03.585
dental practice.

00:41:04.144 --> 00:41:05.106
And then help them, of course,

00:41:05.226 --> 00:41:06.507
understand and plan for the

00:41:06.726 --> 00:41:08.268
tax liabilities that are

00:41:08.407 --> 00:41:09.228
going to be very different

00:41:09.969 --> 00:41:10.889
for a new practice owner as

00:41:10.929 --> 00:41:12.010
opposed to perhaps being

00:41:12.030 --> 00:41:13.411
like a W-II associate.

00:41:13.771 --> 00:41:14.652
So that's our world.

00:41:14.913 --> 00:41:16.934
We love working with first-time owners.

00:41:17.355 --> 00:41:19.056
And I would say earlier is the better.

00:41:19.896 --> 00:41:21.978
We like to really get

00:41:22.018 --> 00:41:23.039
involved and formalize our

00:41:23.059 --> 00:41:24.398
relationship about a month

00:41:24.460 --> 00:41:25.760
prior to either the close

00:41:25.800 --> 00:41:26.541
date or the opening date.

00:41:28.067 --> 00:41:28.768
That's about when I'm

00:41:28.788 --> 00:41:29.989
throwing it over to a CDA.

00:41:30.048 --> 00:41:31.170
Yeah, it's perfect.

00:41:31.449 --> 00:41:32.411
That timing's perfect.

00:41:32.431 --> 00:41:34.092
Yeah.

00:41:34.112 --> 00:41:36.153
Go ahead.

00:41:36.173 --> 00:41:36.373
Honestly,

00:41:36.414 --> 00:41:37.394
not that we don't sometimes get

00:41:37.434 --> 00:41:38.094
the call of, hey,

00:41:38.114 --> 00:41:39.356
I bought a practice last week.

00:41:39.436 --> 00:41:41.197
And well, hey,

00:41:41.217 --> 00:41:43.639
it's still a good time to get going.

00:41:44.061 --> 00:41:45.163
And you guys are a full

00:41:45.202 --> 00:41:47.744
service bookkeeping, accounting,

00:41:47.784 --> 00:41:48.003
the whole?

00:41:48.023 --> 00:41:49.463
Yeah, that's our pro.

00:41:49.483 --> 00:41:49.684
I mean,

00:41:49.704 --> 00:41:50.945
we really have one program and it's

00:41:50.965 --> 00:41:51.585
full service.

00:41:51.625 --> 00:41:53.606
So we build the accounting

00:41:53.646 --> 00:41:55.327
system and maintain it moving forward.

00:41:55.367 --> 00:41:56.688
We take complete care of it.

00:41:56.827 --> 00:41:58.807
And then we give them a full

00:41:58.849 --> 00:42:00.648
color dashboard style

00:42:00.688 --> 00:42:02.590
report that's written for dentists.

00:42:02.610 --> 00:42:03.811
Dentists can actually read

00:42:03.911 --> 00:42:05.010
and it makes sense, right?

00:42:05.030 --> 00:42:06.331
And it gives them comparison

00:42:06.371 --> 00:42:07.572
with our client averages.

00:42:08.713 --> 00:42:09.333
So we're all about,

00:42:09.393 --> 00:42:10.414
we want the dentist to

00:42:11.233 --> 00:42:13.454
realize that appropriate profit margin

00:42:14.264 --> 00:42:15.184
so that they have that

00:42:15.224 --> 00:42:16.226
appropriate financial

00:42:16.246 --> 00:42:17.387
reward that they should

00:42:17.467 --> 00:42:19.208
they should have uh when

00:42:19.307 --> 00:42:20.789
owning a business and I

00:42:20.869 --> 00:42:22.150
personally you know for the

00:42:22.190 --> 00:42:23.570
clients that we coach on an

00:42:23.751 --> 00:42:26.213
ongoing basis after people

00:42:26.454 --> 00:42:28.914
own you know next level has um

00:42:30.893 --> 00:42:33.034
many clients that have went

00:42:33.054 --> 00:42:34.596
through the buyer and

00:42:34.695 --> 00:42:37.157
startup journey with Next Level,

00:42:37.197 --> 00:42:39.119
but then they retained us

00:42:40.019 --> 00:42:42.300
after close and are paired

00:42:42.320 --> 00:42:43.541
and working with one of our

00:42:43.702 --> 00:42:46.083
seven wonderful practice

00:42:46.103 --> 00:42:47.324
management consultants.

00:42:47.925 --> 00:42:49.465
I personally love your

00:42:49.525 --> 00:42:50.746
report because I still get

00:42:50.786 --> 00:42:53.949
pulled in kind of as a high level CFO.

00:42:54.048 --> 00:42:56.891
And when they send me your reports,

00:42:56.931 --> 00:42:58.692
it makes my job super easy.

00:43:00.253 --> 00:43:01.653
And so I love those reports.

00:43:01.954 --> 00:43:05.157
I find that they are just enough, not,

00:43:05.777 --> 00:43:05.996
you know,

00:43:06.016 --> 00:43:07.898
you guys are trying to be a consultant,

00:43:07.938 --> 00:43:09.360
but you're also trying to

00:43:10.701 --> 00:43:13.101
educate them on some basic KPIs,

00:43:13.121 --> 00:43:13.742
which I love.

00:43:13.802 --> 00:43:15.603
So yeah, good stuff over there.

00:43:15.884 --> 00:43:17.085
Yeah.

00:43:17.105 --> 00:43:17.385
Awesome.

00:43:17.405 --> 00:43:18.045
Appreciate that.

00:43:18.601 --> 00:43:18.900
Well,

00:43:19.101 --> 00:43:21.101
I guess this concludes another episode.

00:43:22.121 --> 00:43:23.021
Again, folks,

00:43:24.242 --> 00:43:26.222
very important topic in the

00:43:26.724 --> 00:43:29.784
purchasing a practice process.

00:43:30.264 --> 00:43:30.864
I've never done an

00:43:30.925 --> 00:43:33.005
allocation schedule episode before,

00:43:33.045 --> 00:43:33.885
so here we are.

00:43:35.146 --> 00:43:35.465
Morgan,

00:43:35.885 --> 00:43:37.567
thank you so much for your acumen

00:43:37.586 --> 00:43:38.847
and knowledge in the space

00:43:38.887 --> 00:43:39.708
and what you do for our

00:43:39.728 --> 00:43:42.168
clients and all the dentists out there.

00:43:42.528 --> 00:43:43.889
We covered a lot of ground in

00:43:47.349 --> 00:43:48.931
uh your time and investment

00:43:49.012 --> 00:43:49.893
and folks thanks for

00:43:49.952 --> 00:43:51.454
listening being a part of

00:43:51.474 --> 00:43:53.396
the program I would ask you

00:43:53.436 --> 00:43:55.278
to please review us give us

00:43:55.338 --> 00:43:57.362
a five star I don't need a

00:43:57.382 --> 00:43:58.762
big paragraph of how

00:43:59.083 --> 00:44:01.585
awesome uh I am or what

00:44:01.646 --> 00:44:03.307
weird t-shirt I'm wearing

00:44:03.347 --> 00:44:05.090
but you just simply hit

00:44:05.110 --> 00:44:06.972
star and submit that helps

00:44:07.052 --> 00:44:07.893
us on our rankings

00:44:08.554 --> 00:44:10.355
And subscribe, be part of the program.

00:44:10.375 --> 00:44:11.375
I think we've got private

00:44:11.414 --> 00:44:13.056
Facebook groups you could be part of.

00:44:13.096 --> 00:44:16.036
And anyways, as always,

00:44:16.077 --> 00:44:18.117
thanks for your time, your investment.

00:44:18.277 --> 00:44:20.197
And I guess that concludes

00:44:20.237 --> 00:44:22.318
another episode of Dental Unscripted.

00:44:22.358 --> 00:44:22.938
Thanks a lot.

00:44:23.318 --> 00:44:23.699
Thanks, Morgan.

00:44:23.739 --> 00:44:24.278
All right.

00:44:24.318 --> 00:44:24.880
Thank you, Michael.

00:44:24.900 --> 00:44:25.639
Appreciate it.

00:44:25.659 --> 00:44:26.199
Take care, buddy.

00:44:38.534 --> 00:44:39.878
Let us know how you like the show.

00:44:41.661 --> 00:44:46.769
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00:44:46.809 --> 00:44:48.333
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