Welcome to Dental Unscripted. Where Mike Dinsio and Paula Quinn break down the practice ownership journey, one episode at a time. Starting up, buying, and running a successful dental practice. What up, what up, guys? Welcome back to another episode of Dental Unscripted. As you guys know, this is Michael Dinsio, one of the co-hosts of the program. And I, if you guys are big YouTube followers, I'm sitting in my living room, so the sound is not my weird podcast booth that I sit in.
uh but that's just how today's going um and so here we go uh so yeah today's I'm super excited about today because we are um me and a friend of mine that's uh big into the accounting world I refer a lot of clients over to we're gonna uh digest everything that goes into the allocation schedule when buying a dental practice. And so we're going to break this kind of this idea, this topic of allocation schedule.
But first, before we do that little housekeeping, And before I bring on my guest, I'd like to invite you guys over to the Dental Unscripted channel if you haven't already done that. So I've talked to a lot of you on the phone that are followers of the program and you haven't done that. Do it. We will stop publishing on Dental Acquisition Unscripted and we will stop publishing on Startup Unscripted soon. So please jump over there.
to Simply Dental Unscripted, the channel, because we're just bringing both brands and both channels into one. And we are going to be talking all things start, all things buy, and also how to run a dental practice as well. So please join us over here, like, comment, subscribe, all the things.
okay without further ado let's bring in morgan hammond uh morgan is has been working with me for many many years on lots and lots of deals he's a wealth of knowledge um morgan welcome to the program man how you doing thanks michael thanks for having me it's good to see you again Yes, sir. Yes, sir. Why don't you tell us a little bit about your firm? I know you guys just went through Emerge. Congratulations again.
I mean, you guys started a fantastic accounting firm and just brought in more resources, which is exciting. But why don't you give everybody like a breakdown of what you're doing today and what the company is all about? Yeah, you bet. We started in twenty ten as HD accounting group. And so we've been at it for fifteen years supporting dentists who own their private dental practice, very much a niche firm.
And as we've grown and scaled, you know, we decided we were at a point where we wanted some additional resources in the form of technology and staffing, which is always important and accounting and tax. And so. We recently combined with a top-twenty firm, Eisner Amper, and they have organized us in our dental-specific subsidiary, Eisner Advisory Group Dental Advisors. I'm the partner in charge. I have all my team.
We're still doing our same core services, which is the monthly accounting, the profit advising, and the tax planning, only now we get to offer so much more and have a more comprehensive experience for our clients. As an example, this morning, We just sent an announcement out. We can do cost segregation studies now, and we already have. That went out at nine this morning. We already have like three doctors that are saying, hey, look, we want to talk.
So we can add a lot of value as part of Eisner Amper now. So it's been just a natural progression as part of our journey, but it's still very specific niche, private dental practice owners only. That's our world. I mean, just cost seg, picking cost seg up is huge for the listeners. It's huge. Yeah. And the price point's great, too. I mean, it's just it's we're super excited. And so we're just getting started with that. But it's been it's been really, really wonderful. I love it, Morgan, man.
Congratulations on that success. The first question I asked you was, is the fee structure going to change? Is the service going to change? That's always the big question. My clients that we sent over just more recently, the answer is no. Same people, same service, same responsiveness. We all have the same tools. We just get to add a lot more to it. That's awesome. That's awesome.
Well, let's get into this topic, allocation schedule, because it feels like every day I have to kind of get in and I'm like, look, I'm not a CPA. I just know enough to be dangerous.
And I thought, well, let's get a CPA on the program and let's just kind of diagnose this kind of issue the first thing the first thing to hit what is it what is it what is it yeah as you know you're you're heavy into the transition space we're not in the transition space we certainly advise on it and um when it gets to to this particular topic so the the first point of negotiation is the price of course And then once that price is agreed to, then we have to decide, okay, how are we going to
allocate that price among the various assets that are being purchased? Because these are all asset purchase agreements. So broadly speaking, there is the used equipment. There is the patients. there's a promise not to compete. And then we might, you know, generally it doesn't get too granular, but you know, you might break it down to some supplies and sometimes they might say, well, this is medical equipment and this is furniture, but I kind of group those as fixed assets.
So there's, there's generally like four or five main categories where that purchase price will get allocated. And I've even seen website thrown in there too. Sometimes you can get as granular as you want. I, you know, I think of it, Honestly, Michael, if you break it down and you and I both know, there's two main categories. It's the fixed assets and it's the goodwill. Just so you know, the promise to not compete, that should never be more than five thousand bucks.
It should just be a nominal amount, but it's usually just the assets and the goodwill. Morgan, can I ask you, like, why do some people get more granular on the topic? Like what, what's the purpose of chunking this thing up? Cause you're right. It's like, okay, there's the equipment and then there's the goodwill and that's really it. So why do they, why do they do that with the goodwill? Oh, well, with the goodwill, it's very important. And we'll talk about that consideration with the seller.
But if people want to get granular into the website and I've got these supplies and you've got to buy, you know, I don't think it serves much of a purpose. It doesn't really have a material impact on the taxes. And so when you see an agreement put together by, I think, somebody who does a lot of dental transitions, you don't see it.
broken down like typically it's yeah it's four or five categories well I have seen brokers get more grand and I'm like why are we doing this but I I felt like they had a reason for it but not not really so if we think about it and I um there's two two perspectives and they're very different there's the the seller perspective and the buyer perspective And within each of those roles, there's competing objectives, right?
So what's the buyer, what's good for the buyer is the opposite of typically what's good for the seller. So I think maybe we start with the seller because- So wait, let me recap. So so the allocation schedule, just kind of throwing it out and just making this super simple is you got the purchase price. Let's just say a million bucks. And we have to define how much of this million dollars of the purchase price, whatever it is.
is broken up into hard assets, which is the equipment, and not so hard, soft assets, which is what we all call is goodwill, right? Intangibles, you bet. Intangibles. And the other thing we might want to throw in here, Michael, is that this is an asset purchase agreement. They're almost all asset purchase agreements. So when you buy a dental practice, you're not buying that dentist's company. You're buying their stuff, right? And you're going to put their stuff in your own brand new company.
And you're going to start day one as your, whatever, whatever PLLC or PC you set up for yourself. So you're just buying their assets. And that's why it's an asset purchase agreement and why we're allocating those assets. So versus, versus, and I know, but just for the audience versus a stock sale, right? A stock sale, which is a horrible deal for the buyer.
And you should never do that because you can't, a stock sale is not deductible for the buyer because, And then you're on the hook for all prior liabilities of the seller. So if they didn't pay their payroll taxes from years ago and didn't disclose it, it's still your problem. So you almost never see a stock sale. I don't either. I don't either. So can you say that a little bit more simple? So everything that we touch and I honestly don't think I've ever done a stock sale.
stock sale is you're buying the other dentist company so if it was abc family dental llc you're buying their stock certificates and saying that is now my company okay the problem with buying stock it's just like buying stock on the stock market you can't deduct that it's non-deductible so the allocation schedules moot point with this doesn't matter you're taking their balance sheet you're also taking all their liabilities Yeah, liabilities, taxes, all the thing.
But I have heard of some stock sales before when like very, very unique situations, right? The only time I've heard of it and seen it is if somebody's selling a piece of their practice. And so they want to sell maybe fifty percent of the stock if they have an existing S Corp, which that Michael's a whole separate podcast. So adding a partner is a whole, whole, whole new topic to visit about. OK. But so I will just call it ninety nine percent of the time. It's an asset purchase.
You're buying the doctor's assets. You're buying their their fixed assets and their tangible assets. You're going to put them in your own company. Perfect. Yes. So because the show has gotten more broad over the years, it's not just buyers that are listening. If I helped you or if you've been listening for five years, I'm getting calls today, my younger docs wanting to sell to DSOs or, hey, look, ownership's really not for me. I think I just want to sell and go back as associate. Totally fine.
Let's start. Let's hit both buyers and sellers because Morgan, you might be helping sellers. I primarily help buyers buy, but let's let's hit the buyers first. Let's hit the buyers first and then we'll talk. And I think it's important whether you're a buyer or seller, it's always helpful to know, hey, where's the other side coming from? That's right. What's keeping them up at night? That's right. So for the buyer, this is the key is a key concept. On an asset purchase agreement.
As the buyer, you get to deduct a hundred percent of the purchase price, no matter what. Say that again, because that's something I say on every deal and it needs to just sink in. They oftentimes hear that just because the hard assets are lower in value, that they're not going to get right. I'm missing out. And so, and this is the, as a new business owner, also an important key concept, you always get to deduct. a hundred percent of every business expense.
It's just a matter of timing of how soon. Yes. So that that's where you start as the buyer, no matter what you get to deduct the whole price in all cases. Yeah. So, so when Morgan says that it's twenty percent equipment, eighty percent goodwill.
OK. The buyer the equipment that twenty percent you get to deduct that Either right away or over five years That's the choice so as an example medical equipment is ductable five years or You can say everyone's heard of section one seventy nine that says let's let's just deduct it all right now the goodwill Eighty percent of the purchase price that that must be deducted straight line over fifteen years.
So that's why you'll you'll hear people say, well, as a buyer, you want a high amount to fix assets, you can deduct it all right away and then you can you can have your let's just say you'll have your party a little bit earlier. Right. You only get the tax deduction once. Do you want it sooner? Do you want it later? But you still get to deduct the whole thing no matter what. So it's just timing the fixed assets. It's more accelerated. You can do it now.
goodwill over time for fifteen years okay so so in in reverse morgan in reverse here so you get to write off the whole thing it's just how long do you spread it over time right it's kind of like a loan the more you spread a loan payment out the smaller the payment is the So that's essentially that amount, if it's goodwill, that smaller amount is the write-off every year. That's what I heard. Correct.
So just to say it again, because I think you may have broke out if that was on my side or your side. Yeah. So for hard assets, it's how many years? And for goodwill, it's how many years? So there's a schedule. It depends on the type of hard asset. The biggest one, the most consequential is the medical equipment. The accelerated, the rules, the accelerated depreciation is five years for medical equipment. Okay. Okay. Or you can say, tell you what, let's forget that five years.
That's what section one-seventy-nine is. That says, you know what? You bought this used equipment. Let's deduct it all this year. Let's just take it all right now. So it could either be instant or spread out in the short term. And then whatever's allocated to Goodwill is straight line over fifteen years. Okay. Okay. So as short as five years with hard assets, And then as short as fifteen years on Goodwill. Yeah. Okay. All right.
So the other thing I want to comment on is when we kind of separate topic, but similar when we're evaluating or coming up with true profit of a dental practice. This is an interesting little thing. Everybody always asks me about depreciation and amortization, right? So can we hit that real quick? Because isn't it, it's related here, is it not? So that's what we call, we put that what we call below the line, right?
So if we're talking profit margin on a practice, that's before you look at depreciation amortization. So we do not factor that in. If we're analyzing a practice for profitability, the depreciation and amortization is not part of that discussion. That's the owner's tax situation. Same thing with like the owner S-corp salary, that's irrelevant.
So if the practice collected a million dollars, and has a forty percent profit margin before owner comp before depreciation before amortization I mean there's four hundred k in profit for the owner so we don't we do not factor in depreciation and you know you'll hear the term ebita and that's what they're talking about their earnings before interest depreciation amortization because it doesn't matter like whatever the seller whatever their whatever they chose to depreciate their assets
because you do get a choice whether you want to do bonus or section one same line. That's irrelevant to how the practice is performing financially. That's just the owner's good deal write-off. It's just kind of another line. It's not an actual bill. It's their strategy, the seller's strategy.
But is it true that goodwill is related to the amortization is that a true statement or because depreciation is uh yeah the relation and amortization yeah go ahead depreciation you'll hear depreciation more related to like a fixed asset because it depreciates like it's worse less over time or amortization over a period of time they're really referring to the same thing they're non-cash deductions So let's say you're deducting your goodwill over fifteen years.
You get to year ten, so you still have the practice at that time, and you still have your one-fifteenth tax deduction on the goodwill. That didn't cost you any money. No. You spent that cash ten years ago. But is amortization goodwill and depreciation hard assets? Yeah, that's a good way to think about it. But it's the same thing. It's a deduction. They're both deductions. That's perfect. Okay. All right.
So I wasn't really planning on going there, but since we had an account on the phone, you might as well go there, right? Okay. So back to the buyer's perspective. So essentially now we've got our asset groups, Goodwill, hard assets. We've got the schedule now that you've laid out seven or five years, seven years, fifteen years, depending on what the accountant wants to do. And that's your job for them. Let's talk about like.
I mean, what's the bridge there, any other things that you're thinking about as far as like the buyer goes and what they. So this is what I think about for the buyer, and I think to really understand like where to go for the buyer, you do have to have some knowledge of where the seller is coming from. And so I'll just touch briefly on the seller's perspective because that's going to inform my advice to the buyer.
So for the seller, when they go to sell a practice, that's a significant taxable event. And the first question every seller is going to have is how do I minimize the tax bill? And the answer is there's really not much you can do because they owe gain, they owe income tax on the gain realized. And the gain is the difference between what the buyer's paying them and what's called their tax basis. And their tax basis is what they originally paid less what they took in depreciation.
Well, let's not get crazy. We're getting crazy. Simple example. Simple example. Let's say somebody buys a CEREC machine, okay, a hundred, a hundred and fifty thousand. And let's say they choose to depreciate the whole thing right away, right? I'm taking section one seventy nine. I'm writing that whole thing off this year. So if they buy it for one hundred fifty K and they take one hundred and fifty thousand in depreciation, their tax basis is zero. Right.
If they bought bought it for one hundred fifty and accelerated over five years and that's going to be over time and maybe by year two, it's I'm just pulling numbers out of the area, but it's down to like one hundred thousand. So if their tax basis, if they depreciated fifty, their tax basis is now one hundred. So. That's the math. Right. And so whatever you get paid. So back to my example, they bought the CEREC. One hundred fifty K. Let's say they kept it.
They deducted the whole thing right away. Tax base is zero. Two years and they say, you know what? This isn't for me. I'm going to sell it used. And so they sell it used for eighty thousand. Well, if their tax basis is zero and they sell it for eighty thousand, they just pick up eighty thousand in ordinary income. It's called depreciation recapture. They got to pay income tax on it. So the same thing applies in the aggregate when you sell a dental practice, right?
And you look at that allocation and let's keep it real simple. Michael, we've got the million dollar practice. We got two hundred K to equipment and eight hundred K to goodwill. If the tax basis on their equipment is fifty thousand. And the purchase price has two hundred allocated to equipment, they just picked up one hundred and. Fifty K of what they have to pay income tax on. You can't change it. There's no there's no hiding from it. There's nothing that can be done.
So for the seller, where we get into competing objectives, the same thing applies on the goodwill. If it's a startup, there is no basis in goodwill. They owe gain on eight hundred thousand in that example. But the difference is the gain on goodwill is taxed at favorable capital gains tax rates. So if they're in the thirty seven percent tax bracket, the gain on equipment is taxed at thirty seven percent. Yeah. The gain on the goodwill is taxed at twenty percent.
So. The only way the seller can influence and lower their tax bill is to push for a lower allocation to equipment, because that means a smaller percentage of their taxable gain is taxed at that high marginal tax rate so it doesn't dramatically alter the tax bill but it does influence it so that's why I you know our clients have heard me say the allocation is a bigger deal for the seller than it is for the buyer yeah and and I you know I think the buyers at the at the time like
I think at the time that the buyers get to the place where you pick them up, looking at allocation schedule and they're getting ready to close and you're talking to them about accounting and bookkeeping services and they're just exhausted, right? They're exhausted. They just got their butts kicked. That's how they feel, right? They tried to negotiate the price they may have lost. We started chipping away at the ARs. We won a little bit there.
Then they started getting into the work in progress and all the little things. And then the lease, the lease starts kicking them in the shorts. And by the time they get to you, they're like, I just want to win somewhere. Right. And then there you are like, well, you know, you get a little benefit to juice the hard assets and then they lock on to that. The truth is, this is a big, big deal for sellers and a very little deal for the buyers, right? It is.
And so to kind of circle this back around, For the buyer, just keeping that in mind, the more you push them on bumping up the fixed assets so you can have your bigger deduction now, you're driving up the dollars on their tax bill. You're literally on the seller's tax bill. And it's going to be a big tax bill. It's sometimes shocking for the seller. You're driving up the actual dollars. So you just have to be mindful of that. And we're not in the transition space, Michael.
You've already counseled them through this process. And by the time they're asking me about allocation, I will tell them, look, it comes down to a meeting of the minds.
let's say that the the seller you they've arrived at like fifteen percent to equipment and I I'll I'll ask the the dent to say I'm you know they're looking at hiring us as their accountant after they're in ownership and I'll say well how do you feel about that practice you know do you see yourself there do you like it does it check every other box does it feel good if so like you may not want to jeopardize the deal over allocation Because you still get to deduct the full purchase
price no matter what. And the other thing, Michael, is this. Let's say they're buying a practice and this buyer has maybe a more expansive skill set than the seller. And so some of the stuff that was being referred out, they're going to start doing. That's production they're not paying for. They're going to make more money. And they're going to make way more money than they made as an associate.
And so if even though maybe a higher percentage of that goodwill gets pushed off for the next fifteen years, when you're making more money, those tax deductions become worth more when you're in higher tax bracket. So it's not all bad having some of that hanging out in the future. I didn't even think about that. So if the plan is for you to make more money in the future, it's great to defer some of those tax write-offs to the future.
And I will say this, as an ex-banker, you usually pay your loan off in eight to ten years on average, right? Those were just statistics when I was a lender. So in eight to ten years, when you don't have that loan payment and you don't have that interest write-off anymore that we all love to take advantage of, that allocation schedule could be the difference maker. So I didn't even think about it.
Yeah, it doesn't, you know, people get very excited about Section one seventy nine, which again, just to recap, all Section one seventy nine is, is Hey, the rules are if you buy medical equipment, that's depreciated over five years or section one, seven, nine. Forget that. Let's just deduct it all right now. And so if you're making, say, your practice profits, four hundred grand and you buy that CEREC and that's one hundred fifty thousand dollar deduction that like that's that feels pretty good.
Like I'm having that party like right now. And you're going to have very favorable tax rules that year. But but let's just say, OK, we do that. But you're, you know, two or three years from now. Maybe we're not making four hundred. Maybe we're making seven hundred. You're going to be at a higher effective tax rate. And if you still had some of that CEREC deduction hanging out, that tax benefit is actually worth more money. So it's not always... It's not always a bad thing to, to push those off.
I love, I love what you said there. So everybody always talks about section one, seven, nine, when you go to the trade shows and like right now, the Invisalign is, or a line, I should say a line tech is coming out with this Illumina and they've got some sweet deal and everybody's, this is the rage. And like a hot minute ago, like, It was something else was the rage. There's always going to be a rage. And then the salespeople always love to talk about this. Section one. And you're right.
Everybody gets super excited about it. So what's the longest you can stretch? Because everybody talks about how, like you said, let's have a party and not pay any taxes this year. By putting it all in one year next year, I tend to think let's bank it over time. So how long can you stretch one seventy nine out? It depends on what you're buying. But again, medical equipment, it's five years. There's no discretion. It's hard rules. It's like it's like the goodwill. It's fifteen.
There's no there's no option A, B and C. It is what it is. But you could do all of it in one year or you could divide it by five years. In the year of acquisition, you have a choice. You could say, let's take half now and then deduct the other. But whatever's left over is five years. You cannot say, hey, let's just start with five years and we'll get to year two. Then let's take the whole thing.
No. No. The year of acquisition, you can choose to take all or a portion of section one seventy nine and then whatever is left over, if there's anything left over is five is five years and it can't change after that. OK, so so so for simple math, I've got two hundred thousand dollars of Hard assets. The allocation schedule, it was a million dollar practice. Let's say it's eighty twenty. Eighty percent was goodwill. Twenty percent was hard assets. So I've got two hundred grand.
If you're following my math, the very first year of the acquisition, I didn't know that half of the two hundred could be written off the first year to be a hundred grand. And then you would divide the other hundred grand left over five. It has to be over five for medical equipment. So, OK, so twenty grand a year and then that would be the schedule, essentially. Yes, it's accelerated. So it's not linear. It's accelerated to geek out. It's double declining balance depreciation.
So it's not linear on the equipment. Now, the goodwill is straight line over fifteen years.
okay okay but in theory like give or take that's kind of how people should think in general yeah okay but here's to to um go back to what you said you know okay we're you know it's your end the equipment's on sale and if you hear anything like well you don't want to miss out on section one seven like you never just for for all practice owners out there you never miss out on anything it's all just timing You know, if you don't get it this year, you get it next year. You never miss out.
And again, if you're going to make more money next year, the tax benefit is more dollars. It's actually worth more. So I don't get wound up about that. The other thing, just a very key concept of section one seventy nine is just ordering the equipment doesn't doesn't count. It has to be placed in service, which means delivered and in a ready condition. So it has to be installed. It doesn't mean you have to have used it, but it has to be installed to be deductible in that tax year.
And the other thing that people can sometimes get confused about is, okay, what if I get a loan? Does that spread the tax deduction out? Or what if I pay cash? Your method of payment is irrelevant. If you buy a piece of equipment and it's placed in service that tax year, that's when you can depreciate it, whether you do the whole thing or spread it out. Whether you got a loan or paid cash, it is irrelevant.
that uh that's really good like we this is exactly what I wanted out of this episode um just as kind of a fun little bonus and since we're since we're into it and we've kind of funneled it all the way through hard assets yeah you mentioned startup yeah um Because I do have a lot of startup listeners and they're listening to this as well, potentially.
How does cost segregation, because we mentioned in the beginning episode, how does that play into this strategy, if at all for an acquisition or a startup? So cost seg is for when you start talking about real estate and let's think commercial, non-residential commercial real estate. So you buy your practice, build your location. When you purchase non-residential commercial real estate, that gets depreciated straight line over thirty nine years. That's a long time.
Thirty nine years is thirty nine years. So that's a very small tax deduction. So one question I get often, Michael, as well, you know, from a tax perspective, should I buy or should I lease? And I tell people, look, it's like the tax should not move the needle on that decision. You only want to buy real estate if you want to be in the commercial real estate space and you want to own real estate, invest in what should be an appreciating asset, realizing there is risk.
know a good buddy of mine bought he bought his real estate it was a good move for him it was a a bank building he converted into a dental practice it's beautiful michael six months into it the city came and made him repave the parking lot that was two hundred fifty thousand he's like what I wasn't planning on that so that I mean those are the things you gotta think about when you own the real when you own it it's your problem So there's risks involved.
So you only want to own commercial real estate if you want to be in the commercial real estate space and you want to invest in what should be an appreciating asset. That's why you own real estate.
Don't do it for tax write-offs because your mortgage interest and your one thirty ninth depreciation, if you compare those to what your lease payment would be, and lease payments fully deductible, it's not a huge, it's not a big enough difference, in my opinion, to be a significant decision, factor in decision making. But let's say we go down that road. We say, you know, I really want to own my spot. And you purchase it, you either do a ground up, build it, or you substantially remodel it.
So again, whatever the cost is, whatever dollars you spend on the improvements, not the land, but the improvements, you get to deduct the whole price. It's just a matter of time. You get to deduct a hundred percent. So what a cost segregation study is, is that's when engineers go in, it's a very specialized work and they break it down.
They look at every, every dollar you spent and they look to substantiate and reclassify those expenditures to fix assets as opposed to real estate improvements to take it from a thirty nine year depreciation schedule to maybe down to a five or seven. Essentially, it's like slicing up the asset so that you could find things within the building that could be depreciated sooner.
And a good example of that would be, I hear this one a lot, I bought a building and I bought cabinetry and dental cabinetry. And so let's get dental cabinetry accelerated, not on thirty nine years, but on five or seven years, right? Or five years, rather. So what a cost seg study does, it does not create new tax deductions. It just accelerates them so that you can have them now because you likely will not own that building for thirty nine years. Right. Now, here's the other thing, Michael.
Let's say somebody doesn't do the cost seg and say, well, I just didn't think about it or just, you know, was on the to do list and just never did it. Not the end of the world. Let's say five years, five, seven years later, they go to sell. They sell the building. Well, whatever your cost is. Right. Let's say they paid eight hundred thousand for the building. And let's say, you know, they forgot to do the cost seg. And so they're just depreciating one thirty ninth. Right.
And whatever time left, let's say they've depreciated two hundred thousand. So they paid eight hundred. They depreciated two hundred thousand. They have six hundred K tax basis. And then they turn and they sell it for nine hundred thousand, turn a nice, handsome hundred K profit. They will owe capital, long term capital gains. On the difference between nine hundred and six hundred. So the reason I give you that example is if they didn't take the cost seg, their their tax basis is higher.
They're going to pay less capital gains when they sell the practice. Right. You don't lose anything. It's all just a matter of time. Interesting. The IRS gets what they want to get. They get paid. When and how. Right. That's cool. All right. Wow. Great episode, Morgan. We went almost forty minutes here on a lot of different things.
At times, it probably got a little detailed and granular, but I think we did a great job of explaining really how you should approach this from a seller and buyer's perspective we looked at what it is how it works depreciation versus amortization we looked at one section or section is there any other tricks tips that you would have maybe post close uh for buyers or sellers to kind of end cap the episode know if we just if we just circle back to okay allocation you know what
what what is that that meeting of the minds and so I I think you know a seller one of the one of the bigger challenges of the seller is just is breaking down the tax liability and helping them with that with buyers um it is it is less consequential for them and I think they'll soon find once they get into ownership they're going to have a whole lot more to think about than that little You know, four or five percent difference that gets moved to a fifteen percent, you know, I'm sorry,
a fifteen year amortization. So in the in the big picture, I think it's kind of a short lived concern for the buyer. And they got they have such an amazing journey in front of them in practice ownership, higher income potential.
uh you know working to to build because the practice itself you know should be an appreciating asset that allows the dentist to enjoy high income have some control over their life and hopefully have a nice high quality life if they put it all together so um I'd say it's just it's the allocation it's just a step in the process as they move into practice ownership and it's one like you said it's one of the last ones before you're at the finish line Totally. Morgan, how do you guys help?
When do you want to be brought in? I always give an opportunity for you guys to just, you know, we could put something in below your firm and, you know, you guys do. We love working with doctors that are that are our first time owners, whether that's a startup or a practice purchase. We've supported hundreds of doctors in both over the last fifteen years.
I have always uh helped them along the way I don't charge for that we're we're not in the in the transition space we don't we don't negotiate deals we don't we're not we're not involved like you are but what we do always is if somebody is looking to if they're buying a practice the time to get us involved is I'd say at least thirty days prior there there's no like earlier is better um And I'm always happy to be a second set of eyes over the seller financials, just to let them know,
hey, is there anything concerning? Is it sort of within the norms that we see every day? And then if they do want some help on that allocation and they decide we're a good fit, I'll help them with that as well and come to that meeting of the minds. And ultimately our goal is to support our doctors and ownership and help them with their, it's the easy button for their monthly accounting.
We give them that our practice profitability analysis, help them make sure they're realizing that appropriate financial reward that they have in mind when you own a dental practice. And then help them, of course, understand and plan for the tax liabilities that are going to be very different for a new practice owner as opposed to perhaps being like a W-II associate. So that's our world. We love working with first-time owners. And I would say earlier is the better.
We like to really get involved and formalize our relationship about a month prior to either the close date or the opening date. That's about when I'm throwing it over to a CDA. Yeah, it's perfect. That timing's perfect. Yeah. Go ahead. Honestly, not that we don't sometimes get the call of, hey, I bought a practice last week. And well, hey, it's still a good time to get going. And you guys are a full service bookkeeping, accounting, the whole? Yeah, that's our pro.
I mean, we really have one program and it's full service. So we build the accounting system and maintain it moving forward. We take complete care of it. And then we give them a full color dashboard style report that's written for dentists. Dentists can actually read and it makes sense, right? And it gives them comparison with our client averages.
So we're all about, we want the dentist to realize that appropriate profit margin so that they have that appropriate financial reward that they should they should have uh when owning a business and I personally you know for the clients that we coach on an ongoing basis after people own you know next level has um many clients that have went through the buyer and startup journey with Next Level, but then they retained us after close and are paired and working with one of our
seven wonderful practice management consultants. I personally love your report because I still get pulled in kind of as a high level CFO. And when they send me your reports, it makes my job super easy. And so I love those reports. I find that they are just enough, not, you know, you guys are trying to be a consultant, but you're also trying to educate them on some basic KPIs, which I love. So yeah, good stuff over there. Yeah. Awesome. Appreciate that.
Well, I guess this concludes another episode. Again, folks, very important topic in the purchasing a practice process. I've never done an allocation schedule episode before, so here we are. Morgan, thank you so much for your acumen and knowledge in the space and what you do for our clients and all the dentists out there.
We covered a lot of ground in uh your time and investment and folks thanks for listening being a part of the program I would ask you to please review us give us a five star I don't need a big paragraph of how awesome uh I am or what weird t-shirt I'm wearing but you just simply hit star and submit that helps us on our rankings And subscribe, be part of the program. I think we've got private Facebook groups you could be part of. And anyways, as always, thanks for your time, your investment.
And I guess that concludes another episode of Dental Unscripted. Thanks a lot. Thanks, Morgan. All right. Thank you, Michael. Appreciate it. Take care, buddy. Let us know how you like the show. Rate us on Apple and Spotify. Subscribe and follow for more.