Prosperident, Bent Ericksen, and Cirrus Group Discuss Current Issues

[0:00] You are listening to the Dental Practice Owner's Podcast, brought to you by Prosperident. From our unique perspective as dentistry's embezzlement experts, Prosperident's team can bring you the information that is important to practice owners. The Dental Practice Owner's Podcast brings you strategies, tools, and tips that you can use, and dentistry's thought leaders as guests. So sit back, relax, and listen to Prosperident's Amber Webber, Wendy Askins, and David Harris

[0:31] talk about the issues that matter to you. It is just like that friends that can count, so that is David's daily life as he criss-crosses the universe here to help support the dental community, to help understand the criminal thought process, and help educate and protect dentists. David's the CEO of Prosperident, the world's largest firm investigating financial crimes committed against dentists.

[1:01] He's the author of the book Dental Embezzlement, the Art of Theft, and the Science of Control, and over 30 articles in dental publications. David is a licensed private investigator, a forensic certified public accountant, and a certified fraud examiner. David, an absolute privilege to have you on this evening. Thanks for joining us.

[1:21] Great to be with you. And Adrienne, if there's one similar point of feedback from every doctor, from Anchorage to Honolulu to Key West and Halifax and everything in between, it is definitely staffing, staffing, staffing. And I'm putting up with stuff because I can't get a hygienist into the office. I can't retain staff.

[1:41] I'm paying big bonuses, and I'm still dealing with all sorts of frustrations. So Adrienne Twig is our subject matter expert on that. She's the principal and co-owner of Bent Erickson & Associates and an HR compliant consultant, having both the experience of managing a large dental group practice with 35 team members. Oh, that sounds like a lot of work. For over 17 years and working with dentists across the country, Adrienne brings a positive,

[2:04] proven approach to solving everyday employee-related challenges, strengthening the team. She's presented nationally. She's joining us from Miami tonight after presenting twice already today. God bless you for being here. She's a member of the Seattle Study Club, Speaker's Bureau, Society for Human Resource Management, American Association for Dental Office Managers, and a truly incredible speaker

[2:25] everywhere. And myself, I'm your humble expert on dental office lease negotiations, and it's my privilege here on behalf of Sierra's Consulting Group to share what we have seen as the good, the bad, and the ugly of what landlords now are doing to really impact and impede. And unfortunately, there has been some nightmare transition types of scenarios. So a quick introductory poll as we go through, just to get a quick sense of everybody in the

[2:51] room. I know we've got a few hundred here. Just help. We'll help to try to customize some of our content this evening about a little bit of background on yourself. Are you applying to plan to build or relocate, to acquire, planning to transition,

[3:05] and sell the practice potentially in the next five years? You know what? I'm just planning on hunkering in and staying put, or none of the above. Also the stage of your career, right? Many of you might be, you know, I'm just about to wrap it up and hang up the coat, David, right?

[3:21] Or Adrian, I've just opened my very first clinic, and my office manager doesn't want to sign an employment contract. So from side to side, we'll keep that poll up for a minute. We appreciate that, and then we'll cover on those shortly. So really, excuse me, the three points of this evening is embezzlement. What do you need to know in 2023 from David Harris hiring?

[3:43] Who do you love? Who do you keep? Right? And who do you grow with? And myself in terms of minimizing risk and the dental office lease. So on that note, I'll stop sharing here and pass it over to the David Harris.

[3:55] When you stop sharing the sharing button moved, you're messing with me. And just to kick off, we've still got lots of people adding in, but David, we've got about 10%, 11% that are early stage, roughly 37% or mid-career and later stage. And then about 15% are either a clinic leader or a non-doctor. Perfect. Well, welcome, everybody.

[4:23] What I'm going to do tonight is a little bit different from what I've done in past serious webinars. I'm going to present a single situation, and you can see the title there. We're going to introduce you to a doctor and a thief and an investigator from Prosperity and fortunately, the doctor will be with us on video to tell a lot of the story. Here he is.

[4:47] His name is Dr. David Hughes, a wonderful guy, great clinician. He's an orthodontist in Virginia. And he had the misfortune to employ this woman whose name is Lisa Anselm for a long time, 15 years or so. And more or less out of the blue, he called me one day and said, you know, something doesn't feel right.

[5:10] And I have the feeling that my long time very trusted office manager might be up to something. There's one more actor in our trilogy. There she is. Her name is Wendy Askins, and Wendy is what's called a supervising examiner with Prosperidad. She's been with us for over a decade, and Wendy has a couple of distinctions. The first distinction is that she has found more embezzled dollars than any of our other

[5:39] investigators. The second thing is she has received more letters of commendation from clients than all of our other investigators combined. So Wendy is 100% the total package. And she specializes in orthodontic embezzlement investigations. So it was logical that she be assigned to this spot.

[6:04] So now we're going to watch Dr. Hughes by video. And we've got three or four slides each with a little different aspect of what happened to him. So let's let David tell his story. And as the investigation continued, I was floored, absolutely floored by the extent of the embezzlement and the breadth of complexity of the multiple strategies being used in payroll

[6:36] and the company credit cards and the cash payments that were being diverted. And the mirroring of things that we like vendors and suppliers that we use. There were parallel accounts set up. So that the credit card statement would have recognizable vendors, but those purchases were actually going toward personal purchases and Amazon. One thing we know about thieves is that we see very few one-trick ponies.

[7:11] Almost every person who steals from a dental practice uses multiple methods. And that's what David was getting at, you know, and unusually a lot of a lot of thieves will focus on revenue theft, in other words, stealing either patient payments or insurance payments. And one of the things that that marks Lisa Anselm, the embezzler in this case is that she did that.

[7:31] But at the same time, she was also creating expenses that shouldn't have been there. So it points to the fact that embezzlers diversified just like you would diversify money in your 401k. Another really common theme with embezzlement is manipulation, gaslighting, if you like, where thieves try to control how their doctors think. And David had some really interesting things to say about this.

[8:00] One thing that embezzlers do, as I've learned, is that they convince the doctor that they're irreplaceable. And that's an absolute red flag for people that know better and are alert to this. And believe me, I beat myself up about all of these different weaknesses that I had and were obvious to her, but she saw that I was watching certain things and not other things. And honestly, the embezzlement went on for about five years.

[8:30] It just, things were not adding up to me, but she would always say, oh, it's understandable or, you know, the costs have gone up. A lot to unpack from that. Manipulation and one really common factor that we see with thieves is territoriality. And by territoriality, I mean possessiveness about their duties, and it'll even extend to their workspace.

[8:54] And we heard a little bit of that coming across from David. The other thing that we heard, of course, was that when he went to Lisa and said, you know, things don't seem right, she always had a good answer for him. Another thing that David found out the hard way is that he thought that his accountant was doing a lot more to protect him than the accountant really was. And you know, one of the, one of the interesting characteristics of dental practice when we

[9:25] compare it to any other kind of business is that your accounting is actually split into two parts. In other words, you have practice management software that looks after revenue and you have QuickBooks or some other kind of accounting software that looks after expenses. And the two of them really don't talk to each other. When your accountant does their work, especially in the U.S., and it's a little bit different

[9:48] in Canada, but in the U.S. when the accountant does their work, they don't need to even look at your practice management software. They can do everything that needs to be done from your bank statement and your QuickBooks or your other accounting software, whereas most of the bodies that are buried in dental embezzlement are buried on the revenue side. In other words, in practice management software.

[10:11] So let's let's hear what David says about about the role of the accountants. I felt vulnerable and I asked my accountants for an audit just to because there was a lot of money flowing in and out of the practice for the purpose of the. You know, the debt service on this expansion renovation. I just wanted to make sure there were eyes on all of those transactions and it was weird. I don't remember their response precisely, but they basically declined.

[10:43] Like that wasn't really their role.

[10:49] When you look at embezzlement globally, in other words, across all industries, including dentistry, but also including everything else, accountants find about 40% of it. When you narrow that focus just to dentistry, that number drops to about 9%. And that's really what David found out the hard way. I felt vulnerable and I asked my accountants. Whoops, a little replay there, sorry.

[11:12] And then the next question for David that I asked him was, well, what did you learn from this? And he's got some great information here. Embezzlement, dealing with embezzlement is about prevention. I'm part of an unenviable fraternity in my state with two other orthodontists that have had this happen to them. All three of us are speaking to our local societies to try to help others. You won't get your money back.

[11:43] You won't get your sleep back. Just prevent this from happening. Put the safeguards in place. It's like a patient comes to you and says, doctor, I'd like to spend the least money on my teeth in my lifetime. And if you're having that conversation with a patient, probably what you're going to do next is say, okay, become really good friends with your toothbrush and your dental floss. And visit our hygienist as often as we tell you to, because that combination of things is a lot cheaper and a lot less intrusive than the alternative, which is what happens to people when they neglect the basics.

[12:25] And David's advice about your practice is equally good. It is cheaper and far less painful to work on prevention than to clean up after. So, last month, Lisa and some got got sentenced to three years in prison and was ordered to pay restitution of $200,000 to David use both David and Wendy askings who who was the lead investigator in the case were in the courtroom when Lisa and some got sentenced and they they each had something to say about their experience in the courtroom so let's let's hear from them both. And it just felt like the justice system was doing justice to what happened so it was there was closure, even before the verdict was read, there was an element of closure in just being heard, and having the facts the black and white numbers and facts presented to the court and read I felt a lot of excitement, just throughout the entire day, the excitement that this was the closing hopefully of one chapter for David, but the beginning of a new chapter for the thief who is now going to suffer the punishment for it. So that's how they felt after a few takeaways for all of you.

[14:12] The first one and I suspect Adrian will have a little bit more to say about this but I cannot overemphasize the importance of pre employment screen. One of the things that I've noticed about dentistry is that hiring decisions tend to get made with the benefit of a whole lot less information than what should happen. And I'm going to throw out a really sobering statistic for the audience if you live in the United States 70 million Americans in other words one in four adults has a criminal record. And yet I see countless practices that don't do the very basic criminal record check. It doesn't stop there either it's important to talk to former employers it's important to look at somebody's social media activity. Probably in a lot of situations drug testing is something that should be considered as well.

[15:05] There are a lot of things that need to happen. Before you bring somebody into that very important place called your practice, and it's really tempting right now when everybody's complaining about how hard it is to find people it's really tempting to shortcut this stuff. When you do that sooner or later you're going to get caught. The second important takeaway is financial oversight and there's a lot I could say here. But we'd all be here till midnight in whatever time zone you're in so I'm going to just keep it short. Three quick takeaways.

[15:37] The first one is the reports you look at at the end of the day and at the end of the month should be ones that you printed yourself. As soon as you allow somebody to print those reports, you create a huge person huge possibility of deception. So I know there are a lot of doctors who would like to go through their whole career without learning the first thing about their practice management software. It's a really bad idea. The second thing is a basic piece of math, the amount you collect should be the amount that you deposit. My suggestion would be to try to line this up monthly as opposed to doing it every day. What makes the daily comparison hard is that you have a lot of types of money coming in where the timing is different.

[16:22] In other words, if somebody pays you by credit card today, that's recorded as a payment your practice management software today, but it might not hit your bank account until the end of the week. So when you look at a month as opposed to a day, a lot of those timing differences have kind of self resolved. Again, a lot more I could say about that and I'm happy to answer any questions after. The third thing is articulation and as soon as I say that every dentist in the audience has this mental picture of the relationship that the mandible has with the maximum. That's one kind of articulation. What I'm talking about is financial articulation. And the way financial articulation works is this, if you have if your offices was open 21 days this month and you have 21 end of day reports in your left hand.

[17:10] And you have one monthly summary report in your right hand. The totals of each of fees and payments and adjustments from the 21 reports should be exactly the same as the total on the month and summary report. If those things don't line up in other words, if they don't articulate, then what happened is that somebody came in when the office was closed and pushed through some transactions that they clearly don't want you to see. So three quick takeaways again happy to answer any questions after and Adrian I guess you're up. And we just pulled up a quick poll, which will be a survey towards the end as well. And David looks like you struck a chord over 76% of surveyed people are looking for a follow up call so lots of good questions through there to the Q&A again guys we're really going to dig into it at the end to deep dive into these.

[18:11] We'll also after going through some key case studies but she was on we've got some great Q&A as well as we've got a chat that's just flurry of activity from the few hundred of attendees we have right now. So, on that note, Adrian you should be able to share. Hey, and, and just if you share the full screen Adrian we should be able to see the full presentation versus the. Got it. Got it. Looks great. Well thanks for the opportunity to be on here. As I have said before I always learn things listening to David and Eric you as well when we talk about these subjects sometimes that are a little out of our scope but we still need to know.

[18:57] So, I'm going to talk a little bit on negligent hiring. Give you a little bit of information about us. We're Ben Terrick sent in associates and we are we do human resources and employment compliance for the health care industry. We work exclusively with the health care industry. We've actually been in business for a little over 40 years, although I've not been here 40 years, but the business has been here with a stellar reputation and HR is our specialty. We work in all 50 states in the United States and as David was kind enough to remind me, we have a lot of participants tonight that are in Canada. And so some of the things that I may talk about may not apply to you in the province that you're in, but the bottom line is compliance and being careful and cautious about who you hire.

[19:52] The method and the ways that you go about it are going to apply, regardless of maybe some of the laws or regulations that you may deal with. We're in a lot of different dental publications, and we are the most trusted name in the profession for human resources for the field of dentistry. So there's a whole lot of different components when you talk about hiring. Tonight, we're really going to talk about reference and background checks and making sure that you've got everything in all your T's crossed in your eyes dotted so that when you go to hire that person, you know that you're covered. And my slide is not advancing. Add live.

[20:46] Wait just to be that I pulled up the poll Adrian so maybe. Yeah, yeah, it's right now. Yeah, it's good. So like I said, we're going to really hone in on the reference in the background checking. So the statistics right now for falsification on resumes and applications is astounding. You can you can guarantee that about almost half of the information or some of the information on resumes and applications right now is false. So adding whether it is the length of employment, maybe they are stretching the dates that they've been employed at a certain place. The salaries may be a little bit inflated. Right now there are many states that legislation is up in the United States that as a prospective employer.

[21:43] They're allowed to add to ask what the former salary was so that's one thing you need to be aware of. I'm not sure about the provinces in Canada, if that has made it that far north yet, but just be aware if you're in the United States and you're wanting to know what candidate has made in the past you need to be careful. I'm not sure what you're in because you could be under the legislation that says you can't ask about that. But some of the experience has certainly been inflated about what they have done, you know, what their capabilities are and their education. We are astounded monthly about hygienists that are coming in and they don't even have a license or their license is expired has not been renewed. But as far as it goes on their application and their resume, they're in good standing. So these are all things that you need to be aware of you need to know how to go about checking them, making sure that what you're getting on that application and resume is absolutely in fact true.

[22:57] This is a case study that we've come across where there was an associate doctor that was seeing a patient and mistakenly prescribed the wrong medication for a patient. He had some pretty severe side effects and the patient came back and sued the doctor for malpractice and it actually came back on the employer because when things were run and the records were looked into the employer had not checked any previous references on that doctor that he hired as an associate and it came back to the employer as negligent hiring, which is exactly what we're talking about. Had that doctor done the extra steps and I'm sure that it would have been more than one or two. He probably would have come across something in the references about that doctor. Even if he hadn't he could have said that he had done his due diligence in checking references and doing those extra steps to make sure that he had gone the extra step to to find out anything in the background about that associate that he was hiring.

[24:14] Another case study that we found was a doctor had hired a new employee had not done the reference check had not talked to previous employers. If she had she would have found out that that employee had been let go because she had a violent temper and had gotten into altercations with other employees. There was some behavior where they suspected that maybe there was a drug issue or a drug problem there, but nothing was done due diligence was not done on the part of the employer. So there was an altercation and that new employee unfortunately did a pretty nasty right hook, I guess, caught the other employee in the face, ended up with a broken nose. That also resulted in negligent hiring. When that employee that was hit and was hurt kind of dug into things and did some investigation on her own about that new employee.

[25:19] It really is important that when you you start to look at your the applications and the resumes, you know, make sure that you're digging in and that you're getting good information on that. So the negligent hiring goes back to when when that employee that you've hired ends up in some type of violent act or some type of act that affects another employee as a personal injury or some type of damage to an employee that you have on staff. So the court determinations in this will go back on the employer to find out. So what employer what doctor what did you do to do your due diligence to find out what the background was on this employee. Did you call the former employees to make sure that the information that you got on that application was in fact true, and it was provable for you before you hired that employee. And they're going to ask, okay, was this a risk that had you done due diligence and had you run the reference checks and all that that you could have discovered that well certainly. For the employee that had the violent temper that was let go from the practice that could have been discovered if they had been able to go through and do a reference check with the former employee.

[26:54] But like I said due diligence wasn't done. And that's how it ended up in court. So the court's going to look at the potential liability. What was the liability with the hiring employer, as far as going back and doing those reference checks and looking. So that's where the liability is going to end up on the doctor that hired that person without the due diligence. So let's talk a little bit about conducting the reference checks. There's a lot of questions about, well, you know, what and how, who can I call what can I do, you know, what do I need to have well the first thing we're going to recommend that you have is a signed release from that candidate that you can absolutely check the references. If they're not willing to give you a release to do that that may immediately put up a red flag that you need to think about and see, you know, what's going on why would they not want you to check their references.

[28:00] And I apologize for a little bit of lag here. I am working from a hotel room instead of my home office so waiting for my slides to advance. As you do Adrian interestingly on the poll results, almost a 5050 split to do you have an up to date policy manual that was created by an HR professional. Fortunately the knows have it 52% no 48% yes, and then do you check references by speaking to a former employers on each new hire yes 65 no interestingly 35%. Yeah, those are those are pretty scary statistics especially for the ones that do not have a compliant up to date policy manual with the way things are changing at such a rapid pace right now, not having that policy manual that you can refer back to on a consistent

[29:04] basis is really something that I would implore everyone to get taken care of, and not just borrowing your cousin that owns the hardware shop. You need one that is produced by an HR professional that knows the laws that knows the regulations that you're under wherever you're located with the threshold with the number of employees that you have. So having that policy manual is a huge critical component to having your HR covered. So, hopefully my slides will advance now so the next thing you need to think about when you're doing your reference checks is making sure that you're talking to the authorized source to give you the information. One thing that we recommend is if someone gives you a name of or a company to call and they just give you the person's name and a phone number. Do a Google search. Make sure that the phone number that they give you is in fact connected to the business and it's not maybe their best friend that you call and will give a glowing reference on that person.

[30:18] But do a Google search, contact or look up the business online to make sure that the number that you're calling is actually who you need to talk to. Hopefully you can talk to the doctor making sure that you're getting the authorized source with good, clear information. You're going to ask job related questions, things that can be verified so that when you ask the doctor, or if the doctor has passed you off to an administrator or a bona fide practice manager, making sure that your questions are within the realm of the legal questions that you can ask. You're not going to ask how old this person is. You're not going to ask how many kids they have. You're going to ask job related questions. We've got some examples for you that I'll get to, but making sure that they're within the scope of legalities and job related along the line. Avoiding any type of pre-offer questions that may come up, but once again keeping them job related and that you're verifying the information that has been supplied to you, whether it's through the office manager or the doctor or anything that you have done as far as researching the company goes. Consistency is another thing that we recommend that you strive for, that you're asking the same questions of all candidates so that nobody can do anything in the way of discriminatory claims, but you are consistently asking the same questions to each candidate that you interview.

[31:57] Some of the sample questions that we recommend is something like, if you're talking to a former employer, so what's your evaluation of the competency level of which this person performed their duties. That is somewhat subjective, but at the same time you're going to have, they're going to be able to tell you whether or not that person was able to perform the task, the duties and the responsibilities that he or she was assigned. This one, if you're asking a former employee or a reference, would you describe them as being self motivated? You know, if we ask the candidate that themselves, I mean, who in a job interview if they're asked, are you self motivated is going to go, well, you know, you know, every once in a while I kind of need a kick here and there to get me going. That's not going to happen. But this is a good question to ask that employer, you know, did you find that they were able to look around and see what needed to be done without having to be told every single task or duty that they did. So whether or not they were self motivated is a good question, especially if this is someone that is working in the admin department, maybe greeting your patients or are at the front desk that has a lot of duties about when the person enters your space. You know, how was their customer service skills? Did you feel like they were really connecting with your patients and making them feel welcome? And then that can carry all the way back to the clinical team, you know, whether they were good at making the patients feel comfortable relieving any anxieties that they may have.

[33:46] Asking how they were an effective member of the team, you know, did they get along with everyone? Were they somebody that kind of held the team together? Was their attendance satisfactory? You can certainly ask that because here again, this can be proven by your payroll records by your time clock, you know, whether or not they were in on time, whether they had issues were showing up at all. And of course, the last question is one that is universal. It's would you rehire this person? If you start out with that questions, a lot of times, you may know your answer as to where you whether or not you go further down the path with this person. If somebody says no, I would not hire this person back. That's definitely a red flag that you need to think about. When we get into doing background checks, we certainly recommend that you do background checks on on your people. There are a lot of pediatric practices in some states now that are being required to have background checks done with their employees. Just because they work so closely with children. I know some offices and pediatric, pediatric practice practices don't want the parents going in the back with with the child. That's certainly an area that maybe some parents would be concerned doing background checks and in that area would certainly be called for and not a bad thing at all.

[35:17] But there again, make sure that you're keeping it job related to type of background check that you have is going to be it's going to vary by state to state in the United States and it probably will vary in Canada. David will probably be able to address that in the question and answer section, but the laws pertaining to credit reports and credit checks can be pretty restrictive. You want to make sure that if you're doing a credit check, it's related to their job. If you've got somebody at the front desk that is handling finances handling money. Boy, you're certainly going to make want to make sure that they are trustworthy that they're reliable as much as you can, if they're going to be handling your accounting and taking money and credit card information over the counter. So the screening out portion of it is consistency. You know, if you knock one person out of the running for something being consistent across the board there again so you are avoiding any type of discriminatory issues that go along. So the selection process and the rejection process. Make sure that you know it's apples and apples oranges and oranges and that your selection and rejection is based on the same criteria.

[36:42] So that once again you don't run into any type of discrimination and avoid creating any type of disparate impact against one person versus another. So we've gone through a really quick overview of that and I think the bottom line is making sure that you've got great questions that you're asking every single candidate that you've got. Check your references if you have to do some extra work into going online, going to the company and Googling it making sure that you're doing that and you're talking to the correct person. Somebody that is authorized to give you the information and authorized to say yay or nay to give you any background information if you have those signed reference forms. A lot of times whoever you talk to may request a copy of that release from the candidate saying that yeah it's okay to give that information out. That is completely normal and so it helps for you to have your documentation in order.

[37:58] We are big on documentation at Bent Erickson and Associates so having the documentation there having signed authorization form certainly goes into it and helps you to do your due diligence and get away from any claims of negligent hiring. So that's it in a nutshell. So Eric, I will turn it back over to you. Well Adrian you've got at least seven or eight questions through the chat plus another probably half dozen or so on the Q&A which we'll get to shortly. So as we bring it to the third pillar, thanks Adrian, it's lots of questions between north and south of the border that we'll dig into. But ultimately a lot of good best practices and that really brings us to here where ultimately there are three key numbers that you may be shocked can impact your salability of the practice. So when we touch on now from embezzlement and employee theft to negligent hiring and or disastrous hiring fall one in the same.

[39:03] The third is those disastrous types of transitions and that can be things such as passing away right and falling to the emergency exit where you're nearly needing to sell quickly and stats are as that if you don't sell within the first 90 days. The likelihood of that practice selling falls to almost zero but three quick numbers 85% of dentists have a lease that can prevent them from ever selling the practice. So for the 74% of you that have a lease right there will touch on some of the core components that can be hiding in your lease. Now especially post pandemic what we see is that more often than not, especially as a lot of the office nationally through Canada and the US right the office market is softening for rents. There are even more than 40% of dentists overpayment rent. And as you'll see some examples and some videos of clients certainly 80% of landlords actually have a lease that structures it that they are entitled to a percentage of your sale price, meaning that when you sell the landlord says that that is just as much their profit as it is yours for the blood sweat and tears David continues to shake his shake his head over those staggered.

[40:14] For those of you that as this is the first serious webinar you've attended. Thank you welcome right we've been at it now 29 years we've done we're 13,000 of these types of dental office lease negotiations, and we're the only healthcare dental specialized tenant advisory negotiation firm of our kind in North America. With that being said, to really dig into some of the case studies. So, these are some that actually I pulled from some of the recent practice brokers so Tom Schneider is head of Henry shines practice trends. Transitions team, and these were for recent examples that we went through recently so number one, here was case number one this was a situation in the Northeast US where the buyer was so frustrated through the process, walked away from the deal, fully finance transaction with a fully negotiated purchase agreement. However, at the 11th hour they said oh yeah I forgot I got to assign the lease from the seller to the buyer. The landlord asked the seller to remain as the responsible party, also known as the continuing liability clause on the purchaser's new lease for the seller's remaining term of the existing lease which was two years and for the term of the purchaser's

[41:23] lease which was, you know, eight years on top of that for 10 concurrent years. After eight after weeks of negotiating the landlord relents and only requires a seller to be responsible party for two years. But through that period of time, the purchaser said this is nuts if they're making it so difficult for the seller, then there's no way that I want to get in here so the buyer just walked away and walked away from all of that issues, all because that lease wasn't structured in a way to allow for right that continuing liability clause to be removed. So, case study number two, financial strength of a purchaser. Now, you might be shocked to know that the landlord could have a clause in there that states that they have to be of the equivalent net worth of you on your exit when they are entering into the lease, an equivalent net worth. Well, how many associates are going to have the same net worth as you on your way out. So here's an example where the seller brought through a buyer to the landlord, right, must have at least 50% of the net assets of the seller or the seller is liable for five years after the sale. After, after full price offers over a year and a half of negotiations and offers were rejected by the landlord finally a purchaser was found as a needle in the haystack who happened to happen to own her own practice and her real estate.

[42:48] So finally the doctor could sell to finally find someone that was at least equivalent of half of her net worth. Number three, months to months for the 37 of you that are in a month to month lease, right, the 6% of you, case study number three months to month lease. One of the brokers had six candidates six potential buyers, where each potential seller had a month to month lease thinking that their landlords would give them a favor and they hey I'm not tied into it, and I can just walk away. But the sellers were shocked to learn that the purchaser would not buy and more importantly the lender, right, especially the big guys Bank of America, RBC north of the border etc. If there's insufficient term on the lease they will not issue a long term loan. So if there's only five years worth of term in some cases the banks will only give five years worth of payback period.

[43:40] And obviously if you're selling your practice for $2 million there's no way an associate's going to be able to service that debt over that short period of time. Six potential sellers were unable to sell their practice and had to walk away from their practices, all because of they left themselves very exposed with the month to month lease, which out without the ability of selling the cash flow and that continuation of payroll. So we study number four through the eyes of the purchaser, which we are all selfish as humans we're all thinking about number one, right, maybe not Adrian, but we're all thinking about number one. As a result, you need to start looking at your contracts through the eyes of the buyer, no different as your handbook through the eyes of the buyer your employment agreement through the eyes of the buyer and your leaks through the eyes of the buyer. So in this particular case, Byron seller got together agreed on the sale price agreed on the closing date purchasers a corporate entity, right had eight practices strong balance sheets, right the purchaser is also out of state, and new to the market landlords a real estate trust right the big REITs the big national guys landlord initially laid an unrealistic set of expectations with the seller to stay on for the remaining two years of the lease purchaser was required to give a corporate and a personal guarantee.

[44:59] And the purchase is both parties both sides everybody started to hey we'll handle it etc. But again through all the back and forth the landlord still wanted that pound of flesh to that personal corporate guarantee. And the purchaser said we're done walked away after spending $20,000 in legal fees and the buyer had already spent $9,000 in legal fees, all because of one little clause in the bottom of the this section. So for those of you for the few hundred of you that are running through here and joining us this evening. This is where if you're following along on a digital copy of your lease this assignment section is key. By definition, it's describes right the process as to if you can sell your practice right in alignment with assignment of the lease which is usually one of the two conditions of sale to sell your clinic it's usually conditional to the buyer getting financing. Number two, right the successful assignment of the lease, because how much is your practice worth without the keys. So therefore this assignment clause clearly does break down. When you can sell your practice what the landlords responsibilities are right what the conditions of that sale maybe right and more importantly, right what the actual continuing liability and financial aspects of it.

[46:15] So this is a personal client of mine. Dr. Mara Northern California came to me devastated right at 74 years of age. She was in a beautiful strip mall and the landlord owned right another building another another business in that strip mall and wanted her nice and cap space. So with similar language to the lease as we just described. The landlord had all the control as to whom she could sell to and when she tried to sell her practice three separate times one to a partner right one to an associate and even one to a corporate buyer. Every time the landlord said no. So it's 74 years of age you imagine this just to be able to reap the rewards from selling of her assets into her retirement.

[47:06] She was then forced to relocate 10 minutes north. Right, we were able to negotiate or a fit luckily right a great new agreement with the landlord that was very anxious to secure a medical dental tenant and we got the landlord to cover 100% of those building costs. Can you imagine being 74 years of age and being forced to go through the headache of relocating all because of one little sentence right hidden in article 76 subsection two of your lease agreement. Right, so as we look to that this is what to look for right number one is don't be surprised in your lease. This is an over 75% of this section is in almost 100% The landlord must give you prior written consent to allow you to sell your practice. Number two, the landlord could say yes, the landlord can say no, or the landlord can say you know what. I'm terminating your lease effective of your closing date of when you plan to sell retire and move on just for asking to sell your clinic and assign your lease, putting all the power back to the landlord.

[48:19] Oh, and they can also reset it back to market rent or 15% greater. Oh, and by the way, any difference between what you'd normally spend in rent versus your proceeds the landlord is entitled to a percentage of those practice sale proceeds. Four files cross our desks in the past few months where the landlord has collected anywhere between $60 to $160,000 of consideration money cash from the doctor, just purely for the landlord's right to assign it from them to the corporate buyer or otherwise. As shocking as that is, and then arguably most importantly, which killed those previous three out of the four deals, right as it states here not was standing. And look out for those the landlords consent to any assignment or subletting the tenant shall not be released from its obligations under this lease and shall remain liable for any failure of the tenant or design ease forever and ever on that meaning that you will remain as liable personally or appropriately as you are today, even years after you've sold a doctor who attended one of our courses pre COVID in Michigan, raised his hand and said this exact thing happened to him. He retired in Florida got a phone call years later. Unfortunately, the doctor he sold to was three months behind in rent and gone.

[49:34] The landlord said unfortunately because of the continuing liability doctor you remain liable and you remain liable right for not only the past three months but the remaining four and a half years on the lease. The doctor called his office manager and had to reopen the clinic. Had to get the band back together one little clause hundreds of thousands of dollars of liability. Number two, and we've got a doctor here to share their story. One particular clause on the options if there's two takeaways from tonight. Right number one is to add in into your calendar right now when does your lease expire and more importantly when if any is your option to renew deadline. If you fail to miss that option to renew deadlines.

[50:20] Those remaining options become null and void and you right have just become a month to month tenant. One little clause right could be personal to you right that you don't have the only you have the opportunity to renew the lease not the buyer. Right or the landlord could put through a new standard form lease or the landlord can give all new rent right at your expense. An example, recently out of Texas, a doctor had reached out to us got this his friend right was the doctor next door thought it was his friend golfing buddy etc. Right got this letter had built it five years prior got this letter and said unfortunately as you know your lease expired November 14 20 2018. Right you had an option to renew but you were required to give me notice by six months prior to the expiration of your lease which you did not do.

[51:11] However, please be advised my broker will be placing a for lease sign a conspicuous but non intrusive place on the premises this week and they'll only show you share your premises you know during business hours. Oh lovely right how oh and if you want to stay have your people call my people. So this is a very similar situation to what happened to a great client of ours and I'll share this from Dr. Dr. Thatcher here quickly. My name is Sam Thatcher. I'm a general dentist here in San Francisco and I'm also the team dentist for the San Francisco Giants. I've been practicing about 20 years.

[51:50] I've been in this space for 16 years. We actually started from scratch. This was an empty space and we started and we had a family friend who's an attorney look over the lease for us. Although we really didn't negotiate that much because we were just really excited to get in and start practicing. After practicing for 15 years my lease was coming up for renewal and I actually missed the renewal deadline. So that made me pretty nervous and anxious about renegotiating a new lease with fair and affordable terms to protect me and my family.

[52:22] My Henry Shine sales rep Ellen Hong is the one who recommended Siris Consulting Group to us. She's been our sales rep for years and I really trust everything she recommends to us. So when Siris looked over my lease they found several major issues. The assignment clause gave my landlord the right to terminate my lease and throw me out of the practice if I tried to assign the practice to someone else. There's a clause in the lease that says that the owners are entitled to half of the funds from a sale. In other words if I were to sell my practice for a million dollars they would receive $500,000 of that.

[52:51] And the new owner if they were to default I would be on the hook financially. There was the relocation clause which said that they could actually relocate this practice to somewhere else in the building at any time and I would be left on the hook financially for that move. After reviewing the lease it was a no-brainer to retain Siris to handle my lease negotiations. Siris was able to negotiate some very reasonable rental rates. They were also able to eliminate the relocation clause completely.

[53:20] They were also able to renegotiate the assignment clause. This took away my landlord's rights to any of the practice sale proceeds. It also took away their right to terminate the lease and it took me off the hook financially if the new owner were to default. Siris was also able to negotiate $6,000 in attendant improvement allowance to allow me to remodel my space.

[53:40] They also negotiated a five-year option to renew and they gave me the ability to review any operating costs charged to me by the landlord to make sure I'm being charged fairly for any camp fees or other operating expenses. So from that perspective you know prime example Dr. Peek of his career thinking about now transitioning etc and all of that was going out the window all because of one little clause and just being busy

[54:07] and forgetting to exercise that option. So any of that has caught your attention and caught your concern. These are just some great one-to-screen shot. This is a great component to look at just some of the clauses we typically focus on when we review leases to help understand exactly where your red flags are. So at least now you can be clear and ideally have a negotiation treatment plan next time around.

[54:30] As we summarize and get to Q&A number one is start early. The best time for those of you in a lease are starting at least 24 months in advance prior to your lease renewal. The earlier the better the more time you have the more leverage. It's never too late but the more time you have the more leverage it's about 18 months to pick up and relocate.

[54:49] Number two get all the information get a digital copy of the original lease and the amendments, writer's exhibits. Number two is get all the information you need for goals all the way through the process, have your lease professionally reviewed. Get the average rental rates. And then number five is determine that carefully choreographed game of chess

[55:09] long before you do anything but please don't pick up the phone tomorrow and say I just watched Adrian and David and Eric and Mr. Landlord what do you want to charge me now? It's far better to have a full carefully choreographed plan long before your very first move. Then negotiate the business clauses then negotiate financials.

[55:29] So from that perspective as we'll run through a quick poll for all. So again for those of you that have been eyes have been opened right for those of you that do and do want a consultation with then Derrickson ourselves right and prosperity. We'll get you through the poll questions. And also we're here to help.

[55:50] I think the biggest point through all of these Q&A sections is you're not alone in all of this right my God you've got done and invested heavily through the sacrifice through dental dental school through all the process through all the financial investments through all the headaches right to signing your first associate agreement to signing your first employer agreement as the employer

[56:14] let alone your first lease on the trunk of a car right thinking that oh if I don't sign here today I'm going to have four other dentists that are going to take that space right or boy just you know what I don't even want to think about my office manager taking from me because my God if I lose my office manager right God maybe it's almost worth it to look the other way

[56:32] you're not alone in all this right if there's one key take away is that there are teams of specialists that do nothing but this right who knew who knew there was a dental office embezzlement firm that just does dental office embezzlement or dental office leases or dental office HR right so again it's a pleasure to help assemble this VIP cast for those of you again

[56:56] we waive our fee and appreciation for your time the complimentary rental rates and office lease review I know roughly 65 of you had already requested it even before we had started the event so I wanted to get to some of those Q&A and truly appreciate the great questions and feedback we've had here and I see a lot of emails are already coming through so

[57:16] from that perspective to now jump in into some of those Q&A so Sheila you've done a great job on the notes I see there's lots of updates David you've been keeping in touch David you started first I know you've seen a good swath of them for you why don't you jump in first David in terms of some of the key questions and some of the outstanding

[57:37] ones that we can address first absolutely and I tried to answer as many as I as I could directly while while everybody was talking but some some people were looking for more specifics on embezzlement techniques I'm going to tell you that Prosper didn't just doesn't do that in a public venue so if you if you do have that question please feel

[58:02] free to reach out to us after the webinar we can have a one on one conversation but I'm just not going to comment here on specifics of how people steal somebody asked to explain articulation again I thought that was a great question and if you and I rather than do it verbally I just typed a written answer that you can see in the in the Q&A I made

[58:27] it public for everybody and if you if you want to keep that answer you can just copy it and paste it or you can take a screenshot by if you're on a Windows computer doing the Windows button on your keyboard and print screen that's how you that's how you capture a screenshot I think those those were the key ones there there were a number

[58:47] of questions that probably overlap between Adrian and me a little bit and there were really two recurring themes one was negligent hiring and the question was is negligent hiring a thing in Canada it absolutely is the the other question and Adrian please tackle this because I'm I'm sure you have a great answer a lot of people seem to seem

[59:09] to think that they can't do anything other than confirm employment dates when they're a former employer and they're contacted by a prospective employer yeah yeah that is true that is something that is like the myth that just goes on and on and on there is certainly some wisdom and discretion that you need to use one thing is okay do you

[59:31] have a release from this person that you can give a reference or or that you can contact former employees and at the same time if you are calling a former employee about a candidate and you're asking questions that that former employer can substantiate such as was this person on time that they miss a lot of work things like that that the like

[1:00:02] I mentioned before that the payroll records can be brought up and if that employer the former employer gives you that information they can prove that what they gave you was correct it takes away a lot of the liability but there again we're going to always recommend that you have a release by that person to

[1:00:22] call the references and if they're going to give you references then why wouldn't they sign a release so there are a lot of questions that you can ask I know David like you like you said many people are under the impression that oh well all I can ask is when did they work for me like date of hires and how long did they

[1:00:45] work or would would you rehire this person and that's not true you can get further information once again I will reiterate make sure you have a release from the person an authorization to check references but then the information that that former employer gives you it can be substantiated with documentation and

[1:01:08] that's always going to be imported so yeah there are questions that you can ask other than just would you rehire this person and I'll amplify a little bit 17 states give what's called qualified privilege in other words that that is almost the same amount of sanctity as a conversation that you have with your

[1:01:31] lawyer or your priest or your doctor so there's there's qualified privilege in a lot of states for conversations between employees or between prospective employers and current or former employers and in those cases you can as long as what you say is true and without malice and not

[1:01:48] discriminatory there's nothing you can't say and you can back it up that's the true part that's the true part absolutely we're big on documentation so if you ever hear any of our presentations we are going to pound you over the head with document document document you know just like Eric will

[1:02:08] tell you in real estate it goes back to your documentation and in HR it is absolutely the same documentation for everything. It's a good follow-up and there was a bit of a theme through that of sort of disbelief through some of the notes and some of the Q&A but it's

[1:02:27] especially young associates I remember doing a CE course close to your big event in October Adrian and Denver and you know a prime example was you know some associates up front said we're working for a corporation said oh well the landlord can't do that the landlord can't do that

[1:02:41] the landlord can't move me the landlord can't you know hold me liable the landlord can't kick me out and there was an endodontist in the back I'll never forget it 62 years of age and just started roaring roaring and said let me tell you what the landlord could do I was

[1:02:55] forced to relocate three separate times right once as an associate and then twice should have known better but all as a result that look if the landlord wants to you to walk in with a purple hat and with a feather in a hop on one leg they can do so right this

[1:03:12] is the world's oldest profession the lord of the land and they can all the way down to the type of procedures you're doing we've seen orthodontist be able to negotiate exclusivity over the subspecialty of orthodontist street phase one phase two

[1:03:26] and this line etc. including then the GPs from offering that based on how the lease is structured so literally down into that nitty gritty you know this isn't you signing a you know residential lease in college

[1:03:38] and thinking I you know what if the landlord is going to turn off the heat that the the news channel is going to show up and CNN is going to be here and it's you know going to be alright for the people this is an agreement between two separate

[1:03:50] corporations your PC right in the landlord and it is all down into the T's and C's so the reality of half of these questions that have been all flowing through is what's in your agreement right what's in your employment agreement

[1:04:02] what's in your handbook right what does it specifically say within your lease yeah we do in some of our pre hiring forms in the packet of information that our clients get

[1:04:14] we give forms or we offer forms about giving referrals or giving references as part of our hiring package so you know that kind of

[1:04:26] sets kind of a precedent there that you have that form in the documentation so that if it doesn't work out down the line and that

[1:04:38] employer employee goes somewhere else you have the authorization to give references if they want to keep that so like you said Eric it all comes down to the paperwork and

[1:04:50] what's in it and what's not if one more thing I'll add and I'm a little fussy about terminology here in one area I think criminal record check

[1:05:02] should be called exactly that background check means different things to different people so I never use that in substitution for a criminal records check another question was asked do you need an applicant's permission

[1:05:14] to conduct a criminal record check and I think the answer is irrelevant in other words it doesn't matter whether you need it or not in the state

[1:05:26] should you get that permission absolutely should I'm going to go one step further when you're posting a job tell people what the scrutiny will be in other words if you're going to drug test tell people that when you post the job

[1:05:38] if you're going to do a criminal records check if you're going to whatever else you're going to do if you're going to look at social media tell people that why because the best thing you can do

[1:05:50] is separate unsuitable applicants in other words you don't want to get through the whole hiring process find the exact person you like and then say oh and by the way we're going to drug test you and have them say

[1:06:02] oh well maybe this is the job for me at that point you've invested a hell of a lot in a dead end so when you post a job make very clear what the scrutiny will be and let the people

[1:06:14] who know they're going to have a problem with that scrutiny just weed themselves out save yourself some time and stomach lining I will if I can David

[1:06:26] there's a lot of questions from employers on best practices here I will say from specifically from having all of these great courses from David as an employer myself

[1:06:38] what I've specifically done based on David's recommendations from many of these courses you can see through our youtube channels or otherwise but number one is I always get the corporate visa card statements now sent to my home

[1:06:50] versus to the corporate office number one, number two is I also get a copy and now know how to access the alarm code and in terms of who uses it and when

[1:07:02] in our case we have the individual pass keys so we can see who's using it when and who's access in the office and when and those I know David you didn't want to get into any specifics but just as one employer or two the masses of other

[1:07:14] employers here those are two little best practices that I've done as well as obviously you know keep every specific alert and app on my phone and I even trigger it so that any time the corporate card

[1:07:26] trigger something at 0.01 cents for the personal card as well to the sugar of my wife but needless to say it does oh Eric stop, stop, stop

[1:07:38] it's for fraud prevention fraud prevention one final question Dr. H I had a clause authorizing my sale at the practice

[1:07:50] to anyone in the health profession does not restricted to dentistry I have a walk away clause but it states that I can sell as long as the profession is qualified in the area of expertise as long as it's health related yeah Dr. H

[1:08:02] obviously a client of ours and I saw your note today so looking forward to reconnecting with you as well in my old hometown of San Diego so yeah happy to discuss but obviously we did some great work and we'll give it as broad

[1:08:14] of a capture as well so that depending on your situation whom you want to sell to right the water wider the audience especially someone that wants to be multidisciplinary or otherwise there's lots of options

[1:08:26] there Sheila anything else we've missed David Adrian Nope I'm good I think that covers it I did have a question from

[1:08:38] someone that was asking if we were going to talk about hiring and employees quitting on this webinar and I just offered for them to contact me

[1:08:50] directly and I'd be happy to answer any questions One thing I'll mention that we started doing Adrian that I find helps a lot you know a lot of employers are complaining about ghosting now you know people

[1:09:04] applying and then not showing up for the interview or getting the job and not showing up one thing that that I did recently was when when people

[1:09:16] apply for a job with prosperity now we require them to make a one minute video on why they want the job and that does two things it increases their investment because a lot of times people will post the job

[1:09:28] on somewhere like indeed and there's very little effort for an applicant to just say send my resume here here and here and here when they have to do the video that increases their investment a lot it also

[1:09:40] for us selfishly we do people who can't use computers you know somebody who can't figure out how to make a one minute video probably doesn't really have the computer skills to work here so that's that's a trick

[1:09:52] we've tried and it seems to be working so far and I just throw that out for the for the audience in case that helps them yeah another another thing that is kind of old school is

[1:10:04] when people will advertise their jobs they will say please send us a cover letter and they'll put two or three instructions on in that cover letter and say please do this this and this and if the person can't

[1:10:16] follow through and follow those instructions then you know we believe in a process of elimination when you're looking through resumes is if they can't follow a couple of simple instructions then okay maybe they're

[1:10:28] not a good fit great comment from dr. C you've got all the material for another webinar my hour is up well I cannot thank you enough if there is

[1:10:40] a part two we're happy to do it as well and and truly appreciate David Harris it's an absolute privilege and Adrian every single time staffing issues the difficult conversations

[1:10:52] you're always incredibly caring and give some great best practices there you're very kind Eric thank you hopefully our clients will reach out same for David and help us out there guys and we certainly appreciate it

[1:11:04] so on that note thank you so much we are here all of our contact details are there they'll be an exit survey as well we certainly appreciate your feedback for anything we can do or new topic ideas for the future and

[1:11:16] if you want to continue to hear some of the war stories and how we got through them we're happy to do another one as well perfect on that note Adrian thanks so much David see you love have a good night thanks everybody

[1:11:30] thanks for listening to the dental practice owners podcast brought to you by prosperity you can contact prosperity through its website or by calling

[1:11:44] 888-398-2327 if you have questions about this podcast if you would like to discuss your practice or there is a topic you would like to see in a future podcast we would love to hear from you amber

[1:11:56] Wendy and David will be back soon with another episode