Announcement

Collapse
No announcement yet.

"Showing the books"

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • "Showing the books"

    When reviewing an offer, what types of documents should a resident being offered a partnership-track position in a democratic private practice be asking for?

    Many people talk about how new hires should "see the books" as part of due diligence before taking an offer, but what does that exactly mean?

  • #2
    Welcome to the forum. I don't think you're going to find any practice that is willing to share private information with an employee. When everyone has decided it's a good fit and you are ready to buy in to the partnership, that is the appropriate time to ask to see the financials. The purpose is to justify the price you are being asked to pay for your share.
    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

    Comment


    • #3
      As much as you'll be allowed to view honestly. Some will let you see everything, this is rare. Most will be more opaque. I think it should be more transparent otherwise you could be getting sold a lie.

      Hard part is interpreting what the books say.

      Comment


      • #4
        The only thing you should expect to see as a potential new hire is your contract. That should explicitly detail what work you're going to be expected to do and what compensation you'll receive for that. Ideally, it'll outline your path to partnership, including time frame, goals you'll need to meet to get there, who needs to vote you in, how the buy-in will be calculated, and what you're actually buying into (as many places have 'tiered' partnerships, where all partners aren't equal, only some own stakes in the real estate or equipment or some ancillary revenue stream -- watch out for those gotchas, they tout how you'll all be 'partners' and you will be...in the professional practice, but only a couple of the senior guys own the thing that really makes all the $).

        As far as seeing further into the books, you can certainly ask. Before you do, make sure you know what info you're actually hoping to learn in the unlikely event they are willing to provide you with more info. If you're just asking to ask, but you haven't the first idea about what a P&L looks like, or how to figure out if they do a good job with billing and collections or not, or if they're swimming in unsustainable debt, you'll not get much out of the endeavor. If you're savvy with regards to those things, great. The more you're conversant about, the more they're likely to try to reasonably answer what you're asking.

        One piece of financial info that'd be nice to have would be to see actual total comp data for a representative doc in the practice. Again, they may or may not show you anything, but it's often reassuring to see a real world confirmation of 'this is what Dr. X made in 2017' with totals of all the comp they received for working. That may dramatically change before you become partner, so it's just a 1 year data point, but it's nice to see that there's truth to the 'I made Y $$$ last year'...not that anyone would ever inflate that number when talking to a potential hire...

        Comment


        • #5
          I completely disagree with Johanna here. By becoming an employee you are expecting to become a partner, not stay an employee. You are also tying your future income, reputation, financial goals, etc. to this group. It’s only sensible to get the books before signing as an employee. I’d look to get 2-3 years worth of their financial statements and to have these looked over by someone who can interpret them wisely. Ask about buy in and what this is tied to. Inspect the financials to see if this is reasonable. You don’t want to find yourself in a situation 2 years down the road kicking yourself for not doing your due diligence now.

          A private group not offering their financials to an employee expecting to be a partner is a red flag, especially after you demonstrate a willingness to sign a non disclosure.

          Comment


          • #6
            You may not be allowed to "see the books" but I don't think it's unreasonable to get some sort of verification of what partners make.  If they won't show you W2's or whatever, you should at least be able to assess case/RVU volume and see if what they're verbally telling you matches up with rough calculations based upon volume.

            Comment


            • #7




              I completely disagree with Johanna here. By becoming an employee you are expecting to become a partner, not stay an employee. You are also tying your future income, reputation, financial goals, etc. to this group. It’s only sensible to get the books before signing as an employee. I’d look to get 2-3 years worth of their financial statements and to have these looked over by someone who can interpret them wisely. Ask about buy in and what this is tied to. Inspect the financials to see if this is reasonable. You don’t want to find yourself in a situation 2 years down the road kicking yourself for not doing your due diligence now.

              A private group not offering their financials to an employee expecting to be a partner is a red flag, especially after you demonstrate a willingness to sign a non disclosure.
              Click to expand...


              That has not been our experience, but that doesn't mean everybody's experience is the same. It sure doesn't hurt to ask. I agree it would be a good thing, just that most partnerships (again, only in my realm of experience) are more "opaque" as @Zaphod said. Appreciate your providing an alternative POV and the nondisclosure is a good point, also.
              Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

              Comment


              • #8
                We're pretty open with our employees/partnership track docs ONCE they're in the partnership track. But we don't show our books to everyone who interviews with us. If they ask what a partner is making, we'll certainly tell them. That's what they really care about most of the time.
                Helping those who wear the white coat get a fair shake on Wall Street since 2011

                Comment


                • #9




                  We’re pretty open with our employees/partnership track docs ONCE they’re in the partnership track. But we don’t show our books to everyone who interviews with us. If they ask what a partner is making, we’ll certainly tell them. That’s what they really care about most of the time.
                  Click to expand...


                  So you all would refuse to show a person who has been offered a contract your books?  Not interviewing, but who has a contract like the OP.

                  Comment


                  • #10







                    We’re pretty open with our employees/partnership track docs ONCE they’re in the partnership track. But we don’t show our books to everyone who interviews with us. If they ask what a partner is making, we’ll certainly tell them. That’s what they really care about most of the time.
                    Click to expand…


                    So you all would refuse to show a person who has been offered a contract your books?  Not interviewing, but who has a contract like the OP.
                    Click to expand...


                    I guess we'll cross that bridge when we come to it. I don't think anyone has ever asked. I don't think we have a policy about it. I think I'd start with asking what they want to know and then determine if we're comfortable revealing that info. Bear in mind "the books" aren't exactly readily accessible to any of us. We hire out our coding and billing and I really only see a summary of the data once or twice a year.

                    It likely matters more to the OP than someone joining a larger, more established/more standardized group like ours.
                    Helping those who wear the white coat get a fair shake on Wall Street since 2011

                    Comment


                    • #11










                      We’re pretty open with our employees/partnership track docs ONCE they’re in the partnership track. But we don’t show our books to everyone who interviews with us. If they ask what a partner is making, we’ll certainly tell them. That’s what they really care about most of the time.
                      Click to expand…


                      So you all would refuse to show a person who has been offered a contract your books?  Not interviewing, but who has a contract like the OP.
                      Click to expand…


                      I guess we’ll cross that bridge when we come to it. I don’t think anyone has ever asked. I don’t think we have a policy about it. I think I’d start with asking what they want to know and then determine if we’re comfortable revealing that info. Bear in mind “the books” aren’t exactly readily accessible to any of us. We hire out our coding and billing and I really only see a summary of the data once or twice a year.

                      It likely matters more to the OP than someone joining a larger, more established/more standardized group like ours.
                      Click to expand...


                      That's amazing that no one has ever asked.  AT&T has been around forever and is well established, but if I were going to tie my entire net worth to that stock (which I wouldn't) you bet your butt I'd do a thorough financial analysis.  Exhibit A for why this is necessary:  GE.

                      Even if accounting is outsourced it can still be obtained by a simple email.  It's amazing what some groups expect new partners to pay for.  Certainly the analysis matters more for a small group, but the basic argument still holds about doing due diligence for a larger group.  It makes no sense to me for people to argue about a careful analysis of a contract but not to do the careful analysis of the numbers that underly parts of that contract.

                      Comment


                      • #12


                        That’s amazing that no one has ever asked. AT&T has been around forever and is well established, but if I were going to tie my entire net worth to that stock (which I wouldn’t) you bet your butt I’d do a thorough financial analysis. Exhibit A for why this is necessary: GE. Even if accounting is outsourced it can still be obtained by a simple email. It’s amazing what some groups expect new partners to pay for. Certainly the analysis matters more for a small group, but the basic argument still holds about doing due diligence for a larger group. It makes no sense to me for people to argue about a careful analysis of a contract but not to do the careful analysis of the numbers that underly parts of that contract.
                        Click to expand...


                        I understand what you're saying but it's a bit different for publicly traded companies where the financials are public knowledge. With that said, I doubt any private group is going to hand over all the financials to those who ask, however, you should have a clear understanding of the buy-in, buy-out, structure of the partnership, and the average compensation for partners over the last several years.

                        Comment


                        • #13





                          That’s amazing that no one has ever asked. AT&T has been around forever and is well established, but if I were going to tie my entire net worth to that stock (which I wouldn’t) you bet your butt I’d do a thorough financial analysis. Exhibit A for why this is necessary: GE. Even if accounting is outsourced it can still be obtained by a simple email. It’s amazing what some groups expect new partners to pay for. Certainly the analysis matters more for a small group, but the basic argument still holds about doing due diligence for a larger group. It makes no sense to me for people to argue about a careful analysis of a contract but not to do the careful analysis of the numbers that underly parts of that contract. 
                          Click to expand…


                          I understand what you’re saying but it’s a bit different for publicly traded companies where the financials are public knowledge. With that said, I doubt any private group is going to hand over all the financials to those who ask, however, you should have a clear understanding of the buy-in, buy-out, structure of the partnership, and the average compensation for partners over the last several years.
                          Click to expand...


                          You cant have a clear understanding of buy in/out if you dont know what you're buying. I wouldnt give it to an interviewee, but if someone was being considered strongly for a position, an NDA and some kind of summarized financials for last three years should be fine. Doesnt have to be detailed, just important stuff to applicant.

                          The other thing is you have to remember even among those that ask you are going to get about a 99% rate of not knowing how to look or what to gain from the information before them, so its kind of not an issue in reality and more a trust building endeavor.

                          Besides, even in public companies, like GE, its so easy to hide toxic problems and make the books look great.

                          Comment


                          • #14


                            Doesnt have to be detailed, just important stuff to applicant.
                            Click to expand...


                            I think what I outlined is what the applicant will deem important. Again, the average compensation per partner will be most important out of all of those and that is what most applicants will want to know any way.

                            Comment


                            • #15





                              Doesnt have to be detailed, just important stuff to applicant. 
                              Click to expand…


                              I think what I outlined is what the applicant will deem important. Again, the average compensation per partner will be most important out of all of those and that is what most applicants will want to know any way.
                              Click to expand...


                              Agree you're likely to do well with that, making compensation clear and obvious. Doesnt make it the end all, but many wont look further.

                              What is the cost of that compensation, both now and when someone leaves? Probably too high level for a new person as we dont seem to learn that its an important question except by experience.

                              Comment

                              Working...
                              X