In this episode, we talk about:

[2:39] Michael’s career path into advisory services for healthcare, physicians, and real estate

Michael has worked as a CPA in a broad range of advisory services for 41 years, starting with his current firm in 1981. As he was working with healthcare clients and physician practices with traditional accounting and tax matters, he realized he was most interested in answering questions in an advisory capacity about subjects beyond accounting and tax. With his growing interest and client needs, the firm decided to focus on building and growing that side of the practice. Starting with 15 people and a local representation of physicians, services have now expanded to other locations, with up to 280 people in the firm and locations in 47 states.

[8:24] The formulas and compromises that have become lifesavers for practices

Michael has seen a lot of practices buy somebody out at appraisal value, which is really only on sale, and then he feels they’re locked in a ‘death spiral’ because everyone who funded that wants their own buy out at that same level. Michael’s firm has focused on getting into the true value of a minority interest and they try to lock that value in, using tested formulas to create a predictable methodology that can be applied to everybody. This has created a much more sustainable real estate model. In the physician world, Michael says they are usually dealing with ego and economics, and they believe they’ve solved both of those issues with their formulas, creating solutions for their very intelligent client physicians.

[12:35] How Michael and his team choose the winning model for each practice

Michael and his team believe the very first step in creating a winning model for any practice is to listen. As every practice has varying needs and goals, they ask about what has worked in the past, what challenges the practice has faced, and then they create a few solutions. They’ve created blended approaches, and in the small chance they can’t solve the problem, like when multiple groups come together and they can’t get equitable ownership across all real estate, they may suggest to sell some buildings and cash out to eliminate the conflict between who is paying rent and who is benefiting. Every group needs something slightly different, and Michael and his team work hard to ensure they have the best available options going forward.

[14:40] Examples of how Somerset CPAs and Advisors help their clients

Somerset CPAs and Advisors help their clients in many ways, working especially hard to solve all the problems they have seen in the last 15-20 years on the front end. They have used new methodologies to fix existing portfolios, set practices up for success before their first building of ownership, and to guide practices out of leasing and into ownership, creating business principles that legal will memorialize in an operating group. They believe in deciding on business principles in advance, walking through every scenario and making sure that everyone agrees on what would work best, including agreeing on valuation methods for good and adverse departures.

[20:50] Michael’s thoughts on the safest real estate investment in the world

Michael believes that the safest real estate investment in the world may be owner occupied buildings. You can trust that your practice will be successful, recruit doctors, create a great practice with a solid reputation, and pick a good location. You can also include space for complimentary companies that would allow you to not pay 100% of the rent, but still have the total amount of rent paid to your real estate entity.

[23:31] Our recommendations to get started in real estate ownership

Michael and his team have a pretty comprehensive plan to get physicians off to a great start in real estate ownership, even if they haven’t invested in land yet. It’s a great idea to start this process at least three years prior to your lease expiration so that there is adequate time to draft and revise plans and documents, buy land, and build. It would also give additional time to prepare for possibile supply chain issues or zoning complications. 

[28:13] Deciding when to exit

If you own your real estate, there are countless opportunities to exit, you just have to decide when and how exiting would work best for you. Michael has been most impressed with a partial exit, and has found that there are really creative entities out there that have found really good solutions without always having to be an all or nothing approach. Whether you’re struggling with too much real estate in your portfolio, or you want some cash for your medical operations, there are ways to exit that would be beneficial to your goals.

[29:35] Michael’s first job 

Michael’s first job in high school was in janitorial services in an office building. His most memorable job was during a time he was in college working three jobs during the Summer, one of them being a team that would paint street numbers on the curb and then collect donations. After that, Michael found Somerset CPAs and has been with them ever since.

[32:09] What Michael is currently reading or listening to for news, information, or inspiration 

Michael listens to CNN for most of his news as he feels it’s the least politically biased. When he has time to read he focuses on the future of healthcare payment models, like Dr. Marty Makary’s book on wasted costs in healthcare.

[33:16] What Michael does for healthy self-care

Michael has always had a passion for running. Now, as a father, he enjoys walking four days a week. 3- miles at a time, and then spends time playing baseball with his son.

[34:30] Michael’s thoughts on whether leaders are born or trained

Michael believes there are a lot of natural born leaders. He feels there’s something innate in most leaders, like personality or a natural magnetism, that doesn’t come from extensive learning. He does think you can become a better leader by reading, observing, and listening, but he leans more toward people being born with elements of leadership.

Thank you for tuning into the Providers, Properties, & Performance podcast!