As a business and health care law firm, we represent clients in multiple sectors and specialties, especially health care. This season’s theme is The Universal Language – Business, and in this episode, Michael and Brad share their experience as entrepreneurs. Tune in for lessons learned, proudest business strategies, and the truth serum of every business…money!
Join us next week as we are joined by special guest Amir Mortazavi, CEO & founder of Vitalyc.
Listen to the full episode using the player below, or by visiting one of the links below. Below is the episode’s transcript which has been edited for readability. If you have any questions or would like to learn more, email us at info@byrdadatto.com.
Transcript
Intro: [00:00:00] Welcome to Legal 123s with ByrdAdatto. Legal issues simplified through real client stories and real world experiences. Creating simplicity in 3, 2, 1.
Brad: Welcome back to another episode of Legal 123s with ByrdAdatto. I am your host Brad Adatto with my co-host Michael Byrd. Michael welcome to a new season.
Michael: Thanks, Brad. This past season was one of my favorite seasons, but I am excited for season 8 and I can’t believe I’m saying that out loud. Season 8.
Brad: I love it. Michael, let’s roll out to our loyal audience. What is in store for them for this season? Drum roll, please.
Michael: As a business and healthcare law firm, we represent clients in multiple sectors and multiple specialties, especially healthcare. This season, we’re going to be searching for some common ground, Brad. We are trying to [00:01:00] find that commonality for our diverse audience, and we’re going to bring in lots of guests to help us. This season’s theme is The Universal Language – Business.
Brad: I don’t know if that sounds right, Michael.
Michael: You know, Brad, I hate to admit you’re right. I agree with you. In fact, I even Googled it because I always thought the universal language is love.
Brad: Ahh, l’amour. C’est très bien. Je suis tellement amoureux de Français. La cuisine, le vin, le fromage, Paris, le vin…
Michael: That’s enough, Brad. You have got to stop. I’m from Texas, I don’t speak any French. I think I heard wine in there somewhere, but yeah, we got to move on from the French.
Brad: I see. I always thought the true language of love was speaking French because maybe you could be eating lots of cheese and drinking lots of wine, but I’ll grant you that [00:02:00] business is a universal language.
Michael: According to Siri, you’re right, Brad. In fact we’re all right. Love is considered a universal language and French is considered the universal language of love. And of course, as you said, business is a universal language as well.
Brad: So, Michael, are you saying we should change the format and maybe talk about love this season? Um, but maybe still stay away from our dating lives.
Michael: Definitely stay away from our dating lives, but maybe we can combine all of this together and have a season that’s about business and love.
Brad: Oh, okay. Challenge accepted Michael. Following this new season on business and love, did you know that it’s legal for an attorney to sleep with their clients in Texas?
Michael: That escalated quickly, Brad. This is why you can’t have nice things.
Brad: That’s probably right.
Michael: And it’s also a reason why we can’t host a show talking about love or talking about love [00:03:00] and business
Brad: Let’s go down a cleaner path. You and your wife, Stephanie met at a law firm.
Michael: Yes. And to be clear, she was not a client. So we weren’t testing this law that you were happened to know really easily off the top of your head. Yeah, we will follow up on that later. And there was a 15 year gap between our workplace encounter and our first date
Brad: Don’t tell me, you were put in that friend zone and eventually found a way to escape?
Michael: No, no, no, nothing like that. Plus Brad, we all know there’s no escaping the friend zone. Stephanie was actually my replacement at my first job out of law school.
Brad: So they upgraded?
Michael: Yes, yes, on so many levels. I had been moved from one section of the firm over to another section of the firm. In fact, I was moved over to be working directly for the name partner. And then Stephanie was hired [00:04:00] from my old position and we ended up working together for a few months before I ended up taking a job at another firm.
Brad: Yeah. Michael so far, this is not much of a love story at all.
Michael: Yeah. I mean, at that point, you’re right. We barely knew each other. That part of the story of us working together is important because all my work friends ended up becoming her work friends. And so fast forward through lots of life, I even met you at some point along the line. All the way up to 2011 and our mutual friends from this original jobs went to work to try to set us up after Stephanie had moved back to Dallas from Los Angeles. And we both said no for about two years.
Brad: Yeah. Now this is starting to sound like one of those classic Hallmark love stories.
Michael: Yeah, I know. It’s not that exciting. We both had adult stuff going on.
Brad: That does [00:05:00] not sound like a good Hallmark story.
Michael: So I was trying to be a partner in a law firm, trying to keep you in check, and you know as well as anyone how hard that is. And I was a single parent of four kids, which was, you know, easy compared to being your partner, but still a lot of work. And Stephanie was trying to establish herself at work in Dallas after moving from LA, and juggle being a single adoptive mother.
Brad: All right there Casanova, tell the audience what changed.
Michael: Well, our mutual friends saw something that neither of us had time to sit back and focus on and see, I guess, because they tricked us both into showing up to a happy hour. They called her to set up a happy hour, and then unbeknownst to her, called me and asked me to join for an old work happy hour. We were all there and I decided to ask her out on a date. We were married 10 months later.
Brad: Okay. Well, Michael, I have a confession. [00:06:00] First, I am not a stalker. Second, I actually have a picture of the first date you were ever on. Riley, drop it up there so our audience can see it. Audience, just to let you know, I was not following Michael. My family just happened to be at the exact same restaurant they were on their first date, and we randomly there. So I did what any good friend would do. I leaned over to the left and took a quick picture of him sitting there on his first date.
Michael: And sent it out to all of our friends.
Brad: Oh wait I might have done that to you.
Michael: Yeah. Who needs enemies when you have friends who can mess with each other? Well, at least now we have a photo capturing the moment because we ended up getting married.
Brad: Yes. I think we should stick to business though this season.
Michael: Yes. And we both know we don’t have the maturity to keep a love theme on the rails. You’re going to, no pun intended, love today’s opening story about the universal language [00:07:00] business.
Brad: Yeah and I cannot wait to introduce today’s guests. I hear one of them is particularly humble, although he’s very famous, interesting, and handsome I’ll let the audience see for themselves.
Michael: Yes, Brad we get it. You’re one of the guests today and you can’t call yourself handsome. Remember, we are also now on YouTube.
Brad: Ooh block that out. Rats! Yeah, totally forgot about that. I’m fine. We will say I have a great personality? But no, seriously, I’m excited to introduce our guest format this season and for us to actually be the first guests.
Michael: Well, Brad, other than being devilishly handsome on our audio only format…
Brad: So hot on audio.
Michael: We’re going to start the interview and you get to be the guest of honor for the first question.
Brad: Awesome. Hit me with it.
Michael: Tell the audience your professional story.
Brad: Sure. And so probably as most y’all know I was born in New Orleans. Go Saints, go Saints, go Saints. After [00:08:00] graduating from law school, I ended up working assistant general counsel for a management service organization. Yes, they existed back then. They managed multi-specialties from surgeons all the way to ENT docs to chiropractor. So it was a great way of really being introduced to the medical world. Although, as we’ve talked about before, my dad was an orthopedic surgeon, so from the outside, I kind of understood what life was like as a doctor. Eventually I did leave the management service organization to go to our outside healthcare council. And at this particular firm I was exclusively working with physicians and, or the businessmen that had ancillary deals with them. So it was a boutique practice. We had clients pretty much all across the gulf south, and it was a great spot to really cut your teeth in the regulatory world and business world that I ended up starting with. Eventually as you know, a little [00:09:00] storm called Katrina, washed me northward and I met some gentlemen named Michael Byrd. And so in 2015, I took all my skills, which we’re not much, but I guess Michael, but enough of them to Dallas, Texas, where we met at our old firm. And where do you come in this picture?
Michael: Well first Riley, please mark where Brad called me a gentlemen and I would like to pull that and use it whenever possible.
Brad: Riley, please make sure your erase, if I ever call him a gentleman again.
Michael: So speaking of commonalities this season, I know that the day I saw your resume, because one of our mutual friends brought it into me, and I was like, that looks like my resume. We have a lot of commonality in our stories, starting with the fact that I’m the son of a doctor and there is something to feeling like you’re living that life of medicine and understanding what it’s like [00:10:00] to have medical things around your house, in that lifestyle, around the house. And my dad encouraged me to be a lawyer, all going up through school. I decided to do it and I went to work for a big law firm out of law school, doing business litigation, which is as you know, not what we do today, but it really set in motion a lot of foundation for what we do today because I was in the courtroom fighting over business disputes. And at the same time, starting to get some pet projects from my father and his partners and starting to cultivate a healthcare practice. And really, they kept asking me to do non-litigation things. And I was like, wow, this is great, there’s not all the fighting.
Brad: So much more fun.
Michael: I know a lot more. I mean, there was strategy involved, all that good stuff. And so that [00:11:00] part of the story brought me to the point where you and I partnered together to build what is ByrdAdatto today.
Brad: Yeah, that’s right. And then for our audience to understand, Michael and I, before we started our firm, we were together for almost a decade straight at our old firm building out that section. So we’ve been practicing together nearly 17 years and by the way, to our audience, we have just recently celebrated our seventh anniversary. Happy anniversary, back to our love story. And that means we really are a match made in heaven. Maybe we should just be partners.
Michael: Brad, you just said we’re partners.
Brad: We did. Right, right. Thanks for the reminder, I just I’m old like you now. I’m not as old, obviously.
Michael: And I’m a gentlemen,
Brad: You are not Michael. Anyone who said that as a liar and a thief. Wait, never mind. Michael, over the years, you and I have advised clients on their career paths and they’re starting their businesses and we’d done this luckily for us. And in multiple different industries from [00:12:00] healthcare to real estate, to you name it. It just seems like we have so many different opportunities that come across our desk. But going back, let’s talk about some commonalities that we’ve experienced in starting our own firm, similar to how we would advise our clients.
Michael: Yeah, it was crazy too. I mean, not only representing other doctors, but we’ve represented law firms. And so when we started our own practice, our own firm, I was surprised by the perspective I gained by doing it because we’d been helping running the larger firm with 40 plus lawyers. There was just something different about starting a small business. And for me, the first surprise I experienced that just jumped out is for years, we’ve had these basic conversations with a client that is starting a business about formation of the entity and making a tax election. [00:13:00] And it was interesting because you and I had been in a business that was an S-corporation for years. It’s a certain kind of pass through entity that has, you know, we were basically employees and partners and we got K1 and distributions, but we got paid a paycheck. When we formed ByrdAdatto we decided to be taxed as a partnership. And we had advised countless times on partnership versus S-corp and it was interesting living the life of being a partnership and realizing that there are real differences that as a partnership, you can’t be an employee, you’re a partner. And that there means instead of a W2, you have guaranteed income and you have to pay taxes quarterly. And so it really brought to me a different perspective on those conversations [00:14:00] with clients when they’re asking, well, should I do an S-corp or a partnership? And I can say more than check with your CPA, which PS, check your CPA. But I do at least have something I’ve lived now and it feels like kind of the lines have been colored in a little bit.
Brad: Yeah and it goes back to a lot of times when you’ve done something, or you advise on something, but until you actually do it, it lives differently and you react differently. And I think if we’re going back to certain things that I’ve looked at, you know, if we’re reflecting is how often as we talk to some of them and they’re starting their business, you start asking those questions about their business plan. A lot of times, if they’re meeting with them in person, they give you that stare as to what’s the business plan or why would I need it? And I remember you and me working diligently on building up this beautiful business plan, the back the napkin stuff. We actually, believe it or not audience, did actually really well almost hitting our business plan. But our business plan was blank on how do you [00:15:00] start it? Like, what do your first 90 days look like? What type of money do you have to have to go get it? Where do you go buy your stuff? What kind of stuff are you going to get? I mean, all the things that you need those are startup costs, that is capital that you need to have now. And is that coming out of your pocket? Hopefully yours, not mine. Or are we finding someone else’s pocket? And that’s the one thing, and I’ll give my hat tip to my dad on this one. Years ago, he said go out, find a banker and make them your best friend. So shout out to Chris Williams at BTH because he became one of our best friends. He like a good banker learned our story, was interested in finding a way to help us, and we ended up doing a line of credit with them. Yeah, audience fast forward to understanding that means you’re personally guaranteeing something. And so be prepared for some heart palpitations, but I think for us, Michael, that was an important element of having that money come in. [00:16:00] And then we also had the hard conversations of okay, if money’s not flowing through the way we want it to come in, we’re bringing all these people to come with us here. Their families are expecting that they get paid. And so we had to have that conversation of saying, well, they get paid first no matter what. We get paid last and we had to be willing to do that. And so when you starting a business, those are scary elements of being an entrepreneur that no matter what business you’re in, as an owner, you get paid last.
Michael: Yeah. I am kind of flush a little bit just thinking about it. Okay. Well, let’s move on to kind of the next question in our format this season. So talk about Brad, some lessons with us starting ByrdAdatto, some lessons learned that you can apply to all businesses.
Brad: Well, I think going back to the startup talk I just had, well, one thing that you will quickly learn in any business is that cash is king. Meaning [00:17:00] that you have to have it, and understanding what does cash flow look like? And that’s a huge issue. So number one, when is your cash coming to the front door? Does it come in at the beginning of each month, does it trickle? And because of that you don’t know exactly how you’re going to get paid and when you’re getting paid. But as you know, Michael, as the cash comes in, it doesn’t mean that we all get to stick it in our pockets. We have the bills to pay. And typically one of the most important ones is paying your team and paying your team on certain dates. You can’t miss those dates, there are rules and regulations behind that. So that team must come first and making sure you have the cash in place to pay that team. So no matter when your cash comes in, that’s again, and that is why you have a good line of credit. So the cash comes in and you make sure your teams paid well. Then on top of that, there may be very large items that every single year they come up, and that could be funding your 401k plan, or it could be buying your insurance or whatever ends. So you need to make sure as cash comes in, you’re [00:18:00] putting some away to the side or using your line of credit. Again, for everyone it is a little bit different, but saving for those rainy day moments because you don’t know when it will happen. And if you do have cash sitting on the side, it will save you in the long run of those heart palpitations. But hopefully going back to have a good line of credit because that’s very helpful. Michael, what are some of your thoughts on that question?
Michael: Yeah, no, those were great. I think one of the things that was, again, a little surprising to learn in kind of operating our firm in startup mode that applies to all businesses is just the realization that probably 80-90% of a business’s overhead comes from just a very few sources. And so for us, it’s people and space, our rent and our staff. And including our entire team, our attorneys, et cetera, is a massive chunk of our overhead. And that’s [00:19:00] common in professional service industries, it is typically the top two things. Now for our medical practices out there, there might be a third thing. Cost of goods sold can be a really big one. So if you’re doing surgery and you have implants or noninvasive stuff, you know, Botox and other things, product like that. Those can be massive.
Brad: Yeah. And audience, if you ever hear someone talking on a panel, they’ll say cogs.
Michael: Yes. Brad, you sound like a silicon valley slash Wall Street guy combined.
Brad: It was very important.
Michael: Nice. So there’s a ton of power in understanding that everything that you’re going to spend from an overhead perspective can be zeroed in to those few areas. And it’s also scary because think about a COVID Brad, we got to…
Brad: I don’t want to think about COVID.
Michael: I know. But you know, we get life turned upside down on a dime [00:20:00] and we don’t know what’s going to happen. No one knows what’s going to happen. Our clients are asking us for advice on what to do. We’re looking at each other, trying to figure out what to do. And what we know is that we don’t want to lay off any people. We’ve got to take care of our clients. We don’t want to cut salaries. And we also quickly learned that landlords were not interested in giving relief to anyone, they wanted to get paid too. Well, then we had to figure it out. What was our plan B if everything got shut down, to be able to keep all those things? And so I was actually surprised how well we did cutting those other 10-15% in costs until we learned that everything was going to be okay. When you hear about people that are furloughing around the country, it was [00:21:00] easy to understand once you realize that that’s the single biggest overhead item for most businesses.
Brad: Yeah. And I think that’s a really important point for you to understand when you are hiring your team and finding your space, going back to what I said, the startup. Understand your business plan. And it’s an important element and shouldn’t drive every decision. But if you start being an outlier, you need to understand why it is outside of the scope of your business plan? For some of our clients it’s because they’re scaling much faster. I know for us, we’ve blown up our business plan multiple times, but it’s okay because we had reasons to it. So Michael, let’s move on and let’s talk about one of the proudest business strategies or accomplishments that would be beneficial in industry besides hiring me as your partner.
Michael: Um yeah…Brad, we’ll move on. No Brad, you know we were a match made in heaven, as you said earlier. And we wouldn’t be ByrdAdatto if there wasn’t an Adatto.
Brad: It’s a love story. [00:22:00]
Michael: Yes. Well, you know the answer, I know you know the answer. My passion here on the business front is around the subscription model we have, Access+. And of course we have that happening with our clients in healthcare. You just wrote an article on dental subscriptions. It’s a thing out in the world because it’s such a great platform and there’s all the valuation people tell you that your business is even more valued if you have a subscription model, all those things. Well, we felt like we saw something that was going to solve some fundamental problems with how lawyers charge their clients and create alignment. And so we’ve talked about that before, and I probably don’t have enough time to go deep on that, but I will say from a business perspective, kind of thinking about some common grounds for anyone thinking about this subscription model is learning how [00:23:00] that impacts cash flow. So, you know, we’re charging clients the old fashioned way, either on a project basis or hourly. And then all of a sudden we have people sign up to pay a fraction of that on a monthly basis. And so all of a sudden our monthly revenue starts dropping the more success we’re having in getting people to sign up for Access+ the more we’re realizing that, wow, this really negatively impacts cash flow, at least in the short term. And so learning how to make projections, learning how to look at your, using another jargon KPIs, your key performance indicators, all of that stuff changed on a dime and we’re realizing you’ve started learning that we have to look at our business in a fundamentally different way. And then it was also fun to see us hit that tipping point, where we had enough members to where [00:24:00] like, wow, we are a subscription based law firm and that is the driver. Just from a business perspective, which as I said, can go on and on about my passion for it on a kind of client experience perspective. But that was just something I’m really proud of us for solving and it makes us a really unique business.
Brad: Yeah. And maybe not every business can have that subscription model, but most people didn’t even think law firms could do it. So I think it can be applicable in many different industries. I think the other piece that I’m super proud of for us is, and this again is how we communicate. And I guess it sounds like a really weird one to talk about, but from a business perspective, the way we communicate is different in lots of different forms, right? Forms of how we communicate with our clientele. So that’s something that, you know, having great communications with your customers, if you’re building a business. And then more importantly for us, which was our aha [00:25:00] moment whatever it was six years ago now, when we decided that we really are focused on educating others. So obviously we have a podcast. This podcast is about educating others. We do public speaking all the time, so that’s another form of education. But internally we built ByrdAdatto University, and that was a big aha moment of understanding your biggest expense item is going to be your staff. And if you’re not training them and working with them and developing workshops, or just keeping them continuous learners, they’re not going to be able to improve themselves, which means that they can’t improve themselves, you can’t improve as a whole, as a firm. So I think going back to strategies is understanding that education should never end for you and for your staff and finding that way to communicate with them on that. So it’s maybe education and communication or a little vice versa in that strategy. And you know, you and I have been on panels over the [00:26:00] years and we have these key speakers. They talk about education, education, education of the staff, and that can be in so many different ways. And those who don’t see that as a focus, because of a fear that the person, you educate them and they leave. Well what if they stay.
Michael: Good stuff
Brad: All right. Well, Michael let’s go to commercial and on the other side, maybe bring some other insights in?
Michael: Sounds great.
Access+: Many business owners use legal counsel as a last resort rather than as a proactive tool that can further their success. Why? For most it’s the fear of unknown legal costs. ByrdAdatto’s Access+ program makes it possible for you to get the ongoing legal assistance you need for one predictable monthly fee that gives you unlimited phone and email access to the legal team so you can receive feedback on legal concerns as they arise. Access+, a smarter, simpler way to access legal services. Find out more. Visit byrdadatto.com [00:27:00] today.
Brad: Bienvenue à nouveau dans les Legal 123 avec ByrdAdatto. Je suis…
Michael: Brad stop. English. We are not in New Orleans.
Brad: Oh yeah. During commercial I kept thinking about the language of love back to French. Sorry, take two. Welcome back to Legal 123s with ByrdAdatto. I’m your host Brad Adatto with my cohost Michael Byrd. Now, Michael, this season we’re searching for this common ground. Our theme is The Universal Language – Business. Not French.
Michael: Yes. No more French this season, Brad.
Brad: Okay.
Michael: As we shared our answers as interviewees for this first episode, it became apparent quickly that if the universal language is business, the root of that language, kind of the Latin of that language in the business is money
Brad: Cash.
Michael: We talked a lot about cash.
Brad: We did talk about cash. And when you’re talking about cash flow, you talk overhead, we talked about overhead, tech status, the subscription model, they all [00:28:00] deal back with cash. And this translates to the legal model in some capacity, Michael.
Michael: Yeah. I mean, from our perspective, when we’re advising a client, it would be very linear to just give a client a document and not try to help make sure there’s alignment with what they’re trying to accomplish and what they’re actually doing. And so we call the flow of money the truth serum of a business. If a client tells us, oh, this is what’s happening, we know that the money flow doesn’t lie when we look at their PNLs and their balance sheets. And so when we’re looking at legal documents, they may say one thing, and we know whether they’re doing what they’re supposed to be doing by looking at the truth serum. And again, the money doesn’t lie. So it becomes so important to giving good legal advice to factoring in the business side and looking at the flow of money to [00:29:00] see if what they think is happening, is happening in reality or what is supposed to be happening is happening in reality.
Brad: Yeah. And going with that, so you have the business side of this, but when you start applying the healthcare laws on top of this it is even more important to understand that flow of money. We talk about this it feels like every episode. So if I said this before audience forgive us, but this is where that form and substance, as you were describing is so important. Based on our regulations that we have to look at, depending on we’re looking at, federal laws or even state laws is the tracking of where those monies originate. How they get moved, literally from which bank account to what entity, are they correct. And all those pieces, and especially in healthcare can trigger different types of rules and regulations. So you have to be very careful as you bring in that cash. How did you get that cash? Where did it originate? Where’s it going? And why is it going in that direction?
Michael: Yeah. And my final [00:30:00] thought, Brad is just thinking about the universal language and talking about the root of it being money is when you get into sophisticated transactions like M&A, when you hear about the proctology exam that we talk about in other episodes, yes, they are digging into the money. And even deeper than that, you hear about quality of earnings analysis. And though it’s like they’re taking the true serum and they’re stripping it down even further to see what’s actually happening. So again, when you’re looking at commonalities, money and the flow of money are just central things to all businesses. What are your final thoughts Brad?
Brad: Yeah, I mean, I’ll just tell you anyone who’s an entrepreneur, it’s a wild ride of some people compare it to the rollercoaster where you’re clicking on up and next thing you know, you’re screaming your head off, or sometimes you feel like you’re going upside down around, around. But there are these core business items that every [00:31:00] action that if you want to have a successful business that you must follow. And I think we’ve kind of narrowed it down to one of those really successful pieces of which is cash is king.
Michael: That’s right. That’s very, very good.
Brad: Well, Michael, that’s the end of today’s episode. But guess what? With the universal language of business, we’re going to have all these awesome guests. Next week we have a super special secretive guest that you don’t get to know until they show up. So I’m not going to let you know, but audience, if you go look you’ll see it in our notes. You can cheat and look in the notes and you can see who our guest is next week, but don’t tell Michael. Just don’t tell him. All right, thanks for joining us.
Outro: Thanks again for joining us today. And remember, if you liked this episode, please subscribe. Make sure to give us a five- star rating and share with your friends. You can also sign up for the ByrdAdatto newsletter by going to our website at byrdadatto.com. ByrdAdatto is providing this podcast as a public service. This podcast is for educational purposes only. This podcast does not constitute legal advice, nor does it establish an attorney-client relationship. Reference to any specific product or entity does not constitute an endorsement or recommendation by ByrdAdatto. [00:32:00] The views expressed by guests are their own and their appearance on the program does not imply an endorsement of them or any entity they represent. Please consult with an attorney on your legal issues.
