The vast majority of dentists buying a dental practice should choose a flat-fee attorney. I’ll lay out the pros and cons of both approaches below and you can decide for yourself.
#1 – You’ll Be Happier Knowing Your Costs Upfront
The main reason I recommend a flat rate attorney is buyers are happier knowing their costs upfront. No matter how long a deal takes, no matter how much back and forth takes place between parties, the buyers who know how much they’re going to be charged ahead of time are the happiest. You’ll never feel like you’re on the clock or worried that asking a question will cost you hundreds of dollars.
I’ve noticed buyers with hourly-rate attorneys often try to rope an accountant or broker into answering legal questions in hopes they can avoid involving the attorney. Inevitably, this adds time to the transaction as the attorney always wants to weigh in any way on relevant issues (and appropriately so!) despite when in the process the issue is brought up. The psychology involved in the human brain strongly favors the flat-fee arrangement with attorneys.
You might think your transition is straightforward. Betting you know exactly how your dental transition is going to go is dangerous. You might do the math and make assumptions about your deal and decide you’re better off with an hourly attorney. And you might be right. But, that’s like me going in to see a dentist for the first time and thinking I know exactly what the treatment plan will look like. It’s a dangerous assumption.
#2 – No Conflicts of Interest Between Your Attorney’s Best Work and Your Wallet
Flat rate attorneys avoid the potential conflict of interest between client and attorney of “churn.” Churn is what happens when an attorney creates extra work simply to bill for it. Legal firms based on the hourly billing model live and breathe billable hours. I’ve talked extensively with attorneys at firms who have monthly billable hour targets. If you miss that target, even in one month, you’re very quickly called in to see a partner about “commitment.” I’ve seen countless examples of hourly attorneys who send unnecessary emails, make unnecessary phone calls, and send revisions back and forth on the smallest points. Are all hourly attorneys padding their hours unnecessarily? Of course not. There are some great hourly attorneys out there. Churn is so prevalent, however, and the potential conflict of interest so high that I stand firm in the recommendation to simply bypass the potential conflict with a flat-fee attorney.
#3 – Flat Fee Attorneys Tend to Specialize in what You Need
I’ve noticed that attorneys who offer flat-fee arrangements on dental transitions tend to focus their businesses on…well, dental transitions. Their clientele tend to be exclusively dental (no medical, no veterinary, no chiropractic, etc). They’re not usually sidetracked offering estate planning and litigation help to dentists. Similarly, I’ve noticed that the hourly-rate attorney’s firms tend to offer the kitchen sink of legal services. Because they offer more services, it’s harder to have a flat-rate menu for the entire range of legal work a dentist could bring through the door. If you offer 100 different options, it’s just easier to quote a client an hourly rate. If you only offer 1 or 2 services, it’s much easier to get a sense of your costs and how much time the work will take and charge accordingly. Hourly attorneys bill that way because they’re not sure how long your deal will take. Flat rate attorneys are so familiar with your kind of deal that they’re comfortable with a flat fee.
The Case for an Hourly Rate Attorney
The primary reason to engage an hourly attorney is the belief that you can save some money by not using them very much. I recognize (and appreciate as a former grad student myself!) how strapped you feel early in your career with that pile of student loans looming and a still-growing salary. Thinking you can keep legal expenses low on your dental practice purchase is, admittedly, tempting. But the odds are against you.
While writing this article I reached out to the last 10 clients I worked with who also used an hourly attorney and asked how much their final bill was. Their average bill was $9,340. One client’s bill was $18,000! Ouch.
The flat rate attorneys I work with most often have an average fee of $6,900 for everything involved in buying a dental practice. Correctly navigating the legal waters of one of the largest purchases you’re ever likely to make is not where you want to try be cheap. And the chances you end up ahead are low.
On the other hand, there are situations where it can make sense to engage an hourly-rate attorney. Practices changing hands under very amicable circumstances with incentives closely aligned could justify choosing an hourly-rate attorney. For example, a father selling a practice to a son, or a partnership with all major terms already in writing might make sense. I’m sure there are other examples where you think you can save some money and yours might be one of them.
Before you make your decision, however, think clearly and be honest about why you’re choosing the hourly or flat rate attorney. If you’re simply worried about costs, you’ll be happier and probably come out ahead with the flat-rate option.
Did you read this as an email? Please pay it forward by sharing the article with a friend. They can use this link to sign up to get awesome articles like this every week.
Know someone considering buying a practice? Have them reach out directly to me via email, firstname.lastname@example.org to help them through the process.
Read more below about how to buy a dental practice because good advice is important!