Thursday, October 13, 2011

10 Legal Pitfalls for Early Stage Companies

The entertainment world is filled with very talented people offering highly valuable products, services, or content. Many of these offerings have the potential to make these people very wealthy. Unfortunately, many of these same people never get there due to a misstep along the way. This article shares a few of the foundations for protecting your vision.

This information comes from an outstanding panel I sat in on at the 2011 Southern Interactive Entertainment and Game Expo (SIEGE) conference. In this panel , 3 attorneys discussed the safeguards and faults they most often see in their practices. The attorneys were Zach Bishop, TJ Mihill, and Tom Buscaglia… Zach and Tom primarily help businesses on the prevention side, and TJ described himself primarily as a litigator – he’s the one looking to attack or defend the agreements that others have set up (or not set up). Each was very engaging and informative on his own accord, and together they made for a great panel. Their bios appear at the bottom of the article.

So here they are… the 10 most common legal pitfalls

Pitfall #1: Not forming the proper legal entity
From a litigation standpoint: The first thing a litigator tends to look at is corporate structure and adherence. If he can pierce the corporate veil that separates an individual’s assets from the corporations, he can pull one's personal properties (home, savings, etc) into a case, leading to a potentially larger win for his client - not to mention the additional stress on the defendant.

From a funding standpoint: Certain corporate structures will not be funded by venture capitalists. If you’re contemplating this route, it’s important to structure properly – or have a conversion plan – early.

From a vesting standpoint: As people move into and out of one’s organization, work they contribute may give them an ownership claim to the organization’s future fortunes. Corporate structure can impact whether these attempts succeed.

Pitfall #2: Failure to have participants sign paper
It’s important to have anyone who contributes to your product sign an agreement identifying who owns their contribution. Even if it’s someone you trust immensely, you’ll one day likely engage other parties (product distribution people, for example) who may not touch your product without confidence that there are no lurking claims.

Pitfall #3: Using someone else’s property without permission
If you incorporate something someone else has produced, you must get their blessing. You must consider everything: Code, images, music, sounds, and even fonts are suspect. Some people will charge fees, others will want royalties, and some willgrant permission simply for a mention in the product credits.

As an example to prove that people monitor this, note that programs called code scanners have been written to determine if any of your code mirrors that of another program.  I wonder why someone took the time to write such a program...

Pitfall #4: Not knowing what rights you need once you get their permission
Even when you have someone’s permission, it’s important to know WHAT permission you’ve been given. Put a license agreement in place, and be sure to have an attorney review that license.

Pitfall #5: Falling into Open Source Software Traps
There’s a common misconception that public domain and open source software is free for you to use... period. It may not have an up-front cost, but some such code can be very costly if it imposes the condition that incorporating it makes your entire product open source itself. You MUST understand the conditions of any such code you incorporate, and I’m told that the license agreements are tricky – legal consultation is your best bet.

Pitfall #6: Failure to secure Intellectual Property (IP) protections
Copyrights protect text you write, and they’re very easy to get. Interestingly, your creation is protected even if you don’t register it… but the protection is typically not enforceable in court without registration.

Trademarks are important to protect what you create (or name) AND to insure that what you create doesn’t overlap with what someone else has created. As with copyrights, they don’t have to be registered, but it’s best to do so for enforceability and to avoid having to “re-create” because you unknowingly infringed on another trademark.

Pitfall #7: Not understanding publishing agreements
It’s critical that you engage an attorney here. You MUST know what rights you are granting. Intellectual property, ancillary merchandise rights, and sequel rights can unknowingly be given away by a seemingly harmless clause.

Pitfall #8: Not preparing for success
When your product takes off, be able to support it. Availability, technical support, exposure through visibility, these are but a few of the items one needs to be prepared for. The best product in the world will sink if the experience of getting to it is overly frustrating.

Pitfall #9: Not anticipating the downsides of success
There’s a strong likelihood that there will be dips in the growth cycle. It’s important to be ready and willing to make cuts early and as deep as necessary to insure survival. The attorneys (and I) have all seen enterprises that didn’t make cuts when they should have and suffered greatly for it.

Additionally, it’s inevitable that as your success grows, people will appear to make claims against that success. Don’t let it get you down - just know it’s coming, defend against it early, and keep moving.

Pitfall #10: Not calling your lawyer
What more would you expect from a panel of lawyers?!?! Seriously, though, they offered solid advice on managing attorney costs. You should plan those attorney calls and Google your questions in advance. Have an outline of topics so that you can move quickly through them. And where possible, provide insights gained through your advance research. In the absence of such research, you may wind up paying your attorney hundreds of dollars per hour to do what you could’ve done yourself simply to get to the point of being able to make a recommendation.

Pitfall #11?
It’s very tempting to add real estate pitfalls, but I’ll save that for another article! Suffice it to say that getting the right location at the right price with the right protections and flexibility is critical. Many options will present themselves, and it’s important to know what best fits your growth model. A tenant representative will protect your interests and the landlord will already have budgeted to pay their fees, adding no new costs to you.

Disclaimer. The comments in this article are a summary of what was shared in the panel discussion and should NOT be taken as legal advice. You need specific legal counsel. I am a licensed real estate agent and can offer tremendous insight into that field, but I am not an attorney.

The attorneys:

Bishop, Zach
Zach Bishop moderated the panel and gets credit for creating the list of 10 pitfalls.  Zach is an attorney with Wyrick Robbins in Raleigh, North Carolina. His practice is concentrated on technology and corporate transactions, including the licensing and distribution of intellectual property, business process and information technology outsourcing, technology acquisition and development, mergers and acquisitions, venture capital financings, joint ventures and general corporate matters. Zach's practice includes the representation of prominent video game and middleware developers on a full range of matters, and he frequently speaks at gaming industry conferences on legal issues facing gaming companies. Prior to practicing law in North Carolina, Zach practiced in the Atlanta office of a large national law firm, and he is licensed to practice law in North Carolina and Georgia. Zach received his B.A. in Economics from Duke University and received his J.D., magna cum laude, from Tulane University Law School. He was listed among North Carolina Super Lawyers "Rising Stars" in 2009 and 2010.

Buscaglia, Thomas
Tom Buscaglia, The Game Attorney, is a principal in the law firm The Game Attorney PC, with offices in the Seattle, Washington, area. Tom has assisted game developers since 1991 with all aspects of business and legal matters. Tom wrote the chapter entitled “Effective Developer Agreements” for the book, The Secrets of the Game Business and has written numerous articles, including Game Developer Magazine and the Game Law series of articles and an Expert Blog on Tom is a perennial presenter at numerous conferences such as the Game Developer Conference and PAX where he speaks on the game industry business and legal matters. Tom Chairs the International Game Developers Association Charitable Foundation and served on the IGDA Board of Directors from 2005 - 2011. As FaTe[F8S] Tom is founder and Supreme Warlord of FaTe’s Minions, an online gaming "clan" that has been competing online since January, 1998. Tom’s firm web site is

Mihill, Thomas
Mr. Mihill’s practice encompasses a wide range of complex business disputes, with an emphasis on intellectual property. Mr. Mihill has represented individuals and corporations in both bringing and defending against trademark and copyright infringement claims, trade secret violations, and cybersquatting actions. In the area of video games and virtual worlds, Mr. Mihill has counseled and represented game developers and publishers in intellectual property and business matters. Mr. Mihill has tried cases and represented clients at the state and federal level, in Georgia and nationwide. Mr. Mihill is a member of the IGDA and GGDA, as well as the American Bar Association, the Federal Bar Association, the State Bar of Georgia, the Atlanta Bar Association, and the Cobb County Bar Association.

Buscaglia, Thomas
Tom Buscaglia, The Game Attorney, is a principal in the law firm The Game Attorney PC, with offices in the Seattle, Washington, area. Tom has assisted game developers since 1991 with all aspects of business and legal matters. Tom wrote the chapter entitled “Effective Developer Agreements” for the book, The Secrets of the Game Business and has written numerous articles, including Game Developer Magazine and the Game Law series of articles and an Expert Blog on Tom is a perennial presenter at numerous conferences such as the Game Developer Conference and PAX where he speaks on the game industry business and legal matters. Tom Chairs the International Game Developers Association Charitable Foundation and served on the IGDA Board of Directors from 2005 - 2011. As FaTe[F8S] Tom is founder and Supreme Warlord of FaTe’s Minions, an online gaming "clan" that has been competing online since January, 1998. Tom’s firm web site is

Monday, August 15, 2011

Average Square Feet per Office Employee

Cramped officeThe total space per worker in office environments rose  to 295 square feet (SF) according to a 2010 study released by the International Facility Management Association (IFMA). 

But don't expect your new office to be 10' by 30'... those are rentable SF numbers (they're "loaded" to cover one's share of building lobbies, etc), and they include shared spaces within the suite such as break rooms, conference rooms, reception areas, etc.  In reality, a typical employeee is getting 75-95 SF of their "own" space, and typical managers get 120 SF.  These individual numbers are trending down over the long term... they were 90-115 SF and 151 SF respectively in the mid 90's.

Depending upon a client's business model, I typically anticipate 200 to 250 SF per employee.  A collaborative software development company may use less than 200 SF per person.  A call center will invariably have less than 200 SF per employee.  A law firm?  300 plus SF per person.

If your firm doesn't lean toward any extremes, 225 SF per person is probably safe estimate of the rentable SF per person you'll need.  If you're unsure, give me a call and I'm happy to help you come up with an estimate.

(404) 547.2009

By the way, you can buy the IFMA study here:

Wednesday, July 13, 2011

Pain Management or Pill Mill?

Pill mills are bad business, and protecting landlords (and our communities) from them is important from both a business and an ethical standpoint. Pain management, on the other hand, is a completely legitimate and valuable field of medical practice. Telling the two apart can make the difference between a great transaction experience and a leasing nightmare.

A recent newspaper article (click here) confirmed that a trend our Healthcare Properties Group has noticed is not isolated... pill mills are on the move.  As the article states, events in Florida in particular are making other states more attractive, increasing the likelihood that owners and brokers will have to filter out more and more pill mills.

Because we receive frequent property inquiries, our healthcare team has learned to recognize them and protect ourselves and our landlord clients.  It's not always easy... a corporate background check may not catch them, as spotting them is a matter of recognizing patterns, not reading glaring indicators.

What is a pill mill?
A pill mill is an illegal drug distribution operation, but they tend to call themselves pain management providers or pain management clinics. The general plan is to open a medical office with a doctor and a pharmacy onsite then “diagnose”, prescribe, and distribute prescription treatments all in one visit. At the end of the day, large numbers of pain medication addicts come from near and far to be “treated,” clinic owners become very wealthy, and society is harmed.

How to recognize a pill mill?
There are a number of indicators we’ve observed. Standalone, or in limited quantities, these indicators may mean nothing. But in the right combination, they are a glaring red flag. Indicators may include:
  • From another state (primarily Florida)
  • In a hurry to lease
  • Unconcerned about rent rates
  • Seek lower-visibility properties
  • Prefer highway access
  • High parking requirement
  • Flashy or very trendy people
  • Corporate entity can’t be verified via state databases

It is very important to note that NOT all pain management providers are pill mills. Pain management is a completely legitimate field of medical practice, and there are very legitimate pain management organizations, some of whom do distribute medications onsite. It would be a mistake to categorically shut the door on pain management providers, because they do provide a legitimate and valuable service. The key is to understand the sector and know what the illegal clinics look like.

Should I work with a pill mill?
While the real estate agent or landlord who unknowingly represents or leases to an illegal drug distribution operation may not incur any legal liabilities, it’s not likely to be good business.  Pill mills tend to bring very high volumes of people - people who often have very questionable backgrounds and who the neighbors hate to see coming. This activity tends to put the mills on narcotics agencies’ radars pretty quickly. It’s predictable, therefore, that a building’s reputation will be tarnished and that the tenant will not complete their lease term. I’ve heard anecdotal stories about clinics not lasting 3 weeks, and an investigator contact of mine recently told me that they sometimes make it “as long as 6 months” before they’re discovered. And I’m told they disappear quickly… forget about enforcing that personal guarantee you had them sign!

And to the tenant representative who considers helping such an organization, I would remind you that all we real estate brokers have is our reputations… are you sure that’s what you want to be associated with?

Let us know how we can help you, and here’s to your success!

General disclaimer. Please note that the information above is based purely upon our team’s observations as commercial real estate brokers. We are not qualified to give legal advice and this information should not be relied upon as such. If you need specific legal advice, feel free to reach out to us and we are happy to help you find a reliable resource, from either a preventive or enforcement perspective.

Wednesday, June 22, 2011

Emergency Hospitals vs Urgent Care Facilities

It's no secret that it costs a hospital a LOT more money to see a patient in a hospital emergency room setting than in an off-campus facility. I recently heard and Atlanta hospital CEO quote a 10-to-1 cost difference.

It's also no secret that new urgent care facilities are opening pretty regularly. On a good note (to a hospital), these facilities handle many of the issues that clog ER's, offer lower reimbursements, and don't require hospital admission. On a bad note (to the hospital), the hospital loses control because it's tough for the hospital to influence whether they or competing hospital get the hospital-bound patient.

"Emergency Hospitals" are a way to address this balancing act AND add value to the community. Baptist Health System in San Antonio Texas is a great case in point... for a full write-up on what they're doing, click here. The article discusses how they're approaching it and does a great job of describing the differences between an Emergency Hospital and Urgent Care facility.

Monday, June 20, 2011

Myths of Sustaining High Output

Balancing output versus burn-out is a struggle in any line of work, so I was immediately interested to read a recent Tim Ferriss blog post addressing that very issue in the context of software productions.  While I don't write code, many of my technology clients do so I'm interested to get a glimpse into their world. AND I'm a big believer that we can all pick up great ideas through the best practices of others.

A little about Tim:
Tim Ferriss is a NY Times Bestselling author... twice. His first book, the 4-Hour Workweek,caused me to re-examine many of my philosophies in regards to time usage and income generation. The book made me a more efficient and effective person, with more zest for life. His 2nd book, the 4-Hour Body, became the catalyst for me getting back into good physical shape. I've followed his blog for a couple of years now, continue to enjoy his fresh perspectives, and highly recommend following him to anyone with a curious nature. There are several embedded links to his blog below.

Family guy that I am, I do have to warn you that not all of his material is safe for the whole family...

Here's Tim:
Posted: 07 Jun 2011 03:31 PM PDT
For the last two years, one name has come up again and again when talking with A-class start-up investors: Pivotal Labs.

See, Pivotal Labs quietly helps dozens of the fastest-growing tech companies in the world, including freight trains like Groupon and Twitter. If your start-up needs to get good coding done quickly, as in lightning fast — or if new hires need to get good at coding quickly — top venture capitalists are likely to look over their shoulder and confide: “Call Pivotal Labs.”

I first met the Founder of Pivotal Labs, Rob Mee, when one of the start-ups I advise, TaskRabbit, began working with them.

One thing is immediately clear: Rob is obsessed with how to get obscenely high output. But that’s nothing new. Here’s the differentiator: he’s obsessed with how to get obscenely high output with sustainable effort. One of his first remarks to me was “3am with Jolt and pizza can be fun, but it’s a myth that it’s the fuel behind scalable success…”

My kinda guy.

I then posed a few questions:

How do you create a scalable, bullet-proof business? In this case, “bullet-proof” meaning that there’s no single point of failure — it won’t nose dive if any single player (like you) is taken out… or opts out.

What are the myths of tech product creation (software specifically, and entrepreneurship more broadly) that he’d like to expose?
This post contains his answers.

Think software doesn’t apply to you? If you’re in business, rest assured that at least a few principles of good software development most definitely apply to you. Translate them into your world and prosper.

Enter Rob Mee

Software development is a rapidly evolving field that got off to a very rocky start.

Conventional wisdom for many years was that software engineering should be like other types of engineering: design carefully, specify precisely, and then just build it – exactly to spec. Just like building a bridge, right? The problem with this approach is that software is just that. Soft. It’s endlessly malleable. You can change software pretty much any time you want, and people do. Also, since software can be used to model just about anything, the possibilities for what you can ask software developers to do are pretty much infinite. Want to simulate a circuit in software? Go ahead. Run a bank? No problem. Connect half a billion people to their friends? Why not, piece of cake. Not only that, but what we ask programmers to produce changes in the middle of the development, often in unpredictable ways.

This is not bridge-building.

Denying the reality of constant change doomed many software projects, for many decades, to either abject failure or huge budget overruns. So why did an entire industry hew to this conventional wisdom that flew in the face of all evidence? Hard to say. Finally, however, there has begun to emerge a new consensus: software development needs to respond well to change. In fact, it needs to be optimized for change. Nowhere is this embraced more than in today’s web start-up development community. So-called agile methods have gained currency, and the “lean start-up” movement calls for exceedingly rapid change, often automated and based on experimentation with the live system.

So we’re all good, right? Not so fast. In spite of the acceptance of more agile methods, there’s plenty of received wisdom hanging around… and most of it ought to be thrown out the window.

1. Myth: You have to hire “ninjas”.
The myth of the hero hacker is one of the most pervasive pathologies to be found in Silicon Valley start-ups: the idea that a lone programmer, fueled by pizza and caffeine, swaddled in headphones, works all hours of the night to build a complex system, all by himself. Time out. Software development, it turns out, is a team sport. All start-ups grow, if they experience any meaningful success. What works for a lone programmer will not work in a company of 10. And what’s worse, encouraging the hero mentality leads to corrosive dysfunction in software teams. Invariably the developers who do a yeoman’s 9-to-5, week after week, cranking out solid features that the business is built on, lose out to the grasping egomaniacs who stay up all night (usually just one night) looking to garner lavish praise. Rather than reward the hero, it’s better to cultivate a true esprit de corps.

2. Myth: Programmers need to work in quiet, without interruption.
This makes sense … if people are working on their own. Every interruption does indeed break concentration, and it takes a while to get back “in the zone”. Some well-known software companies even insist that each programmer have their own private office. That way they’ll never be interrupted, right? Except that modern-day interruptions have little to do with an actual person tapping you on the shoulder, and everything to do with instant messaging, mobile phones, Facebook and Twitter, email, and the music coming in through headphones that programmers swear helps them concentrate. The reality is that most programmers working on their own only spend a small fraction of their day actually programming: the interruptions are legion, and dropping in and out of a state of concentrated focus takes most of their day. There is a solution, however: pair program. Two programmers, one computer. No email, no Twitter, no phone calls (at least not unscheduled; you can take breaks at regular intervals to handle these things). If you do this, what you get is a full day of pure programming. And “getting in the zone” with someone else actually takes almost no time at all. It’s a completely different way of working, and I maintain that it is far more efficient than working alone ever can be. And in fact, with the current level of device-driven distraction in the workplace, I’d suggest it is the only way that software teams can operate at peak efficiency.

3. Myth: Start-ups run hot, so we’re just gonna have to burn everyone out.
Working crazy hours doesn’t get you there faster. In fact, it slows you down. Sure, you can do it for a week. But most start-ups plan to be around for a little longer than that, and developers will going to have to keep programming for months, if not years, to build a successful product. Many start-ups operate as if the pot of gold is just around the corner; if we only work a little harder, we’ll get there. Pretty soon developers burn out, and simply go through the motions of working long hours without any corresponding productivity. Working intensely, for shorter periods of time, is far more effective. Pivotal has helped hundreds of start-ups build systems, and has done it on a strict 40-hour week.

4. Myth: Looming deadlines necessitate shortcuts.
Many software teams use the excuse of a high-pressure market and the need to ship product right now as an excuse to do shoddy work. Writing tests goes by the wayside; careful design is forgotten in the rush of frenzied hacking. But software teams are no different than other teams we’re all familiar with, and the way high-performing teams succeed is not to lose their cool: on the contrary, when the pressure’s on, you stay frosty, and let your training carry you through. How many times have we heard stories of remarkable performance under unimaginable pressure – whether it be military, professional sports, or a pilot landing a plane on a river – and the explanation almost invariably involves the heroes saying, “We trained for this situation.”

5. Myth: Developers should take ownership of their code.
Ownership sounds good. As American as apple pie. Personal responsibility, right? But “ownership” in a software team implies that only one developer writes – and understands – each module of code. This leads to defensiveness on the part of the developer. It also creates risk for the business owner, since the loss of one person could slow the team, or potentially cripple the business if they were responsible for a particularly crucial part of the system. A much healthier process allows any developer to work on any code in the system. Pair programming facilitates this, because knowledge is passed from person to person. The so-called “bus count” (how many people in your team have to get hit by a bus before you’re all dead in the water) is a critical indicator of risk for the software start-up. And it’s not really a bus we’re talking about here – it’s your competitors, who would love to hire your best developers. The more people who understand the whole system, the stronger and more resilient your organization.

6. Myth: You need a quirky hiring process.
Would you hire an actor without an audition? You wouldn’t last long as a director if you did. But this is exactly what almost all companies who hire software developers do today. Usually the process involves talking through an applicant’s experience with them. And that’s all. Imagine asking an aspiring actor if they enjoyed their role as Hamlet. Did you play him well? Good. You’re hired! Many famous software companies propose brainteasers for their applicants. Some top companies even give candidates an IQ test. The best of them run candidates through a simulated software problem on a whiteboard. This is a sorry state of affairs. I’m going to state (what should be) the obvious: the only way to hire good programmers reliably is to program with them. I run programmers though a one-hour, rapid-fire, pair programming interview – and that’s just the start. Having done it over a thousand times, I can score developers relative to each other on a 100-point scale. What do I look for? Mental quickness, ability to think abstractly, algorithmic facility, problem-solving ability. And most importantly, empathy. Because collaboration is the most important thing we do, and it doesn’t matter how smart you are if you can’t relate to how other people think.

7. Myth: Specialization is essential.
Managers, quite naturally, want to attack problems by dividing and conquering. In software teams, this often manifests as an urge to force specialization. Front-end vs. back-end, database administrators, and so on. Brad Feld suggests in his blog that every team should have one “full-stack programmer”, someone who’s a true generalist. He’s right, but he’s not going far enough. Everyone, in every team, should know the full stack [Tim: read Carlos Bueno's piece here]. Why? Because specialization makes a team fragile. Remember that bus count? Every specialist is a liability; if they leave, and you can’t replace them, you’re sunk. Not only that, but it makes a team sluggish. Specialists need to make their disparate parts of the system communicate through defined interfaces. In effect, they end up writing informal contracts with each other about how to do it. This leads to a lot of overhead, and often defensiveness or finger-pointing. At Pivotal, every developer works on every level of the system, from HTML and JavaScript, to Ruby, and down to the database. And the argument that specialists will be better at a particular layer of the system if they’re allowed to focus on it doesn’t really hold water. The state of software technology today is simply not that difficult. Programmers are better off knowing all layers and how they interoperate. By the way, another important implication of all this: you don’t need to hire for a particular technology. Ruby programmers in short supply? Fine, hire a Java programmer and train them in Ruby (pair programming works great for this). Someone defines themselves as a “server-side” programmer? No problem, make them do JavaScript, they’ll pick it up.

If they’re any good, that is.
Read more about Pivotal Labs and find their collection of tech talks here. If you’re in SF or Boston, try TaskRabbit while you’re at it :)
Click here to browse this blog’s other Entrepreneurship posts (covering everything from Twitter and FUBU to selling companies and angel investing).

Thursday, June 9, 2011

How NOT to Improve Medical Practice Profitability

Research indicates that real estate is typically the 3rd highest expense on a healthcare provider's P&L statement, right behind labor and supplies, yet many seem to regard it as a fixed cost that can't be adjusted until the next lease expiration.  And yet physicians sometimes look elsewhere to compensate for reimbursement shortfalls...

I recently encountered a revenue enhancement strategy that caught me off guard and accentuated the need for physicians to look at real estate as a way to preserve profitability. 
My son had to visit his pediatrician this week for a pre-sports physical.  At the end of the visit, the office manager told my wife that we would be billed an extra $100 as part of the practice’s annual patient fee to make up for reimbursement shortfalls on immunizations.  My wife was stunned... so much so that she bit her tongue and suggested that they bill her for it rather than paying it then and there (I married well).  When she mentioned it to me that night, "stunned” was one of the softer words I felt!

In a follow-up call, here's what I learned.  This $100 is an annual “membership” fee the practice began assessing when their accountant told them they has crossed into the red operationally.  And it's not just $100 for everyone… kids under 2 and under are charged $100 every 6 months because they incur more visits and more immunizations.  Once they hit 2, it reduces to $100 per year.  Oh, and it’s per child, not per family.

What interested me about this professionally is that I don't doubt that the practice has been squeezed.  These are challenging times for Physicians, and they have to find ways to reduce costs. (earlier today I attended an MGMA conference focused solely on that topic. )  But rather than looking to patients to make up shortfalls out of their own pocket, did this physician engage a various professionals to investigate the possibility of reducing their overhead (real estate costs, for example)? I'll find out soon enough in this specific case, but in the meantime the question has to be raised more generically.

Our Healthcare Properties Group routinely helps medical practices reduce costs through strategic real estate decisions, and these decisions can be tied to a number of factors which my or may not be related to the timing of one's lease expiration.  Landlord events, tenant events, community trends, etc. can all impact what's possible.  The keys are (1) understanding these triggers and having being able to research them, and (2) approaching the landlord in the most effective manner.  Don't forget to consider this large balance sheet item when investigating cost-cutting possibilities.

Finally, for those who are wondering, I did have the pediatrician reverse the $100 charge.  Not because I'm unsympathetic, but because it wasn't disclosed in advance.

Here's to your success!


Friday, June 3, 2011

Exit Strategy is often overlooked

I met with a doctor this week who owns multiple medical real estate parcels AND a successful multi-location practice.  The doctor has some vacancies to fill, is contemplating an expansion at one location, would like to open an office in a particular area, and is open to sell at the right price.  Oh, and this doctor is 61 years old.

Whether you caught it or not, that last sentence DRAMATICALLY impacts all of the answers. 

Every decision this doctor makes needs to be considered in light of its impact on the marketability of the real estate AND the practice, as well as on the decision's payback period.  And for the non-medical business owner, the same principles apply.

Here are a few of our thoughts in the case of the doctor:
  • Unless there's a very large and very rapid payback on a building expansion, or if NOT expanding would hurt revenues or operations, it's not wise... particularly since healthcare reform muddies the payback period analysis.
  • If the plan is to sell the practice, then a sale-leaseback should be considered NOW.  The doctor can set the term and future rent levels now to maximize property value to an investor, and then sell the practice in 5 (?) years when the long term lease may not be as scary since 5 years of it is gone.  But... that rent level must not hinder the practice's P&L statement, lest the practice's marketability be affected.
  • Opening a new office may not be the best thing to do unless it can be carved out of the rest of the practice and become a place that this doctor settles into as a "retirement practice."
See how it works?  When developing any business plan, it's best to have exit strategy in mind from day one. When real estate ownership is part of the picture, it's critical.

WHOEVER you rely upon for your real estate advice, please be sure that they think strategically. I see far too many situations in which an "order taker" executes on the wrong strategy with results that limit future options.

Here's to your success!


Sunday, May 15, 2011

Vision vs. Planning vs. Doing: The battle within us all

I've gained great business insights from The E-Myth Revisited, by Michael Gerber. One of these insights speaks to the three "personalities" that are at odds within all business owners and leaders: the Entrepreneur, the Manager, and the Technician. Relating them to daily activity, they correspond to envisioning, planning, and doing. Those who work with them will have a successful business/career and enjoy a good time/money balance in their lives. Those who don't will either make themselves miserable, everyone around them miserable, or both.

The crux of Michael's argument is (a) it takes all three personalities to build a successful business and (b) the three personalities are different and will always be at odds with one another. Interestingly enough, each of these personalities should not be regarded as the same person in different moods, but as different people who take over at different times. It's just like the struggle we all have with exercise - there's a disciplined guy and a couch potato living in me, they're always at odds, and if I'm not careful the wrong one will take over.
  • The Entrepreneur is the visionary... the one who has a great idea and takes the time to map it all out in a business plan.
  • The Manager is the planner - the one who keeps an entrepreneur's vision moving in a positive direction. They set up the real-world framework in which the business runs and insure that it all stays together.
  • The Technician is the doer - one who actually does the work that goes to the customer. They don't care about all the behind the scenes stuff - they just want to do the work!
Here's where it gets applicable. Too many times, the people who call themselves entrepreneurs aren't really entrepreneurs but are technicians who had a short-term entrepreneurial seizure. They got really good at the tasks comprising their job and wanted to eliminate the people that were gaining from the fruits of their labor, so they hung out their own shingle. They worked hard on their business until the phones began to ring (aka customers!) and then they worked hard in their business and never looked back. Unfortunately, as word got out about how good they were at the work (Technician), they became consumed in delivering their phenomenal service... alone or with assistance by their side. Without time to spend on the vision (Entrepreneur) and planning (Manager) activities to scale the business and bring in more talent, they eventually burned out. The lucky ones sold their businesses to a true entrepreneur and the unlucky ones imploded.

So what is one to do? The key is to live above the moment... to manage business activities rather than being managed by them.
  • In the early stages, when it really is all up to the owner, one must recognize what their business needs and be willing to be who the business needs most at that stage. It may mean less Technician time and fewer customers for a season... but they'll be happier customers and the owner's commitment to maintaining service levels will be rewarded.
  • As expansion becomes possible, it means finding the right people to fill the roles the organization needs most and investing (heavily) to teach them their job role. This will most likely be technicians (doers) first, and it's critical that service delivery standards be clearly understood so that the customers accept these changes.
  • As growth continues, the owner must find the absolute best talent to fill the Manager roles and must stay heavily engaged with these people. THEY are the key to mastering the time/money equation. THEY will be the ones who eventually do the hiring and build and manage the operation of the business. And THEY are the ones who can sink the business if the owner doesn't remain engaged.
Regardless of one's business phase, the personalities will never go away. Different voices will call loudly at different times. Again, the key is to step out of the moment and decide which person will take charge. When executed properly, as things grow the owner will reach a point in which they're always working on the business but only work in the business when they choose to.
In closing, I'll share that this concept resonates with me where I am. It takes a conscious effort to maintain balance in my business. Promoting Technology RE Advisors, maintaining prior client and prospect relationships, and delivering our service to active clients all require different skill sets, and I'm a living testimony that inertia can pull pretty hard if not understood and managed. As they say, understanding the problem is 80% (90%?) of the cure. I'm grateful to Michael for shining some light on these personnas.

I wish you the best in your endeavors.

Friday, March 25, 2011

Healthcare CEO Roundtable Insights

I was part of an event yesterday in which 3 Atlanta Hospital CEO’s discussed the health care world from their perspectives. The CEO’s were Michael Young of Grady Health System, Bill Moore of Atlanta Medical Center, and Donny Hyland of Children’s Healthcare of Atlanta (CHOA). I walked away with a new tag phrase and a few interesting facts. Here are my take-aways, followed by a statement about what this has to do with real estate…

My new tag phrase
Hospitals MUST contain costs, and I drew a connection between three of the cost-containment “dots” discussed. Here's the new mantra: The right person has to see a patient at the right place at the right time. When these factors align, money is saved.  When they don't align, waste occurs.

  • The Right Person. The optimal use of Physician’s Assistants (PA’s), Nurses, etc, can drive costs down. The story was told of a health system in Pennsylvania that had 7 endocrinologists managing 700,000 diabetic patients effectively… until 5 of those endocrinologists left to start their own practice. The system was unable to recruit 5 more endocrinologists, so they used PA’s to oversee routine work and the specialists as needed. Patient outcomes actually improved, as did profitability.
  • The Right Place. Per Michael Young, the use of outpatient clinics is huge. At their new outpatient facilities, it costs Grady roughly $150 to see a patient (Flu, for instance). That same patient in the ER? $1,500. Training (or motivating) patients to seek treatment efficiently is crucial.
  • The Right Time. Motivating patients to follow their prescribed regimen AND seek early treatment is critical. A $35,000 spine surgery may be averted through much simpler treatments IF those treatments are prescribed early enough. Diabetics who choose not to take care of themselves are particularly troubling, as their expensive treatments often could have been avoided completely.

A few interesting Facts

Accountable Insurance rates. This is intriguing… Grady has reduced their employee insurance rates by 10% since 2008, primary through 2 mechanisms. First, they vary the employee’s cost burden based upon the employee’s lifestyle choices. Those who choose to smoke or not regulate their blood sugar, for example, pay more. Those who exercise regularly and maintain a healthy weight pay less. Second, they show their employees the costs associated with various medical choices. If one MD charges $8500 for a service and another charges $5000 for the same service, the employee is aware. They’re still free to choose whichever they like, but they’re aware of the impacts on their employer.

Consolidation will continue. Hospitals will merge and acquire, and many physicians will become employees. One CEO said that over 50% of physicians today are employees.

Cost-Shifting is going to have to end. With healthcare reform, there won’t be enough private payers to carry the gap left by low government reimbursements.

Parents don’t like to be told that their kids are obese. With almost 40% of Georgia’s children being obese, Georgia has the 2nd highest childhood obesity rate in the country. CHOA is running a happy, healthy campaign (click here for info) that includes billboards with innovative slogans. Per Donny Hyland, these billboards have become controversial (controversy article here). Per the article, they won’t go away… in fact they’re phase one of a larger initiative.

Capitation, despite its many challenges, does do something well… it pushes providers to insure that their patients follow treatment regimens. The example provided was that the provider who prescribes diabetic treatment will monitor adherence to the treatment regimen much more closely if the money for the [unnecessary] $20,000 surgery resulting from non-adherence will come from that provider’s pool of money.

There’s a Supreme Court case looming out there. The flood of newly insureds may lead to a flood of new litigation. To me this is plausible… many of these newly insureds will bring conditions that have been untreated for some time, and I anticipate that some will be looking for someone to blame. I’m not sure if it’s being implemented or not, but there’s talk that certain providers may one day ask patients to waive their right to sue for malpractice before they’ll agree to treat these patients. It’s an interesting idea, but it’s sure to be challenged heavily.

How does all of this relate to real estate?
Referencing “the right place” comments above, a healthcare-focused real estate team can make a big difference in the effective locating of outpatient facilities. Medical spend data, practice density/distribution, and similar specialized information can be used to land a facility in the most effective place, and an understanding of medical trends and economic drivers can insure that the right buy/lease decisions are made AND that contractual terms are favorable AND in compliance with federal Stark and Anti-Kickback laws.

Call me if I can help!

Thursday, February 24, 2011

CCP Games Relocation

February 24, 2011 is a very proud day.  It's the day I can finally disclose freely that CCP North America has executed a new lease, and that I represented them in the transaction. 

The text from the State's press release appears below.  Before we get to it, however, here's an additional [CCP-approved] quote that didn't make it into the press release:

"CCP was represented by John Cobb.  John was with Lynx Real Estate at the time and has since moved to Grubb & Ellis.  The landlord was represented by Fisher Paty of Oakhurst Realty Partners.  Reynir HarĂ°arson, CCP Co-Founder and the creator of EVE Online, the company’s award-winning flagship video game, had this to say regarding the two brokers: 'CCP places a high value on the positive and productive culture of our workplace and therefore takes an active, hands-on approach to site selection.  We were seeking a location that balanced economics and functionality, and John did an outstanding job of guiding us through the process.  Once John identified the site, Fisher and his team worked very effectively to make this arrangement come together.'"

And here's the State's press release, followed by a closing thought:

CCP Games Announces Georgia Expansion
International gaming developer to relocate North American headquarters, create 150 jobs


Gov. Nathan Deal announced today that CCP Games, the Reykjavik, Iceland-based digital entertainment developer, will relocate its CCP North America headquarters from Gwinnett County to the City of Decatur in DeKalb County. This move is expected to create 150 new jobs over three years, bringing the company’s U.S. staff total to 300 by 2013, while retaining its existing workforce.

“For digital entertainment companies, Georgia brings to bear a competitive set of resources for this industry that makes our state a strategic home for game developers such as CCP,” said Deal. “It is also encouraging to see an existing Georgia company expand and take full advantage of our state’s progressive business atmosphere, and enhance its commitment to our state.”

CCP Games is a leader in the multiplayer video gaming industry. The company is the creator of EVE Online, a science fiction-based multiplayer online game, which was introduced in 2003. Two additional projects, World of Darkness and DUST 514, are currently in development. Through this expansion, CCP North America will support the needs of its growing company and suite of products.

“Decatur offers the perfect blend of big city accessibility with a hometown feel that we were looking for,” said Mike Tinney, President of CCP North America. “Georgia’s financial climate combined with Decatur’s social climate provide the ideal conditions for continued growth.”

The company will locate in a 40,000-square-foot facility at 250 E. Ponce de Leon Ave. in Decatur.

“I am pleased to welcome CCP to DeKalb County’s growing cluster of creative industry companies,” said DeKalb County CEO Burrell Ellis. “DeKalb is home to a dynamic young workforce, educated at institutions such as Emory University and the Art Institute of Atlanta. CCP’s decision to locate in DeKalb will create highly paid jobs for both young graduates and more experienced workers in the fast-growing gaming industry.”

Interactive entertainment companies in Georgia benefit from the state’s comprehensive technology infrastructure and highly skilled workforce. This makes Georgia a competitive location for media industries such as video game development, animation and digital entertainment. More than 75 digital entertainment companies have Georgia locations, which are fed by a pipeline of talent matriculating from more than 15 Georgia colleges and universities offering industry-related courses.

“CCP Games had a list of qualities they wanted in a new business location — a strong sense of safety, easy access to MARTA and a high quality of life that would be attractive to new employees — and we met all of them. A business environment that supports creative businesses and had a wide variety of restaurants and entertainment within easy walking distance of their office were also high on their list,” said Decatur Mayor Bill Floyd. “Decatur fit their needs and CCP fits our vision for our downtown business community. We welcome them to our city and look forward to their participation in our creative, actively engaged community life.”

Georgia Department of Economic Development project manager Glen Whitley assisted the company with this relocation, in collaboration with the City of Decatur, DeKalb County, Georgia Power and the Metro Atlanta Chamber.

About CCP Games
CCP is recognized for the creation of revolutionary gaming experiences designed with a unique combination of stunning artistry and advanced technology. Best known as the independent developer and publisher of EVE Online, the critically acclaimed, space-based massively multiplayer online game (MMO) and PC Gamer’s 2009 ‘MMO of the Year,’ CCP is currently in preproduction on two additional titles: World of Darkness, a dark, immersive MMO based on the legendary roleplaying franchise of the same name; and DUST 514, the groundbreaking massively multiplayer online first-person shooter (MMOFPS) set in and linked to the EVE Online universe. Founded in Iceland in 1997, CCP is privately held and has additional offices in Atlanta, Newcastle and Shanghai with a datacenter in London. More information can be found at

Final thought: As you'll imagine, this transaction had many complexities.  While I can't disclose this deal's specifics, I can tell you that its process required that I have an understanding of opportunity zone credits, entertainment tax credits, state and local incentive options, and the recruiting tactics of competing states.  If you're curious to know what this could mean for your organization, reach out to me and I'll talk you through it!


Monday, February 14, 2011

Why Change Brokerage Firms?

I’ve been asked several times lately why we (at Lynx Real Estate) took our Healthcare and Technology teams to Grubb & Ellis. The short answer is that it allows us to expand the reach and resources we offer to our clients.

Reach. As I type this, I’m in San Diego at a national collaboration summit. Hundreds of brokers from across the country have gathered to understand our various specialties and to discuss clients and potential areas where collaboration can enhance the value we deliver. More agents in more cities (over 100) means I now have market specialization everywhere you might be. This should explain the reach part.

Resources. Here is a small sampling of the resources I’ve interacted with this week alone:

- Healthcare. Over 25 Grubb & Ellis agents from around the nation gathered to discuss the new comprehensive healthcare real estate solution we’re building. This team’s individual members have completed over $1B in transactions and have seasoned expertise in all the areas listed below. These are not agents who recently decided to become healthcare experts… they are the real deal. Here’s the expertise we already have in place:
     o Sales - Institutional and smaller
     o Capital Markets (aka funding) for healthcare products
     o Leasing
     o Tenant Representation
     o Facilities Management
     o Stark, Kickback, and Fraud & Abuse compliance protection
     o Construction Management
     o Data Centers

- Technology. Grubb & Ellis has technology-savvy agents across the country who have formed a team to collaborate in helping technology companies make real estate decisions. I’ll be a contributer and collaborator with that team also.

- Land. I was recently asked by a client if a piece of land is (or could become) EB-5 qualified. Not only does Grubb & Ellis have people who know the program, they have people with direct experience in it.

- Foreign Nationals. I’m in the early stages of helping a Chinese business person purchase a specialized technology-centric building. Grubb & Ellis has a group of agents I can tap who specialize in assisting Chinese nationals in their domestic real estate transactions.

Other G&E resources include a chief economist, research department, graphic artist, appraisers, construction managers, and a host of other valuable services.

We at Lynx built a phenomenal platform and helped a large number of clients make very good real estate decisions. The Grubb & Ellis move allows us to continue to do so, but serving a national versus regional audience.  Let me know how I can put this platform to work for you.


Friday, January 28, 2011

Electronic Medical Records (EMR) - 3 reasons it's a hot topic

Health IT and Electronic Medical Records (EMR) are predicted by many to be the most significant issue in the health care industry for 2011. “Why?” is a question that is unclear to many. Here are the top 3 reasons:

2009 Economic Stimulus Package
Health care providers can collect reimbursements of $44,000 or even $63,000 if they attain something called “meaningful use” of a certified electronic health record system. Meaningful use is a fuzzy concept… it’s tied to a practitioner’s increasing adoption of EMR and subsequent ability to retain – and eventually share - more and more health care data. The challenge now is that many practitioners are “stuck in the mud” trying to decide what to do. This is so common that entire organizations and events are springing up to help them with these determinations.

And for those who STAY stuck… in 2015 the incentives will be replaced with penalties.

New Medical Codes
The ICD-9 medical coding system will soon be replaced by the ICD-10 codes. This increase, along with new formats imposed by HIPPA changes, bring a five-fold increase in the number of diagnosis and inpatient codes (over 1,300 mod’s by 1/1/12). Imagine trying to keep up with THAT on paper… practitioners need a 3rd party to manage this task.

Medical Device Event Tracking
The FDA is likely to require closer tracking of adverse events related to medical devices, resulting in an online system to track such events.

What does all this mean for real estate?  It means that (1) Health IT companies are all going to be in a major growth mode this year, (2) practitioners need to be considering technology infrastructure when evaluating real estate, and (3) specialized know-how matters more than ever.

The health care information in this post comes largely from my interaction with health care and technology leaders, but there's a report worth mentioning... it's Price Waterhouse Cooper's report on the top health industry issues of 2011, and it has some great insights. You can access the report here.