Lewis and Clark, Sears and Roebuck, Ben and Jerry, Warner Bros. These names quickly conjure up images of success, but it's easy to forget that these teams started out with nothing more than a dream. Finding a partner to help build your business is no easy task. A good practice partner shares your ethics, vision, and enthusiasm, bringing strengths to your weaknesses. It's someone who understands the responsibility of ownership and has the ability to compromise and work as a team player. Most importantly, partners should get along with each other.
Partnerships can consist of 2 or more owners. Each owner has a percentage of ownership in the business. Partnerships should always be in writing and should have an agreement that outlines the owner's rights, events of termination, valuation methods, and provide exit strategies. Additional items that should be outlined in writing are partner responsibilities and compensation.
Well written agreements make for happy partnerships. Having a document that all parties can reference helps avoid those memory lapses years later.
Pros and Cons of a Partnership
Is bringing on a partner the best way to grow your business? Weigh the pros and cons of partnership. Owners seek partners for a variety of reasons including lifestyle, business expertise, technical skills, or even capital (money). Every partner must weigh the reasons for bringing in a new owner and recognize that partnerships are much like marriages. All partners should have the same vision and goal. If one partner wants to re-invest in the practice and the other simply wants to take out the profits --well that could spell a dispute. In fact, you'll most likely spend more time with your business partner than with your spouse or family. Partnerships also mean that all liabilities are equally shared by all owners. While there are several business entities that will limit owner liabilities, most suppliers, lenders, and landlords will still require personal guarantees of all the major owners. Every owner must recognize that they could be liable for any actions incurred by another partner or owner. (This includes loans, payroll taxes, income taxes, bank deposits, credit card receipts, etc).
What's My Transition Strategy?
If you have owned a practice for years and are planning to retire in less than 5 years, a partnership may not be right for you. Are you willing to re-invest in longer term capital improvements even if you leave earlier? If your desire is simply to ease back on your duties, other options such as bonus programs for employees or outright practice sales with extended seller employment agreements might achieve the same result.
How do I find the right person? Is there a doctormatchmaker.com out there somewhere?
There is no magic or science to finding the right partner. Often it could takes months or years. Most advisors suggest that owners hire a person as an employee and "date" for up to six months. This allows everyone to determine if it is a fit. The hiring phase can include an at-will employment agreement. It can also outline terms of a partnerships buy-in after the honeymoon period (i.e. the new partner may want to value the practice and determine the buy-in price prior to investing time working at the office).