Setting up your veterinary practice as a partnership can be a great way to team up with another person to offer services to your community. It offers “built-in” succession planning, to some extent, and can offer a way to limit liability in some cases. However, you need to do some planning to ensure that your partnership works smoothly with your chosen partner (or several partners). This work, ahead of creating the partnership will help you avoid conflict and headaches down the road.
Creating a successful partnership means putting some thought into whether a partnership is the right type of venture for your situation. You cannot have a successful partnership if the benefits and drawbacks do not make sense for you at the outset.
Weigh the pros and cons before making the leap into a partnership agreement. Here are some of the benefits and drawbacks to think about as you contemplate this very important decision.
Some of the benefits of a partnership include the following.
Reduce your initial financial commitment and risk.
When you start a practice alone, everything is based on your financial abilities and commitments. There is no one there to back you up if you need additional support or if something goes wrong. Having a partner (or several) spreads out that risk, so the entire venture is not resting on your shoulders alone.
It is often easier to get a bank loan.
Veterinary medicine is becoming more and more sophisticated, which often requires higher startup costs to get your practice off the ground. Getting financing is a barrier for many new practices, but it is easier to address with more than one person.
Pooling your assets and credit with other people allows you to provide more to the bank when it comes to getting a loan. Banks often like to see a much higher equity ratio for businesses that are just starting out and having a partner to boost that cushion can be very helpful.
Two (or more) people means more productivity.
If you and your partner(s) are all focused on growth and productivity, you are likely to grow your practice faster. Working as a team can make you more successful than working alone in many circumstances.
Partners share the workload.
If you are the only veterinarian in a practice, you are the person that gets called in every emergency situation. While this commitment to your clients is admirable, it can cause burnout very quickly. Instead, having a person or two to share that responsibility makes it easier for everyone involved.
Partners can also trade off work on projects that are not fun for them. Perhaps one partner really enjoys a particular task such as marketing or tax planning, but you hate it—working to each other’s strengths creates a better practice for everyone involved.
Having more than one person involved in the practice also makes it easier to get away when you need to. You do not have to shut down the whole practice when you have to do Continuing Education or you want to take a vacation, for example.
Partners create invaluable, lasting relationships.
Working on your own as a professional can get lonely. Having a partner to work with you and share your experiences can be a great way to stay connected to another person and create a relationship that you cannot get anywhere else.
More consistent income.
Partnerships can also create more consistent income compared to working on your own, particularly if you have several partners. For example, if you suddenly become ill and cannot work for two weeks—that is just two weeks of pay that you would not have as someone who is a sole owner. Instead, you can rely on your share of the profits in a partnership because your partners are still working.
Keep in mind, however, that partnerships require that everyone pull their share of the duties. If you want to maintain good relationships with your partners, you need to hold up your end of the bargain when it comes to hours or profits. This type of commitment is much more prevalent in a partnership than it would be in a corporate entity or associate contract.
Partnerships are not perfect. In fact, there are potentially serious downsides or drawbacks that you should consider.
You have to share profits.
Perhaps one of the biggest downsides of having a partner is that you have to share profits. Instead of keeping all of the revenue for yourself, you have to agree to split the profits with your partners. You can agree to split these in any way that makes sense for your situation, but every partner will want at least some portion of the profits.
Disagreements can be devastating.
Partners who cannot work well together should not be partners in the first place. Whether you and your potential partner will get along years into the future can be difficult to predict. However, getting this wrong can be very bad for your business—there is nothing worse for your practice’s culture than feuding owners.
Decision-making often cannot occur as quickly.
The more partners you have, the longer it will take to make a partnership-level decision. There are situations where you can create the partnership so that one or two of you are making daily decisions, but decisions that will affect the practice as a whole must involve every member of the partnership.
You cannot just do whatever you want.
One of the main benefits of being a solo practitioner is that you can manage and run your practice as you see fit. Once you involve anyone else, you need to consider what they want and how they would react to any potential decision you are making. Your partner(s) will inevitably want different things compared to you from time to time, and you have to work through those issues together.
One of the main reasons partnerships do not do well is that the partners cannot get along or work together long-term. You and your potential partner(s) do not need to agree on everything—some disagreement or differing viewpoints is good for the development of your practice. However, your “big picture” values and goals need to align.
Philosophy, skills, and goals are items that should “match up” between or among partners. Skills can complement each other, but philosophy may need to align. For example, someone who prioritizes the well-being of animals and client needs above profits will not work well with someone who is only focused on the bottom line above all else.
Work ethic is another big concern that can divide a partnership. For example, if the expectation is that everyone must meet certain goals or work certain hours, but one partner is not pulling their weight, that can be a problem. It is difficult to address situations where one partner is working 80 hours a week, and the other is working 30. If work ethics generally match up, you can avoid many of those issues.
You need to have a candid conversation about your values and goals long before you even consider moving toward a partnership. Simply enjoying someone’s company is often not enough to create a partnership that will last for years to come.
It is a good idea for the partnership as a whole to get legal advice when creating a partnership agreement. A knowledgeable and experienced lawyer will be able to address specific terms for your partnership agreement that you might not have considered.
Some topics that an attorney or consultant will be able to help you address might include:
By addressing all of these issues now, you can avoid disagreements in the future. You can also help ensure that your practice will be ready to go and ready to operate as soon as the doors open.
If you have specific concerns that you want to be sure the partnership agreement addresses, but you do not want to go into detail about those provisions with your partner, having a third-party advisor such as an attorney to help address those hot-button issues can be invaluable.
Dental & Medical Counsel has the experience you need to help you create a partnership agreement that is comprehensive and clear. Schedule a complimentary consultation with attorney Ali Oromchian or give us a call to learn more about how we can help.
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