A partnership for your optometric practice can be both very rewarding and very practical. An optometric partnership may be the best option to share benefits and risks or transition a practice. However, if you do not choose the right partner and set up the partnership incorrectly, it can also cause a lot of headaches. Here, we include a few “must think” aspects of developing a partnership to further your optometry practice.
Partnerships are common in the optometric profession. They generally come about as a method for succession planning or simply to grow the practice so that the professionals can serve more patients or expand their practice into specialty areas.
Members of a partnership arrangement will generally experience the following benefits:
Partnerships also create a unique relationship where partners work together using their best strengths.
Deciding to partner up with someone is a choice that may affect you for the rest of your career. As a result, it is important to make sure that the person who will be your partner is someone you still want to work with for years to come.
It can be difficult to know whether a potential partner will work out that long into the future. But you can take steps now to determine whether the partner you are considering will still be a good option in a few years.
In general, if both partners share the same values and goals, then the partnership will work out better in the long run. For example, if one partner values work-life balance but the other completely disregards it, there will be some occasions where the partners will clash.
Along the same lines, overall goals should align as well. If one partner’s goal is to help people with eye issues, and the other partner’s goal is simply to make money, that can cause some tension.
While there are situations where having two or more optometrists who have similar skills and experience can result in a great partnership, it may work better if your skills and expertise actually complement one another. Having one partner who specializes in a certain area or has unique experience in a particular aspect of care can add significant value to the overall practice.
It can be very difficult to know what a person will be like to work with as a partner until you actually start working together. However, getting to know a potential partner on a personal level long before you consider teaming up is definitely a good idea.
You should also talk about methods that the potential partners use to interact with patients, use staff, and more. As part of this conversation, you may be able to spot potential red flags before they cause problems.
Miscommunication or misunderstanding about how the partnership will function or payout is one of the main reasons that partnerships struggle. Being on the same page as your partners about expectations is extremely important. When you bring on a partner, you should communicate what you are expecting for their workload, administrative tasks, communication, and any other aspect of the partnership that will be required of them.
As someone who is bringing on a partner, you should also have a clear understanding of why you are bringing on this optometrist and how they will add value to the practice as a whole. Asking someone to be a partner who is not really adding anything to your current practice simply does not make sense.
In general, there are two reasons for an optometric partnership:
In general, adding a partner just to add a partner because that is what is expected is a poor reason to partner up with someone.
Whatever the reason for adding a partner, you should have a conversation with any would-be partner to explain your expectations so everyone is on the same page. You do not want to add a partner who is your only plan for retirement, only to learn that the partner is using this partnership only as part of their five-year plan.
Pay formulas are one of the biggest reasons that optometry partnerships have conflict. While the partnership may have developed a pay structure that worked years ago or seemed to make sense when it was implemented, things change, and those changes can result in some “unfairness” in a pay structure.
When everyone contributes to the partnership equally, an equal pay split makes a lot of sense—and an equal contribution is common when partnerships first start out. However, as time goes on, practices change, and an equal pay scale might not make sense if some people are contributing more than others.
Ultimately, you have to develop a pay structure that is going to work for you and the members of the partnership. Something that considers the following contributions might make sense:
Some percentage based on collective revenue and cash flows will likely be a good option. However, if one partner does more management activities than another, for example, you might want to consider making pay adjustments for that type of role.
Pay structures should be a part of your partnership agreement. That means that they are set out in a written document at the outset of the development of your partnership. However, just because it is written in the partnership agreement does not mean that the payout structure is written in stone. You can (and often should) reevaluate payout structures as the overall practice grows and develops over time.
Bringing on a partner can be a great way to plan for retirement or to sell all or part of your practice. Selling an optometric practice can be a huge challenge, especially as fewer young doctors are entering the field and practice values have significantly declined over the years. This is despite the fact that many optometrists have invested huge sums of money into equipment, improvements on leased property, and computers.
Planning over the correct time frame is a big factor in exiting your practice when you want to make that move. It can years or even decades for a young doctor to be ready to take over a practice on their own.
In fact, they may never be ready, and you may need to create a partnership involving several optometrists. Creating a “dynasty” that consists of an evolving partnership can be the best long-term solution for several exit strategies for many partners. All of this takes time, however, and you need to consider how you will exit long before you make the decision to involve a new partner in many situations.
The appraised value of a partnership and how each partner will be compensated are key issues that you need to consider if your long-term goal is a buyout. For example, perhaps a new partner would not contribute any equity now, but they would buy you out in full in a few years. Alternatively, you may want to develop some kind of valuation for shares so that the partner buys in now and then also completely buys you out when you are ready to make that transition.
A partnership agreement should be the foundation of your optometric partnership. It should set out the answers to some of the most contentious issues in your partnership relationship, including things like:
Ultimately, the terms in your partnership agreement should prepare you for the worst-case scenario. If everything falls apart, you should be able to reference the partnership agreement on how to handle the partnership dispute.
Those entering a partnership for the first time may overlook the fact that they can negotiate the partnership agreement. The negotiation process may be harder to do if you are coming into a partnership that already has several partners, but it is certainly possible.
To get assistance with partnership negotiations and drafting partnership agreements, contact Dental Medical Counsel to schedule a complimentary consultation with attorney Ali Oromchian. We can help you think through some of the most challenging aspects of creating or entering an optometric partnership.
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