Future Practice Owners: Plan Early, Plan Often
If you think you may wish to own your own practice at some point during your career, there are early considerations to be made.
Before you sign an employment contract, consider what your future plans may hold. If you believe you wish to own a practice in a specific community, beware of non-compete agreements. If you are joining a practice with the promise of future ownership, get the agreement in writing as soon as is reasonably possible, which normally should occur within twelve months.
After you have demonstrated your worth to the practice, be prepared to seek a different position if the owner will not agree to a reasonable time for transition. At that time, confirm when the owner expects to sell or retire so you have reasonable expectations as to when you will own the practice.
Establish early banking relationship
Establish a relationship with a banker and discuss your practice ownership plans early. It’s best to deal with bankers who have extensive experience working with veterinarians. Community banks know the market and provide local decision making. A national bank across the street from the practice may not be useful if the true decision-makers are across the country and will never actually visit your practice. Choose a banker who is active in the local community and/or the veterinary community, working with the state veterinary medical association or veterinary school and obtain references from other practice owners.
Seek value. Your practice clients come to you because you provide value, not because your fees are the lowest. Maintain your accounts with the banker who will provide the financing you will be seeking and it will pay dividends in the end. Your banker should provide counsel regarding how to prepare for owning a practice. Check in periodically, so your banker is ready to go when you are.
The price should be based on the value of the practice as close as possible to the date of the initial agreement. If you help the practice grow, as you should, you do not want to pay for the increased value you created. Have your CPA and/or your banker confirm you will be paying a fair price. If the seller plans to work as an associate after the sale, confirm the practice will remain profitable based upon his proposed compensation plan. Also, confirm how long this arrangement must last, so you can end the arrangement if it no longer makes business sense. If the owner owns the clinic real estate, and it is not being sold, confirm you will have a lease, with options, for at least 10 years at, or below, market rates. Avoid being forced to purchase or lease assets which are obsolete or not needed.
© 2012 WSVMA