Many of our clients consider their practice a key component in their retirement planning and look at bringing in a younger partner as part of their transition process and eventual full sale of the practice. Therefore Silkin Management Group consultants end up advising these clients on the key issues to confront when embarking on such a plan. This series of articles goes over the highlights of these important points.
In our two earlier articles we discussed a) the importance of having all partnership agreements put into contractual form, b) working out a sales price based upon equipment and real estate appraisals as well as determining the “blue sky” value of the practice, c) taking care to fully pass the management aspects of the practice, and do not sell controlling interest until you are sure the new owner can properly manage the practice.
Today we’ll discuss some important additional points to be considered when bringing in a partner, whether for future sale of the entire practice, or just to expand the practice.
• Get as much of the buy-in amount financed by a lending institution. Ideally, you want anyone but you to finance the purchase. This isn’t always practical. You may end up carrying some portion of the note. However you do it, try and get as much of the financing handled by a bank or other lending institution. There are many lenders who specialize in these types of loans including major banks like Bank of America and Wells Fargo.
• Get in writing how management responsibilities are to be assigned.
As noted in Part 2 of this series, we recommend to not relinquish management control of the practice until the sale of the practice is completed and you are assured the successor can adequately manage the practice. But, until this is done, you should have in writing what the management duties are between the two of you, especially that the final word on decisions fall to you. There also should be some sort of payment for the person being the managing partner. How much depends upon the amount of work it takes.
Future Silkin Management Group blogs will present more key issues in this partner transitioning and practice sale subject.
More questions? See our FAQs
If you would rather speak to us in person, please call us today: (877) 386-0388. Or request a callback at a day and time that is most convenient for you.