Many optometric practices are set up as partnerships. It’s a great way for the business to benefit from multiple owner’s diverse knowledge, skills and resources. With more than one person making decisions and affecting outcomes, however, different aspects of starting and running the business need to be addressed upfront.
When Kelly and I first started out, we took the time to write out our expectations for as many scenarios as we could think of, wrote it out and signed it. We strongly recommend that our clients who are forming a partnership do the same. Create a partnership agreement that details the business ownership and responsibilities today and in the future.
A quick internet search for “partnership agreement templates” can get you something to use as a starting point. You will want to make this agreement as detailed as possible to reduce conflict in the future. Having a lawyer read over your final agreement it is likely the most prudent approach. This document will serve as the road map for your decisions both day to day and years to come – it deserves a significant amount of your time, energy and resources to develop.
There are a number of crucial areas that should be addressed in your agreement.
You will want to make it clear, and likely equal, in terms of how much each partner invests financially, at the beginning of the partnership. It is just as important to discuss how purchases will be made in the future. These discussions should include the clear delineation of what each partner will do for and in the practice. Will one take on more of the staff management while the other will take care of the accounting?
When you are just starting out, you are happy if your bills are getting paid. But it is also important to define how profits will be divided when the time comes and if and how much of a salary each partner will draw from the practice. You may want to talk about a 3- or 5-year plan as well. How much money will be coming into the practice before you increase your draw? How will you pay for large expenditures? Do you intend to save or use credit?
It is hard to imagine ever leaving the practice when you are first starting out but there are a lot of circumstances that should be considered. What if someone gets sick and can’t continue working? What if someone passes away? What if one partner becomes independently wealthy and wants to walk away? One option would be to sell the stake in the practice. What is your position on taking on a new partner? What are the options for buying out the other partner? Who will take on the responsibility of getting the practice valuated? It is also important to sign a non-compete. In the honeymoon phase of a partnership, it is hard to imagine things going south. But in the case of a tough split, it is better to have a written agreement to follow and a non-compete clause to protect the interests of the business.
As both partners get busier and have other stressors come into play, making decisions together will get harder and harder. You need to define how day-to-day management and long-term decisions will be made. Who gets the last say? Identify what types of decisions require a unanimous vote by partners, and what decisions can be made by a single partner. By setting up a decision-making structure that everyone understands and has agreed to, you’ll have the foundation for a more friction-free business.
While everyone hopes to avoid a major falling out, it is important to plan for it so that everyone understands what will happen from the outset. You might agree that if the two parties are at a complete impasse, mediation might be the first step, followed by arbitration.
Kelly recently had a health scare and was hospitalized. There was no question as to how we would proceed – and that made it easier on everyone. She could look after her health, I kept the ship going in her absence. It wasn’t something we had to talk about at that time because the expectations were already clearly defined from the beginning. Having a partner to share the ups and downs with is a blessing. Setting it up properly right from the beginning allows you to navigate the years of your business together with peace of mind.
is the co-founder and managing partner of Simple Innovative Management Ideas (SIMI) Inc. and expert Practice Management contributor for Optik magazine. She can be reached at firstname.lastname@example.org