Taking on a business partner is a potentially life-changing decision with many factors to consider.
It’s a common scenario: you’ve been running a successful practice for many years and are starting to think about slowing down or perhaps even selling, but you aren’t sure which option is right for you.
The RACGP’s most recent Health of the Nation report found that three in 10 GPs intend to retire in the next five years. This, coupled with the fact that there are a reduced number of graduates taking up a future in general practice, means it is getting harder to find a buyer for your practice from within the GP community.
Over the next 12 months, William Buck will publish a series of articles about succession planning for your practice, providing insights into this life-changing decision with guidance on how to avoid the pitfalls and tips to maximise the opportunities.
One way you can start the transition away from your practice is to take on a partner. The ideal partner can share the load and responsibilities of running the practice. This is a significant decision that shouldn’t be taken lightly and requires evaluation of several factors.
After working with many practices in taking this step, these articles will share some key aspects to consider that can help you make that decision.
Alignment: Common goals and vision
Consider whether the potential partner’s goals and vision align with yours. Most discussions and observations with potential business partners are done at a clinical level. That is, are they a good doctor? Do you share the same commitment to patient care?
When considering a business partner, do you need to widen the criteria to include common thoughts on the management and growth of the practice? The answers to these questions will help you determine if you are on the same page with your potential partner about the future of the practice.
Do your potential partner’s skillsets complement yours? When partners have differing skill sets, it can enhance the management of the practice and spread the load. It allows each of you to focus on your specialties and grow your practice. As the saying goes, two heads are better than one.
How you and your potential partner split the profits and share the revenue should be agreed up front. While mulling this over, you should consider all contributions to the practice, including but not limited to patient fee levels, time managing staff, supervising registrars, or financial aspects. These are valid contributions that should be considered.
We are also seeing an increased number of practices factoring in consideration for owners taking time off to care for family and agreeing on how this will impact the practice financially.
It is important to establish a transition plan up front, especially when considering time frames so that there is no confusion or miscommunication down the track. Where possible this should be documented in an agreement.
When going into business with a partner, you should ensure that your legal arrangements are documented, covering exit strategies, non-compete clauses, leave, and other relevant considerations. This will save you time and money down the track.
As with the transition plan, it is equally important to discuss the potential exit scenarios for one or both partners wanting to exit the practice at some point in the future. This can help prevent complications or misunderstandings.
Ultimately the decision to take on a partner in your medical practice should be based on a thorough evaluation of all the factors and be built on a shared focus for the future. Careful planning and communication are key to success.
Belinda Hudson is a director in our business advisory division and is the national lead for William Buck’s Health Services Group.