Have you ever had the conversation below?
“I’m thinking of offering a partnership to my associate.”
“Why?”
“Well, they’ve been here for three years, and it just seems like the right thing to do…”
Any time you’re considering a major decision, like changing your business structure or making significant investments into your practice, it’s worth digging deep into the “why” of what you’re doing. Ask yourself the following questions:
- What would be worse or better if you didn’t make this decision?
- What could go wrong?
- Is this the right time to do this?
Why equity partnerships require careful consideration
Equity partnership—where someone buys stock in your business—affects both your income (since partners share the practice’s cash flow) and your control over daily operations and major decisions.
Like marriage, partnerships shouldn’t be taken lightly. And it’s often harder to end a bad partnership than a marriage.
That said, offering equity to an associate OD can make sense if the practice generates enough income to support two owners comfortably. Here are three reasons to consider taking on an equity partner:
1. Phased exit for an older owner
In planned transitions between an owner and an associate, the risk of changes is two-sided.
One common risk is that the associate gets cold feet at the eleventh hour, and an owner who thought their retirement was on track is suddenly derailed. On the other hand, sometimes the owner delays retirement, and the associate, who expected ownership at 33, finds themselves 38 and still waiting.
In these situations, it often makes sense to “pressure test” the arrangement by selling 40% to 50% of the practice now. The plan is then to transfer the remaining ownership to the new partner or another owner within five to ten years.
2. Securing long-term providers in a small-town context
In smaller communities that struggle to attract new ODs, an all-partner model can be a powerful way to attract and retain providers long-term.
In this case, owners may give up some income and control to ensure they have dedicated partners supporting the community’s eye care needs for years to come.
3. Synergy
In rare cases, practice owners realize that their associate OD is a true “co-laborer” who helps drive the practice forward. With their involvement, the practice grows faster, more profitably, and with less stress. In short, the associate demonstrates true partner potential.
These associates deliver a high standard of care while managing a full patient load, generating strong revenue. They share a passion for expanding into new technologies or patient groups and actively contribute to maintaining or enhancing the office culture.
The role of accurate financials in successful partnerships
Offering equity partnership is a major strategic decision that can ensure an exit strategy, help retain providers long-term, and even simplify growth and expansion. However, it can also lead to disappointment and frustration if the partner isn’t the right fit or if the decision is rushed.
Before bringing in a new partner, be sure you’ve clearly defined your reasons for the partnership.
Having multiple owners only increases the need for accurate, timely, and meaningful financials since more than one person has a claim to the practice’s cash flow. If you’re in a partnership or considering one, outsourcing your books to an impartial third party like Books & Benchmarks could benefit your practice. We offer expert optometry bookkeeping tailored to your needs.
Contact our experienced team today to learn how we can help your practice thrive.
