Consider your partnership carefully


All partnerships should have the legal equivalent of a prenuptial agreement.

It doesn't take much time reviewing the statistical literature on veterinary income to figure out that clinic ownership usually pays better than working every day as an associate veterinarian. In fact, in recent years, merely owning a tidy three-bedroom ranch in Orange County, Calif. or in Nassau County, N.Y. probably paid better than working every day as an associate veterinarian.

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Therefore, it isn't a surprise that there seems to be an upswing in the number of veterinarians, mainly those with between five and 15 years of practice experience, who are actively exploring the possibility of becoming a practice owner. Noteworthy though is that the path to ownership, which used to be the most common (purchase of a 100 percent interest in an existing practice) appears to be waning in popularity.

Instead, many veterinarians who seek the economic rewards of practice ownership are seeking out fellow associates who have a similar aspiration with the intention of starting or buying a veterinary hospital. A number of others look to find a well-established hospital where they can "buy in," rather than buy out the current owner. A buy in usually means the current owner intends to remain at the practice for a fairly significant number of years. In either event, the goal is to form a partnership.

Powerful motivators

The motivations for sharing a practice ownership are powerful. Management problems are a shared responsibility. The financial risk and debt load are to be shared. And not least of all, emergency work or responsibility for evening appointments and weekend hours can be split up. Sounds a lot like a marriage, doesn't it? That's because it is like a marriage. Or, perhaps marriage on steroids.

In law school, I had a brilliant professor, author of numerous textbooks and advisor to judges and legislators who had an excellent perspective on marriage. He said that getting a divorce should be a simple matter. In order to get married, though, people should have to work through burdensome and trying obstacles, provide detailed financial and credit disclosures, make court applications and participate in interrogatories and depositions. That way, the parties know before the commitment whether the other person is what he or she appears to be and whether the two can weather the inevitable hard times and survive.

It's a commitment

Partnership is every bit as big and demanding a commitment as marriage. Partners usually spend more time in each other's presence than with their spouses. Partners are tightly bound financially but without the underpinnings of emotional attachment shared by married couples. Partners frequently look at each other as a means to an end but without considering the needs and desires of the other.

For these reasons, and countless others, I submit that potential partners anticipating either a start-up practice, a joint purchase of a practice or even a buy-in, look with great and scrupulous care at a number of hard questions, including the following:

  • Does my potential partner feel completely comfortable discussing money?

It is vital that partners be open and willing to talk to each other about money matters. To a certain extent, this includes personal financial affairs. This doesn't mean idle chatting about how profits will be used to improve the quality of our medicine. It means, "I don't have enough savings to pitch in if we have trouble meeting payroll in February. How much savings do you have?"

  • Is my potential partner similar to me in her desired lifestyle?

The wheels come off marriages when a modest spending man carries a high maintenance woman. The same is true when a flashy, jewelry-laden sharp-dresser marries a conservative lady. Even if the household income is adequate, disagreements on how money is spent can be fatal.

Widening disaster

When two partners have very different views of their desired lifestyles, practice disasters can ensue. The partner with the big mortgage and big car payment will always be looking to maximize profit payouts ("draws" in a partnership, "Subchapter 'S' distributions in a corporation). One partner might want a reasonable bank balance in the business for slow times while the other may want to extract $10,000 in December for that awesome plasma screen television his wife had been hoping to find Christmas morning.

  • Is my potential partner willing to share responsibilities for all decisions?

Does your practice buddy have any pre-conceived notions about unilaterally handling specific areas of practice management? If you don't know your potential partner really well before the partnership begins, you may be surprised and dismayed to discover that he or she really doesn't trust your judgment about personalities when hiring and firing is considered, and judgment about client problem resolution. Example: "I'll just hand that jerk his records, and tell him not to let the door hit him on his way out..." What about his or her judgment regarding expenses? Example: "If I buy 50 bottles of Baytril this month, we'll save 1 percent!"

It is almost impossible to learn enough about a potential partner or be objective enough in evaluating his personality and life circumstances. In a future article, I look forward to sharing with readers some fascinating anecdotes involving catastrophic partner selections.

  • Does my potential partner recognize the importance of attention to detail in forming the partnership?

Many marriages probably don't need a prenuptial agreement. However, in this regard, marriage is not like a partnership. All partnerships should have the legal equivalent of a prenuptial agreement. That is, they must start with the legal documentation describing the mutual understanding of the partners, the responsibilities associated with the relationship, as well as the compensation and decision-making responsibilities involved. If your potential partner won't agree to such paperwork, run fast and far.

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