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Q&A: How to switch roles in veterinary practice and salaries
Time to reevaluate your position in the practice. Here's how to make the transition a smooth one.
I'm negotiating a practice sale where I would switch to an associate position prior to exiting the practice. I have 25 years of experience and plan to work three days a week. How should I determine my new salary? And what's the accepted rate for a prime- plus-interest formula?
You should be paid the same salary as an experienced associate, says Lorraine Monheiser List, CPA, CVA, management consultant with Summit Veterinary Advisors in Littleton, Colo. To start the negotiations, consider 21 percent to 22 percent of your actual production (25 percent if you're a boarded specialist). "You're also entitled to employee benefits allowable under your current benefit plans, though they may exclude part-time employees," List says. "Check your practice's benefit contracts for eligibility requirements to make sure you qualify."
Then do the math to determine what percent of the full-time benefits you should receive. Assuming you work 24 hours a week as a part-time employee (versus the 44-hour week a full-time associate would work), you'd be entitled to 55 percent (24 ÷ = 0.55) of the vacation, personal, and CE days an associate would accrue in your practice. Similarly, the practice should pay the same portion of your medical insurance premiums.
If the practice buyer asks you to perform significant management services, you can ask for additional compensation. However, it's generally better if you step back from management and let the new owner take control. "Start thinking of yourself as an experienced associate, not as a former owner, to avoid common pitfalls," List says. "Get back to practicing the high- quality medicine that attracted you to the profession initially."
As for the prime-plus-interest formula, the most common formula in attorney-drafted contracts is the prime rate quoted daily in the Wall Street Journal (and available on the Internet) increased by 1 percent to 2 percent and adjusted annually. "Of course, this is a matter for negotiation with your buyer and should be based on your perceived risk of becoming a lender to this buyer in today's market," List says. "If the buyer is also using an outside lender, the lender may have additional requirements concerning your loan."
Finally, be aware that the IRS has a minimum interest rate. Your accountant can advise you on that current rate. Make sure your attorney drafts the promissory note as part of the sale documents to be sure the terms are clearly defined.
"Good luck as you enter this next stage of your career," List says. "It sounds like you and your associate are fine-tuning the details of a transaction that should ensure the continuity and growth of your veterinary practice."