Prepare an associate to own
The most likely buyer in 89 percent of Well-Managed Practices is an associate in the practice. And to prepare associates for an ownership role, you must teach them about and involve them in the practice's business side. Set a target date for the associate's buy-in, then use this timetable to prepare for a smooth transition.
30 to 36 months out Involve your associate in weekly management meetings.
Increase your associate's management knowledge by mapping out the continuing education (CE) programs she will attend. Select management journals to read.24 to 30 months out Continue to increase management knowledge and awareness. Map out CE programs for the year (at least 12 to 16 hours of management programs). Continue reading management journals and books outside the veterinary profession. Begin having weekly management meetings with your associate in addition to your weekly meeting with managers.
Once a month, discuss selected revenue and expense components, and production reports during your meeting.
Begin involving your associate in such financial decisions as setting fees and salaries and establishing the budget, and in such management decisions as strategic planning. Start developing current and long-range practice goals together
18 to 24 months out
Continue meeting weekly and working to increase your associate’s management knowledge and awareness. Identify CE programs your associate will attend. Continue reading management journals and books outside of the profession.
Delegate responsibility to your associate for one area of management: employee development, client development, medical development, financial management, or facilities and equipment. Many owners start with medical development.
Establish management compensation for your associate and pay it quarterly. Management compensation typically represents 3 percent of total practice revenue.
12 to 18 months out Continue to have weekly management meetings with your associate. When conflicts arise, you’ll be better able to reconcile them favorably if you’ve established a pattern of meeting regularly and working through challenges.
Explain owners’ compensation and how it’ll affect the associate. (See “Developing a Fair Compensation Package” on page 44 in September 2004 for an example.
Discuss the affordability of the buy-in, which may be your associate’s largest monetary transaction to date. Ask your advisor to explain to your associate how the buyer’s cash flow will change. Ask your practice valuator to explain the buy-in process.
6 to 12 months out Continue to have weekly management meetings with your associate.
Begin sharing all financial statements and finance-related computer reports. Discuss the results of the monthly financial statements and computer reports during your weekly management meeting.
Discuss the percent of the practice that you’re interested in selling and the percent your associate wants to buy.
Discuss possible financing arrangements. If you’re financing the buy-in, discuss your requirements for the down payment, interest rate, and loan term.