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."