List Practice
Buying A Veterinary Practice

Understanding a Partner Buy-Out

Oct 25, 2017 11:06:25 AM

shutterstock_583896178.jpgPurchasing a practice is a big decision. Many first time practice owners decide to go into business with a partner in order to share some of the burden with another party. Over time, it may become beneficial for one partner to buy the other out of the business and carry on running the practice on their own. This process offers a number of pros and cons to the buyer that you should get familiar with.

The Simple Part

Buying out a partner simplifies some of the steps of making a practice your own. For instance, since you are already an active participant in the practice, it is easier for you to obtain financing for full ownership. In addition, your team is likely already familiar with you in the capacity of leader, so the transition can be easier on your staff. Plus, cash flow and profits are already in place so your risk factor is dramatically decreased.

What You're Responsible For

Despite the fact that the process to buy out a partner is simpler than buying or starting a whole new practice, there are some important steps that you must still undertake. For instance, if you do not have a set valuation method written into your partnership agreement, you will need to have a valuation done. Even if you do have an agreed upon valuation and buyout price, your lender will likely still require an appraisal. On the more personal side, if you haven't been an active leader in the partnership in the past, you may have to step into the role rapidly. Partner buyouts tend to move faster than new purchases, so your transition may happen much sooner than anticipated. In a regular sale it is common for the seller to stay on for a period of time to assist with the transition, but this may not be so with a partner buyout.

Whatever your reasons for choosing a buyout, the most important thing is to understand your timeline and budget for the purchase. Since some of the steps may move faster or be skipped altogether, you need to be prepared to take on the leadership of the practice all at once. Obviously this means that the security you had from sharing the burden of the practice will all be upon your shoulders in the future. Make sure you consult with a legal and practice transition adviser concerning your buyout and partnership agreement to protect yourself and your partner from any future issues.

You May Also Like

These Stories on buying a vet practice

Subscribe by Email

No Comments Yet

Let us know what you think