Building a strong partnership – buying into a practice with multiple owners

When you feel ready to take the plunge into running your own practice, the opportunity may come along to buy a stake in an existing practice.

This can happen when a doctor, dentist or vet is ready to retire, or if they’re scaling back after owning multiple practices. In many cases though, doctors transition from associate to owner in an established practice. 

There can be valuable upsides to buying a medical, dental or veterinary practice. That said, it’s a step that calls for plenty of research on your behalf.

Here’s what to weigh up – on both sides of the ledger.

The benefits of buying into a medical, dental or veterinary practice

Buying into an established practice gives you a stake in a fully functioning business with an established patient base, staffing and equipment already in place.

While reducing risk, it also brings the potential for your stake in the practice to be cashflow positive from day one.

Additionally, buying into a practice can be an opportunity to leverage the experience of your practice partners.

As a further plus, it can be easier to secure funding for your share of the practice as you are buying into a proven business. More on funding later.

The challenges to consider

Buying into an established practice typically calls for a significant financial investment on your behalf. This makes it essential to address several issues:

• Compatibility – in addition to personal and professional compatibility with the other practice owners, you need to be confident your aspirations for the practice (and ultimately your career) match those of the existing partners. Honest conversations up front will help ensure there are no surprises later.
• Financial transparency – professionally prepared financial accounts extending back several years are an important tool for you, your lender and your accountant to gauge how the practice has performed as a business. Ideally, the practice should be demonstrating steady growth – or have made innovations or investments that can foster future growth. What matters is that you have ready access to a full set of financial reports.
• The partnership agreement – a partnership agreement is more than a mere formality. It will clarify your stake in the business, explain how costs and profits are shared, and describe the steps to be followed if one or more partners want to leave the business at some stage. As a partnership agreement is a legally binding document, it makes sense to speak to the team at Avant Law^# to have the document reviewed before you sign it.

Financing a medical, dental or veterinary practice

Part of the appeal of buying into an established practice is that the business is fully functional, often with all the necessary equipment in place. That’s very different from setting up a new practice from scratch.

This also means you will likely need a different type of finance compared to starting a new practice.

A ‘goodwill loan’ is ideally suited to medical professionals buying into an established practice.

The value of goodwill can be determined by several factors such as:

• How long the practice has been operating
• The value of tangible (physical) assets
• Whether an outgoing partner is staying in the practice or moving on, and
• The lease term of the practice premises (if not also purchasing the practice premises, which Avant can also potentially help you borrow up to 100% finance for*).

Avant Finance offers its own range of practice goodwill loans, plus access to those of our lender partners. You get the benefit of no deposit options, potentially giving you 100% finance^*, with funding approved efficiently.

The Avant Finance team will also collaborate with your accountant to achieve the outcome best suited to your needs.

To find out more about how goodwill loans can help you buy into a practice, call Avant Finance on 1300 992 208, or request a free consultation with one of Avant’s medical finance specialists.