Partnerships

RE: Partnerships

J G Wray — Mon, 31 Jul 2017 16:46:03 GMT

[quote user="Anthony Todd"]Beware of partners with political interests as you may find their practice workload is reduced....[/quote]

I was an assistant when Tony Hilbery did his BSAVA Presidential stint. He was positively encouraged by his partners. They saw it as adding kudos. Simon Scott and I just picked up his work. We didn't really mind because he was assiduous in doing OOH and weekends.

RE: Partnerships

Anthony Todd — Mon, 31 Jul 2017 16:26:38 GMT

Just a few more observations.

As far as I am aware "senior partner" has no status in partnership law, unless detailed in the Agreement.

"Managing partner", common in law firms, must be defined in the Agreement.

Beware of partners with political interests as you may find their practice workload is reduced....

Of course this, and even the colour of partners' undergarments can all be defined in the Partnership Agreement so do it ALL before you sign the thing!!

RE: Partnerships

J G Wray — Mon, 31 Jul 2017 12:57:27 GMT

Gordon Shattock was paid out of the partnership 3 months to the day after the bombing. No sentimentality there.

I used to think this was shocking and personality/rivalry driven, but actually it was business

RE: Partnerships

J G Wray — Mon, 31 Jul 2017 12:54:56 GMT

I am mystified why there is so much negativity being articulated in respect of partnerships. Like any business arrangement and having CO Directors is no different, the personal narrative will change over the life of the relationship as well as the business. In troubled business or personal times, the support of a colleague in partnership can be profoundly helpful.

This last Xmas party our erstwhile partner and his wife were invited guests and he frequently drops in for a coffee and a chat. He tells us how proud he is with what we've done. His decision to leave was influenced by health issues and his disengagement from practice was structured and managed financially.

I've made this point already, but a well run business has a clear objective, a clear purpose and knows what it does and how. This then dictates expectations and behaviours amongst the group who own and run the business. Deviation from these behaviours can be discussed in a group that has trust and addressed and remedied without resort to the blunt instrument of the partnership agreement.

Anecdote time and the opportunity misfortune presents to get rid of a partner:

http://www.telegraph.co.uk/news/obituaries/politics-obituaries/7669698/Sir-Gordon-Shattock.html

RE: Partnerships

Gillian Mostyn — Mon, 31 Jul 2017 09:31:46 GMT

[quote user="Braden Collins"]We agreed that the partner remaining in the clinic needed to be protected from having to work with someone they couldn't get along with, so felt that any sale needed to look after them as much as the person exiting.[/quote]

As Malcolm has said, partnerships, like marriage and divorce, often start well but end badly. What if the remaining partner is a bit arsey ... For example, they would rather buy the whole practice outright but won't agree on the valuation? Couldn't they obstruct the sale, and therefore lock an unwilling partner into the business???

I was in partnership with my husband, and the choice to sell the practice was made for personal health reasons so was straight-forward. However, having seen the sheer amount of work involved in selling a practice, I would be concerned that if there was any ongoing ill-feeling about the sale, it would be a horrible process.

If I did it all again, especially with a non-family member, I would be likely to look for a different business structure, as Malcolm has suggested.

RE: Partnerships

Braden Collins — Sun, 30 Jul 2017 04:58:06 GMT

When we wrote our agreement, corporate practices still couldn't own a practice in western Australia. We agreed that the partner remaining in the clinic needed to be protected from having to work with someone they couldn't get along with, so felt that any sale needed to look after them as much as the person exiting. There are clauses in our contract stating that the entity buying in to the business must be approved by all parties, but if a mutually agreed buyer can be found in a set time then the whole business is to be sold.

The valuation method was agreed upon as if the professional relationship broke down, we needed a clear valuation method.

I guess any valuation would reflect the market, so if corporates were paying a fortune for clinics like ours, the valuation would be quite high.

RE: Partnerships

Sarah McGurk — Wed, 26 Jul 2017 22:49:54 GMT

[quote user="Anthony Todd"]

[quote user="Braden Collins"]The other partner will have the right to purchase the leaving partners share of the clinic.[/quote]

So even if the leaving partner has been offered 5 times the best offer by a third party[corporate?]??[quote user="Braden Collins"]

The business will be valued by a specialist valuation company such as Synstrat.[/quote]

Rarely does this relate to actual market value....

[/quote]

Thanks so much for all the replies, and thanks Braden for sharing the specifics of your contract. The above scenario was exactly the type of situation I wondered about.

RE: Partnerships

Anthony Todd — Wed, 26 Jul 2017 11:58:40 GMT

[quote user="Braden Collins"]The other partner will have the right to purchase the leaving partners share of the clinic.[/quote]

So even if the leaving partner has been offered 5 times the best offer by a third party[corporate?]??[quote user="Braden Collins"]

The business will be valued by a specialist valuation company such as Synstrat.[/quote]

Rarely does this relate to actual market value.....

Been there, seen that!

PS. Even using expert specialist partnership lawyers it is VERY difficult to get a sensible agreement.

One, we paid a lot for, had a clause that said "animals were not permitted to be kept on partnership premises", I kid you not!!

RE: Partnerships

J G Wray — Wed, 26 Jul 2017 11:50:46 GMT

[quote user="Malcolm Ness"]Certainly, there are huge advantages to partnership and many/most work very well but be careful and consider things like Limited Companies and Limited Liability Partnerships[/quote]

Quite. Negotiating a new ownership model would be a bit of an art. It would be hampered by a perceived lack of trust on the part of the incoming partner and trust and goodwill (not the balance sheet item) are at least some components of entering co ownership. Where there is a possibility of the professional work producing a financial strain, e.g. work in a highly litigious area then a third party could articulate the benefits to all rather than proceeding on the basis of a defensive personal risk management exercise.

My favourite ownership expense story related to a practice sponsoring a cycle team... you know who you are.

RE: Partnerships

Malcolm Ness — Wed, 26 Jul 2017 11:03:29 GMT

Some good information in this thread but the two important bits about partnerships are not obvious. First, as with any legal agreement, the document is written in the good times but it will only ever be referred to as a means of resolving a dispute so make sure that all the bad contingencies are considered and covered.

Second, in UK law at least, is the oft underestimated fact of 'joint and several liability'. That means that ALL partners are liable for ALL the debts of other partners and that often throws up situations/disputes that most reasonable people consider unfair. A common scenario for terminal partnership disputes involves one partner (or the spouse of one partner) runs up silly debts. The creditor can then pursue the partnership for their money. A school friend of mine is a Barrister specialising in partnership disputes and told me of two examples: The wife of a GP in a medical partnership became addicted to various drugs, including heroin. She racked up enormous debts, remortgaged the house but eventually ran out of cash, marriage had collapsed, GP had run out of cash and defaulted on the already too large mortgage and the whole thing came to a head when the mortgage lender went after the still thriving partnership business to pay the debt. The other partners were obliged to borrow heavily to stay in business. Another example involved a partner over-stretching financially with fast cars and holiday homes. The other partners sacked her but her debts remained and her creditors hit the partnership.

Certainly, there are huge advantages to partnership and many/most work very well but be careful and consider things like Limited Companies and Limited Liability Partnerships.

RE: Partnerships

Braden Collins — Wed, 26 Jul 2017 08:42:11 GMT

Hi Sarah,

This is the agreement I have with my business partner:

Succession Planning:
If one partner is to leave the partnership, then following buy-out points will apply:

The other partner will have the right to purchase the leaving partners share of the clinic.

It is not compulsory for the remaining partner to acquire the leaving partners share. If the remaining partner chooses not to acquire the leaving partners share, the leaving vets share of the business will be placed on the open market. In this case, both partners must approve the sale to ensure the remaining partner will be able to work well with the new partner

The remaining partner will have 30 days to decide if they wish to purchase the other half of the business

The business will be valued by a specialist valuation company such as Synstrat. The value set by this company will be the price at which the sale will occur. The leaving partner will be responsible for the cost of valuing the clinic

A buy-out may be triggered in the following circumstances:

The death of a partner

Total and permanent disablement of a partner

A partner suffering a trauma and being absent from the business for greater than 120 days

Retirement of a partner

A partner wishing to exit the business

Bankruptcy or insolvency of a partner

Loss of right to practice as a vet

It will not be compulsory for the remaining partner to acquire the other share of the business. They will have the right to enforce the buy-out if the above circumstances apply. This will allow the business to continue functioning, as well as ensuring the family and dependants of the leaving vets will have some financial certainty.
In the case of serious illness, each partner will continue to receive drawings for an agreed period of time (eg two months). All partners are required to take out sickness and accident insurance or business overhead insurance. This provides both short term support and allows the practice to employ a locum with limited impact on the profit of other partners while the non-working partner’s financial situation is taken care of.
In the event of permanent succession, a market value of the practice is obtained and all remaining partners are given 30 days to advise that they’d like to proportionately increase their interest in the business. If all partners do not wish to increase their stake then those who do can further increase their interest. This provides opportunity to preserve equity and also a time frame to resolve the matter.
The acquiring partner will have a period of 90 days to finalise acquisition once the market value has been established.
In the event that no one wishes to take up increased interests at the valuation, the practice is put on the market.

RE: Partnerships

Ashley Rubens — Wed, 26 Jul 2017 07:46:58 GMT

[quote user="Anthony Todd"]

[quote user="Sarah McGurk"]Having worked in three practices where the (non-vet) wife was involved, (other than as someone who answered the phone at night) I have never seen this work without causing hideous frustration among the rest of the staff.[/quote]

Sorry, didn't mention that said wife takes no part in the day to day running or working of the practice and in fact never need appear.

[/quote]

i don't know why that got one star, a married couple can buy a house together that neither of them built, why not own a business together that only one works in?

Everything else in this thread comes down to the individual partnership agreement, get a good one and have it checked by an independent lawyer.

RE: Partnerships

Anthony Todd — Tue, 25 Jul 2017 22:59:48 GMT

Sorry, didn't mention that said wife takes no part in the day to day running or working of the practice and in fact never need appear.

RE: Partnerships

Sarah McGurk — Tue, 25 Jul 2017 19:49:54 GMT

[quote user="Anthony Todd"]

Forgot to mention the considerable financial advantages [not mentioned by some accountants.....including mine] of having your wife, husband and/or conjugal partner, as a partner in the practice, even if that partner is not a vet, which is tax efficient, legal, and, as we all know, gives all sorts of advice and support, often better than your own, and answers the bleeding phone 24/7!!

[/quote]

Having worked in three practices where the (non-vet) wife was involved, (other than as someone who answered the phone at night) I have never seen this work without causing hideous frustration among the rest of the staff.

RE: Partnerships

J G Wray — Tue, 25 Jul 2017 12:54:32 GMT

[quote user="George Cooper"]From personal experience - and I endured 25 years in partnership with Peter Jinman - the cornerstone has to be (as EVER) communication, talking, meeting, discussing ad-ruddy-nauseam.[/quote]

PJ is now a Saint to add to being a National Treasure.

[quote user="George Cooper"]That way we were able to accommodate his political (as in veterinary) leanings and my extra-curricular musical activities, as well as the day to day machinations of a busy mixed (to the extreme) practice.[/quote]

Quite. There is life as well as running a business and being a vet

I have a question for you.

At what stage do you need trust in your business partner?

RE: Partnerships

George Cooper — Tue, 25 Jul 2017 11:41:15 GMT

From personal experience - and I endured 25 years in partnership with Peter Jinman - the cornerstone has to be (as EVER) communication, talking, meeting, discussing ad-ruddy-nauseam.

That way we were able to accommodate his political (as in veterinary) leanings and my extra-curricular musical activities, as well as the day to day machinations of a busy mixed (to the extreme) practice. **Anecdote alert** - I well recall one particular day when, in an upstairs office, he and I engaged in one of our "robust" discussions. Apparently the staff were afraid to interrupt us, huddling outside the door wondering who would get blood on their hands! It went on for perhaps two hours when suddenly he said something slightly different that stopped me in my tracks, and to which I replied "Oh - why the F*** didn't you say that two hours ago - I can now see what you mean!!" Laugh - yep! We hadn't laughed so much since Granny caught her boobs in the mangle!.

Later in the partnership I got involved in visiting other practices where I came across partners whose paths rarely crossed, or who never held meetings, or if they did, never actually spoke. The practices somehow stumbled on, usually because a gifted and motivated staff member took the initiative.

And remember - as others have said - any partnership contract can be varied at any time by mutual consent, and the largest "legal" bit in it is usually a set of clauses regarding what to do if things go awry due to all sorts of problems, giving a direction in which to proceed if ultimately the partners CANNOT see a way forward,

RE: Partnerships

Anthony Todd — Tue, 25 Jul 2017 10:05:44 GMT

[quote user="J G Wray"]Married couples can make successful and distinctive practices.[/quote]

RE: Partnerships

J G Wray — Mon, 24 Jul 2017 13:12:58 GMT

Partnership or, for that matter, co ownership of a practice as shareholders in a limited company, is an excellent idea.

We have seen our ownership drop from three to two over the past twenty five years and the two of us remaining have never had a crossed word.

In times of personal and business difficulty the mutually supportive behaviours have seen us through and we're not exceptional.

Married couples can make successful and distinctive practices. Ness and MacQueen spring to mind. They both had/have the tenacity to stick at it

If you are considering partnership, why not go and talk to practices with successful, harmonious and profitable partnerships and copy them in attitude and process? Perhaps engage them as mentors. Get yourself booked on a business support course.

There are any number of sensible attitudes to have in a partnership and I would pick patience and loyalty. For consistency of behaviour I would ensure a proper understanding of the business and what the purpose of the business is and it's rarely just "Delivering the highest standards of veterinary care", yawn boring narrow minded cliché. Once the purpose and aims of a business are defined, the permitted behaviours within the partnership, particularly with reference to spending and personal performance fall in to place.

RE: Partnerships

Michael Woodhouse — Sun, 23 Jul 2017 22:37:11 GMT

It can work the other way too - somewhere I saw practice with 3 partners had to have all 3 agree on any spend over £1000. Consequently they never could all agree and nothing ever got bought.

Its literally down to the individual arrangement.

RE: Partnerships

Sarah McGurk — Sun, 23 Jul 2017 22:20:25 GMT

No. If there has been a similar thread recently I must apologise because I completely forgot to check. I shall do so now.

RE: Partnerships

Jill Butterworth — Sun, 23 Jul 2017 19:32:53 GMT

Did you see the previous thread(s) on this?

RE: Partnerships

Anthony Todd — Sun, 23 Jul 2017 11:30:39 GMT

[quote user="Sarah McGurk"]Can one partner really buy cars without the other's agreement?[/quote]

Yep, unless it is specified in the Part. Agreement........

And remember you are equally liable for the partnership's debts.....

RE: Partnerships

Sarah McGurk — Sun, 23 Jul 2017 08:44:10 GMT

Fascinating Anthony, thanks. I hadn't realised it was so unregulated. Can one partner really buy cars without the other's agreement? And you (rightly) picked up on my confusion when I used the word equal. I was thinking about shares, but of course, that would make it a limited company, not a partnership.

Anyway, I can see why you were advised to think so much. I had always hankered after partnership when younger. Now I see perhaps I was fortunate. It also perhaps offers some explanation about why so many of my bosses were as they were. You have opened up a whole new window for me on my past life.

RE: Partnerships

Anthony Todd — Sun, 23 Jul 2017 04:14:10 GMT

Just to add to the morass....

Partnership Law is vague and, I believe, purposely so because it depends almost totally on what has been written in the Agreement.

The law was written,and vaguely in 1890 and has not been updated.....

Case law is mainly based on a dispute between two bee-keepers in New Zealand in the 1930s......

Happy to be corrected but:

Every partner is equal, as far as any decision making is concerned, independent of profit share, unless specifically detailed in the agreement.

Points of dispute are often work load, wives/partners situation re pay and conditions, cars, holidays and anything else you haven't thought of involving work and money.

Example: my friend's partner in a property company bought his wife a new Vauxhall convertible, the said partner [junior] bought himself a Jag. My friend then bought his wife a BMW and himself a Rolls, to maintain status, all perfectly within the partnership agreement but paid for by the Partnership....

Every partner is jointly liable for debts and [I think] disqualification. [certainly with solicitors]

The value of a practice is exactly what someone will pay for it, not a penny more or less, so convoluted valuations are a waste of money unless the seller wants to inflate the value for a "willing" buyer. [er, assistant given the chance of a lifetime to "buy-in" so to do all the work and get some apparent promised, but usually future, benefit]

All of this, and more, can be modified, deleted, changed, ignored, forgotten etc. etc. in the Partnership Agreement.

Everything else is even vaguer and open to expensive but usually even vaguer not conclusive interpretation.

Partnership disputes usually cost well over £100,000 if pursued anywhere near the High Court, which is the only place they could finally end up....

RE: Partnerships

Sarah McGurk — Sat, 22 Jul 2017 20:21:53 GMT

Thanks Chris. It sounds likely that there would be a clause preventing one (equal) partner from forcing a sale. I presume in most cases, the remaining partner would have first option to buy and/or some control over whether another partner could be taken on.

And I suppose how much the remaining partner would pay would again depend on the specific contract. I was just unsure whether that partner would have to pay market price, which might be elevated by the corporate offer, or whether most would have been set up with specific guidance on valuation, based on turnover and property owned, or some specific aspect of the practice itself.