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What do you think of this partnership buy-in?

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  • What do you think of this partnership buy-in?

    My group just voted me in for partner. There are three "buckets" of income for the partners. All accounts receivable are for professional services only. No medical equipment, no real estate.

    =============================

    Here are the details for buy-in:

    Bucket #1:
    Accounts receivable (AR): $2,337,000
    GCR average for last 12 months 21%
    Buy-in = 100k

    Bucket #2:
    AR: $4,513,000
    GCR 14.6%
    Buy-in: 130k

    Bucket #3
    This is complicated, but the payments for this are delayed sometimes 12-18 months after service is rendered. So the partners say I will receive my portion from the date of service. The positive, is no buy-in. The negative, is that it'll take around 18 months to receive equal pay to the partners for this bucket. I'm told AR is about 3M.


    ================================

    So the total buy-in is 230k. For payment plan, the partners propose that I pay about 25k per quarter from my paychecks (pretax dollars) until buy-in is complete. Zero interest.

    ======================

    Questions:

    1. Does this buy-in seem reasonable?

    2. Should I try to pay it off early (essentially take zero pay for x months until fully invested) or just follow the 25k per quarter suggested?

    3. We haven't discussed the details of what happens when I leave the group, voluntarily or otherwise when partner. Any suggestions for this structure and how to initiate the conversation?

    4. Should I try to negotiate or leave as is? I feel that trying to negotiate may rock the boat, so I'm inclined not to.

    5. Any aspects not mentioned that I should consider or look into further?


  • #2
    I know nothing about translating the buy-in to income.
    I know nothing about the compensation before buy-in.
    The zero % interest seems like you would ride that horse as long as you can.
    You may want to fill in some income information in order to get inputs.

    Comment


    • #3
      Originally posted by Tim View Post
      I know nothing about translating the buy-in to income.
      I know nothing about the compensation before buy-in.
      The zero % interest seems like you would ride that horse as long as you can.
      You may want to fill in some income information in order to get inputs.
      Thank you for the reply.

      Associate year 1: 275k
      Associate year 2: 300k
      Associate year 3: 325k

      Partners reportedly make around 500k

      Comment


      • #4
        So its $25k/qtr for about 9 qtrs to ramp pay from $325k to $500k. Sure beats a $25k per year. Thumbnail back of the envelope.
        The fit of the practice and the partnership governance is all in your court. If you are getting equal in all respects, collections and work schedules and call you have one problem. The exit agreement and any non-compete. It's going to take you three years to breakeven. 18 month to pay and 18 months to make back your investment.
        Compensation, job and location. Is that where you want to stay for at least 5 years?
        Contract wise, the easiest is to ask what the others have and what they are actually offering you. Realistically, the key is how realistic the $500k is and how stable the business is. They for sure aren't going to offer you a better deal than they have.
        • Caution, I can't see how the revenue is generated and expenses allocated. You need to be satisfied that you are getting a fair deal is your production exceeds the others and that the expenses are split fairly.
        Take this advice with a grain of salt. I am not a physician and this is not my wheelhouse. Trying to give you some feedback. The info you have given could be a physician or a plumber is my point. It's just business from my perspective. Tread carefully. You might want to get a CPA that is familiar with the type of practice to review the books and perform due diligence and get a healthcare attorney to review the contract.

        The good news is you got the vote. Congratulations.

        Comment


        • #5
          I have no idea what this tiered A/R means or what GCR is. More importantly, you don’t know what that last part is (nor do we), and you don’t know anything about buy out.

          What if you didn’t buy in? What does your salary look like then?

          Comment

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