Associateships as a Transition Plan
Most associateships never materialize into a practice sale, and often end up involving lawyers to untangle ill-advised and poorly drawn covenants… Why?
There is one scenario that we hear about over and over again… When a doctor brings on an associate, his practice has a value. Over time, the two doctors should theoretically increase that value. So when it comes time for the associate to buy-in to the practice, how do the doctors determine the value of the Goodwill that the associate contributed? Due to poor planning, they usually don’t, and the sale never comes to fruition.
This can be avoided, of course, with timely planing. The practice must be appraised or valued before the associate joins the practice, and then again just before the buy-out occurs. Furthermore, appropriate attention must be paid to how the associate’s contribution to practice growth will be measured, which should be agreed upon and contractually signed.
Then, they must stick to the plan.
And if the doctors work well together, understand the practice overhead, and stick to a business plan, the transition may satisfy both doctors.