Weekly Vlogs

Cleinman Performance Partners Weekly Message

Are Your Ducks In A Row? January 25, 2023

My name is Megan McCarthy and I am the Senior Director of Practice Transitions with Cleinman Performance Partners. Practice Transitions is an area of our consulting business that involves assisting clients with the structuring, management and severing of relationships. Typically, practice transitions encompass the most complex of all business dealings as they involve both relationships and money. Our consulting services include

· Buying

· Selling

· Merging professional practices

· Succession planning

· Employment agreements

· Compensation systems

· Purchase options

· Partnership agreements

· Partnership break-ups

Hello! My name is Douglas Davidson Parry, the Financial Analyst at Cleinman Performance Partners. With each project, we always start with an understanding of your financial performance and profitability. Our financial analysis allows you to better understand the economic impact of what you’re contemplating, create projections based on historical data and help guide strategic decision making. It’s the foundation of our work.

Hello! I’m Beth Foster, the Client Relations Manager for Practice Transitions. In order for Doug, Megan and Al to get to work, conversations need to be had, data needs to be collected and documents to be reviewed. I’m responsible for client communications, scheduling, data gathering, research, and ensuring that your project stays on track.

Together, working alongside Al Cleinman and our in-house attorney, we’re able to deliver on our partners’ unique transaction needs.

Every so often, after working through a transaction, a client will tell us “It took a lot longer than I expected.” At the start of each new project, we do try to set realistic expectations. Outlining all the steps in the process, how long it takes and what factors can affect the process. And you may have heard us say before “Bad Deals are done fast.” Long gone are the days of back of the napkin agreements and a handshake. Transaction work is highly detailed.

Regardless of the type of transaction work, we always start with a request for information, an “RFI”, that typically includes financial statements, operational reports,

and legal documents. And the number one factor that slows down a project is getting the data necessary to get started.

We recently worked with a practice where the senior partner was selling his shares to the junior partner. What should be an “easy” transaction turned into months of tracking down legal paperwork. You see, it doesn’t much matter whether you’re selling to an existing partner, an associate doctor, merging into a local practice or selling to private equity – the process of transitioning your practice and the legal documentation needs are the same.

Working with another practice, in reviewing their data, their financial reports showed hundreds of dollars on the Balance Sheet that were left over from a previous owner and never cleared up in that previous transaction. It’s just another hurdle to jump before moving forward with the current transaction.

With yet another client, during their transition process, we ran a lien search to understand what outstanding debt there was on the practice and found a lien from over 15 years ago that was never cleared. Multiple calls and several weeks later, it was finally cleared.

So, why is this process taking longer than you expected? Why does the request for information or due diligence requests seem never-ending? Usually because we’re tracking down information.

So that begs the question – are your ducks in a row? How strong is your business foundation? How easily can you lay your hands on your formation documents such as your Articles of Incorporation or Articles of Organization? Your ByLaws? Your Shareholders Agreement or Operating Agreement? Do you have employment agreements for all doctors in your practice, including yourself? Do you have a lease agreement in place? What about a list of all intellectual property, patents, trademarks or copyrights? When was the last time you did a lien search on your practice to ensure your old debt has been cleared?

Now’s the time to get organized and stay organized. Waiting until you have a buyer knocking at your door is too late. It will only delay the process and cause frustration.

And while we often hear “This transaction took longer than I expected”, we also hear “I don’t know how I could have seen patients and handled this transaction. I couldn’t have done it without your team. Thank you.” And “Your team is worth its weight in gold. I can’t thank you enough.”

In the words of Author A.A. Milne, “Organizing is something you do before you do something, so that when you do it, it is not all mixed up.”

If you’re contemplating bringing on a partner or starting to think about your exit plan – give us a call. There’s much work to be done before any deal can close – we can help you get your ducks in a row.

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