Creating a Clear Pathway from Associate Optometrist to Partnership with Erich Mattei

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In this episode of The Optometry Money Podcast, host Evon Mendrin welcomes back Erich Mattei of Akrinos for a follow-up conversation focused on creating a pathway for associate doctors to become partners in your optometry practice.

Whether you're an owner thinking about bringing on a partner or an associate doctor aiming to own part of a practice, this episode unpacks the key considerations you need to know.

In this episode, you'll learn:

• The motivations for bringing on a partner (succession planning, growth, and shared leadership)
• Why starting the conversation early is critical for practice owners
• What owners should look for in a future partner beyond clinical skills
• How modernizing business operations can make ownership more attractive
• The essentials of structuring a partnership: timelines, financing options, and compensation
• Legal documents you must have when structuring partnerships and exits
• Final tips for owners and associates to create win-win opportunities

Resources Mentioned:

• Ep 124: Scaling and Freedom – When, Why, and How to Add an Associate Optometrist with Erich Mattei
• Women in Optometry: Guiding the Future: Doctor’s Transition Plan Begins to Take Shape
• Learn more about Akrinos: Akrinos Website
• Eyes on the Money Weekly Newsletter - Get 2025's Most Important Numbers
• The Partnership Charter by David Gage

The Optometry Money Podcast is dedicated to helping optometrists make better decisions around their money, careers, and practices. The show is hosted by Evon Mendrin, CFP®, CSLP®, owner of Optometry Wealth Advisors, a financial planning firm just for optometrists nationwide.

Episode Transcript

Evon (00:04):
Hey everybody.
Welcome back to the OptometryMoney Podcast, where we're
helping ODs all over the countrymake better and better decisions
around their money, theircareers, and their practices.
I am your host, Evon Mendrin,Certified Financial Planner,
practitioner, and owner ofOptometry Wealth Advisors, an
independent financial planningfirm just for optometrist

(00:25):
nationwide.
And thank you so much forlistening.
Really appreciate your time.
And on today's episode, Iwelcome back to the podcast Mr.
Erich Mattei.
And we are really continuing apast conversation we had in a
recent episode.
We talked about the motivationsand best practices for bringing
on and associates to thepractice.

(00:46):
And on today's episode, we honein specifically on how practice
owners can create a pathway fromassociate to partnership.
And so in the first half of theconversation we talk about the
motivations and timing.
Around why you would bring on apartner, a co-owner, to the
practice.

(01:07):
And then in the second half ofthe conversation we talk about
the actual structure of thatbuy-in and the percentages
involved.
We talk about how to structurecompensation between different
co-owners, and we talk aboutlegal documents to review.
And then lastly, Eric and I talkabout our final thoughts.
And so hopefully this is helpfulto you if you're the owner
thinking about whether and whenit makes sense to add on an

(01:31):
associate doctor as a part ofyour own succession plan,
contingency planning, or whetheryou're an associate doctor,
thinking about whether you werewanting to know what to look for
in that opportunity.
Hopefully this is helpful foryou.
I put all of the links inresources we talked about in the
show notes, uh, which you canfind at the Education Hub at my
website, wwwwww.optometrywealth.Com.

(01:53):
And if you have any questions,you can reach out to me here at
[e-mail].
And if you wanna learn moreabout this topic and all things
related to practice and personalfinances related to practice
owners.
What you wanna do is head overto the links in the show notes
and sign up for my Eyes on theMoney Weekly newsletter.
Each week I bring tips oreducation around how you can

(02:15):
make better financial decisions.
And if you do, I'm gonna sendyou a resource that shows you
the most important financialplanning numbers you need to
know for 2025.
And without further ado, here ismy conversation with Erich
Mattei.
And welcome back to theOptometry Money Podcast.
I am your host, Evon Mendrin,and I am excited to welcome back

(02:38):
to the podcast once again, Mr.
Erich Mattei.
Erich, thank you so much forcoming back on

Erich (02:43):
Evon.
It's so great to see you.
Thanks for having me back.

Evon (02:46):
Erich, in a recent episode, you and I talked about
the, the motivations and bestpractices for hiring an
associate and.
this is episode 124, so we'llthrow a link to that in the show
notes for the listener.
But, we talked about thosemotivations and best practices,
and one of those motivationswere practice succession is
passing on ownership of thatpractice to other associate

(03:10):
doctors based on the desires ofthe current owner.
And so it's that motivation,it's that process that I really
wanna dive into with you todayis, is how do we create this
pathway from hired associatedoctor to practice, partner to
practice co-owner.
What, what does that actuallylook like?
And so as we, as we dive intothis, I, I wanna start with the

(03:31):
basics.
What are the motivations of acurrent owner wanting to bring
on another co-owningoptometrist?
Why would an optometrist want togive up ownership of their
practice?
What are some of themotivations.

Erich (03:46):
You know, that's a really, really great question to
kick things off Evon and, andreally what this all ties back
to, I.
Is a a couple of core, corethings.
Number one, what's the future ofthat business gonna look like
from an exit standpoint?
Right.
So typically when we seepartnerships, there's typically
going to be a senior partner anda junior partner, right?

Evon (04:06):
Mm-hmm.

Erich (04:06):
and realizing that that senior partner may I and their
exit, whereas a junior partner'sgonna continue to grow and
flourish into their new role.
They themselves as the senior.
So one motive is to be proactivein planning that exit plan,
right?
Motive number two has to do withsomething that we touched on a

(04:26):
little bit in the last episode,and that's the degree to which
Optometry.
It has a potential to scale.
Now it's, it's difficult to wrapour heads around scaling an
Optometry practice, seen as it'san owner operator type business
where, you know, we need doctorsto be serving patients and such.
But nonetheless, when you lookat bringing multiple doctors

(04:47):
under one roof that havecomplimentary skillset, that can
position a practice to reallyhit a next level of growth that
otherwise perhaps couldn't bedone if you had a single doctor
practicing kind of their singlemodality or, or bundle of
modalities.
So those hands down are gonna bethe top two reasons why doctors

(05:08):
want to get into partnership.
But also outside of that is, youknow, other things such as like,
you know, hey, simply the factthat I want to be in a business
and run my own business, but itwould be nice to have someone
else kind of along for the ride.
Right.
That, that teamwork, thatcomradery kind of that balance
of duties.
Right.
And particularly when we look atfolks maybe that have some
strengths in one area.

(05:29):
and then someone else, the otherpartner may have some strengths
in another area.
So, in a nutshell, you know,what really is driving this
interesting partnership?
Again, it's one of those three,you know, it's going to be where
you've got one plan, whereyou've got one party, the senior
member who's actively gonna belooking to approach their, their
exit from the business on downthe line.

(05:51):
Number two has to do with purelygrowing and scaling, maximizing
the potential and profitabilityof the business.
And then number three is simplyto have a partner in the
business.
'cause you want to have thatteam, you want to have that,
that collaboration that canafford many things, not only in
the practice as far asoperations and performance in
the business, but also havingthat flexibility to perhaps take

(06:13):
that vacation and do some ofthese other things that I know
we touched on in our lastepisode were also some of the
motives why doctors want to bein private practice in the first
place.

Evon (06:21):
Gotcha.
And that that first motivation,that exit planning is really
important as you think about therole of the practice value on
the owner's balance sheet.
And that is a, that is a, can bea significant part of their net
worth.
As they're planning for otherlife goals, other financial
goals, like just financialindependence, being able to, to
capture the value of all of thathard work, to be able to exit

(06:43):
the practice on their terms andthen to enjoy retirement, to
enjoy the next stage of theircareer, whatever that is.
how do we preserve that value?
Well, part of that is makingsure that there's a continuity
of care.
Patients are continuing to beserved in the same manner.
Staff's gonna stick around andthere's an owner willing to buy
it.
We, we don't have to go searcharound, we don't have to have a
fire sale.

(07:04):
You know, there's gonna becontinuity of ownership and
continuity of care.
And, and when does an owner knowthat it's time to start thinking
about this?
at what stage of their career?
At what age?
What about timing?

Erich (07:17):
Yeah, and Evon.
I think that's where right nowwe're seeing a big mindset shift
that if you ask me, I believe islong overdue.
That mindset shift being to gofrom, I wanna be retired in the
next year, so now I need tofigure all this stuff out.
That's the old, kinda the olderway of thinking.

(07:39):
The mindset shift now is I needto start earlier in my career.
I need to be

Evon (07:43):
Hmm.

Erich (07:44):
in this.
So we can kind of think, if wego back a few short years,
right?
The way that private equity isable to come and penetrate
eyecare, not just eyecare, butall industries, right?
The way private equity has beenable to penetrate Optometry,
though, specifically is that wehad a large population of older
doctors who were single owners,as we touched on prior to hit

(08:09):
and record today, were kind ofkeeping all this secret to
themselves.
You

Evon (08:13):
Hmm.

Erich (08:13):
they may have been thinking here and there about
their exit, what's next?
But for all intents andpurposes, Evon, it was a secret.
And it wasn't until they gotthat letter from the private
equity or from the, the hospitalsystem that wants to buy their
business, that all of a suddenthey're like, wow, I, I, I, I
can do this.
So I, so that has, again, kindspurred this mindset shift that
if you ask me, is long overduewhere doctors can be empowered

(08:38):
to be proactive in this journeyearlier in the process.
And there's a lot of otherindications out there that shows
that this, this is certainlygoing to be now, I believe the
way that many practices aregonna start to evolve over time.
we'll unpack some of thatprobably in this conversation as
well.

Evon (08:56):
Yeah.
Interesting.
You're, you're starting to seethat it, it's not just a, I need
to retire next yearconversation.
This is more of a, how do Ibring those, those co-owners in
earlier in that journey and havemore of a gradual, gradual
succession rather than sort ofall at once?
And, and that's interesting.
I, I just think about theconversations I have,
particularly with mid-career,earlier career owners, and

(09:19):
there's, there is a wide rangeof opinions on, I have no
interest in bringing on aco-owner, versus I, I'm more
than willing to bring on anassociate co-owner because I'm,
I'm looking at the growthopportunities of bringing on
that owner and the, thepartnership, as you talked about
the, the complimentary skillsets that another owner can

(09:42):
bring into it.
So I've even seen sort ofdifferences in opinion far
beyond exit and just how those,those doctors feel about that.
And we talked about thosedifferent motivations to hiring
one of these motivations to bepractice succession.
how does that impact what theowner looks for in that

(10:03):
associate?
It knowing that that associate'sgonna be co-owner, not, not just
a great clinician, but alsoco-owner in the practice.

Erich (10:13):
Yeah, that, that's a really, really great question
there.
Evon, as a matter of fact, itgets me to thinking of a, a
practice that we work very, veryclosely with a Picayune Eye
Clinic up in Picayune,Mississippi.
As a matter of fact, it's womenin Optometry just recently
profiled, Dr.
Lori Blackmer, Dr.
Massengale

Evon (10:28):
Oh.

Erich (10:29):
who recently joined the practice.
And actually, it's a fascinatingarticle.
It unpacks some of that, right?
what this journey will look likeand, you know, some of Dr.
Blackmer's motivations inbringing in this young
associate, and particularlybringing her in with this
explicit path to partnership.
And then conversely, from Dr.
Hannah Massengale side, comingin as a, as a young associate on

(10:53):
this path to partnership.
it all plays into really, Ibelieve you, you touched on the
continuity care piece, and, andthat tends to be a really big
motivator.
I.
Continuity of care, knowing thatthere's going to be that next
generation of, of doctor to takecare of patients moving forward,
but also in advancing care.

(11:15):
And that's another reallyexciting thing that we're seeing
here with a lot of thesepartnerships and transitions
where we're seeing, we're seeingmodern full scope Optometry
really come and make its mark inthe practice.
And, you know, that's where wesee some really fascinating
things unfolding such as, youknow, you can consider a
practice perhaps that was areally great thriving practice

(11:38):
that was doing more primarycare, comprehensive care,
primary Optometry the, the, theduration of the practice to
date.
Well now you have.
A young associate that's perhapsa bit more, a bit more, advanced
clinically and in their medicalbilling and can start bringing
the practice from a more of a,an old school optometric model

(12:00):
to more of a new school fullscope model.
So, you

Evon (12:03):
Hmm.

Erich (12:04):
being a huge mode in and of itself, right there, Evon,
and you wanna talk about dollarsin practices.
I can't tell you how manypractices out there have been
hovering in that, you know, six,seven,$800,000 gross revenue
with a single doctor practicingold school Optometry.
And you start digging into thedata and you come to see, wow,

(12:25):
there's this huge opportunityjust in simply adding some
medical services and billingappropriately for medical
services.
I mean, that's just the tip ofthe iceberg.
We don't even have to get intotalking about dry eye and
aesthetics and myopia managementand some of these.
Some of these fascinatingspecialties just simply in
incorporating some medical intoa vision practice can be huge,

(12:47):
but truly across the board, nomatter what way you look at
this, we know that the publichealth need for vision, medical,
and specialty eye care continuesto advance.
And this up and cominggeneration of modern
optometrists, of whom now havegone through school with full
medical training, increasinglynow they're even coming outta

(13:07):
Optometry school with trainingin lasers and, and in minor
surgical procedures such as thecase of that practice that I was
referencing a moment ago, youknow, Picayune Eye Clinic, Dr.
Lori Blackmer and Dr.
Hannah Massengale.
It's just really fascinating tosee all these things come
together.

Evon (13:22):
So one of those, one of those things then talking about
complimentary skillsets is, is,a, a clinical skillset or a
clinical experience that addsmaybe a new line of services or
new scope of care for patientsto, to expand, expand that
revenue opportunity and careopportunity for, for the
community.
So that sounds like that'ssomething to look into.
how about a, an interest ormotivation to own, I'm assuming

(13:48):
that's something you'd want tosee in that eventual associate.
How do you start to notice that?
How do you ask about that ifyou're looking to hire that
associate?
What, what are some things you'dwant to hear to see if there is
a true, you know, opportunityor, or interest in motivation to
own?

Erich (14:04):
Yeah.
Do you know how you ask aboutit?
Evon.

Evon (14:06):
Do you simply ask?

Erich (14:09):
Let's role play Evon.
Let's

Evon (14:10):
Okay.

Erich (14:11):
Dr.
Evon Mendrin, you

Evon (14:12):
Yes.

Erich (14:13):
and I'm Dr.
Erich Mattei I'm a

Evon (14:15):
yeah.

Erich (14:15):
aspiring optometrist.

Evon (14:18):
Okay.
Alright.

Erich (14:20):
Ask me.

Evon (14:22):
Hey Erich, are you interested in ownership here?

Erich (14:27):
Yes.
Evon, I, I, I think I am.

Evon (14:29):
Did we, did we just solve it?
Okay.

Erich (14:31):
I think what Evon, I think we just solved, I think we
just solved what I believe is,is going to unlock the next
universe for eye care,specifically Optometry.
And it's just that, it's justthat I think it's high time,
it's 2025.
It's high time that doctors feelcomfortable and empowered to

(14:52):
speak their mind, to ask aquestion.
There's no need to beat aroundthe bush.
There's no need

Evon (14:56):
Yeah.

Erich (14:57):
keep things a secret, only to have it wake you up in
the middle of the night thinkingabout this and that, just come
out and say it.
Right.

Evon (15:03):
And I don't, I,

Erich (15:04):
And, and that was, you'll recall, I, I even invited you
before hitting record when yousaid, Hey Erich, what's one of
the messages you really wannadrive home?
The biggest message I wannadrive home to doctors.
Whether you're the establishedpractice owner, looking for a
partner or exit, or whetheryou're the emerging owner
looking for an opportunity.
One thing to take away from thisepisode, be proactive, y'all.

Evon (15:24):
mm.

Erich (15:26):
That's it.
Be proactive.

Evon (15:27):
And I, I can feel like there is this sort of,
temptation to keep your cardsclose, you know, to, to not
really, not really show yourtwo, your true intentions for
whatever the motivation is.
Maybe you don't want staff toknow you're thinking about
exiting.
Maybe you don't want to thinkabout exiting yourself, or maybe
you, you don't wanna tip your,your, you don't wanna show your
cards to the associate.

(15:47):
I, I don't know what themotivation could be, but I, I
can sense that there could bethat sort of temptation and as
you are kind of talking aboutright now, I'm not sure that
helps anybody.
I, if you are wanting to bringin an associate doctor that will
own, it's in your best interestto market that so that you can
find the best pool of candidatesthat want to own, and that you

(16:10):
are certain that that associatedoctor is going to be a good fit
to co-own with you from the verybeginning, right?
Not, not, not years into it, butfrom the very beginning and from
the associate doctor, if theyare motivated to own and are
probably going to be a good fitfor ownership, they're probably
looking for that opportunity.
And so from both sides, I thinkit's, it, it is to the best

(16:32):
interest of both to be open withthat motivation, if that's
something that you wanna do.
and you do have to, as you'vetalked about in the past, you do
have to market your business.
You, you do have to present itas something that another doctor
would want to be a part of andsell and that people know about.
And so, we don't need to keepour, our cards too close to the
chest on this one.
And a, a follow up question, andI'm gonna ask a, a couple

(16:56):
questions out of this, but wetalk about those, those doctors
maybe earlier in their career.
They own a practice.
They aren't interested insharing ownership just yet.
but they do want to expand theirability to serve patients.
And so they, they want to hireassociate doctors while, while

(17:17):
still working quite a bit in thepractice.
And so they hire excellentclinicians, excellent
optometrists, great withpatients, but those optometrists
have no interest in owning andthey maybe wouldn't even be good
fits for, for co-ownership forwhatever reason.
And so you, you kind of gothrough, if you project out the
future career of that owner,there might be a pivot they have

(17:41):
to, they have to go throughbecause their current associates
aren't a great fit.
Even if they're greatclinicians, they aren't a great
fit to buy the practice.
They may be forced to sell toanother third party optometrist.
At the risk of the currentoptometrists leaving, if there's
not a great, a great, chemistrythere.
in, in terms of contingencyplanning, if something happens

(18:03):
to the current owners, theycan't be certain the current
doctors will purchase from the,the spouse or from the estate.
So how do you think about thatsort of scenario and this sort
of pivot that that doctor has togo through?
And you don't have to have agreat answer here, but I'm just
kind of thinking out loud.
How do we think about that sortof scenario there?

Erich (18:25):
Yeah, that, that's a, that's a really powerful
question, Evon, and I think oneof the things that it, it speaks
to most notably, is what itmeans to own a practice.
These days versus kind of old,old school.
What did it mean to own apractice?

Evon (18:47):
Hmm.

Erich (18:49):
Evon, you know, and you and I have had a lot of
conversations around this,right?
Like running a business in it's2025, March of 2025 is, we're
recording this, right?
But running a business now, andI'll say post covid, world post
pandemic, right?
Versus kind of pre pandemic.
And the fact is there are moretools and resources and ways to

(19:10):
systematize and streamline abusiness these days.

Evon (19:14):
Mm-hmm.

Erich (19:14):
there are more ways to engage and promote and foster a
strong collaborative culture inthe office these days than ever
before

Evon (19:24):
Okay.

Erich (19:25):
I bring this up to say that.
What, what, what, when, whensomeone does not want to be in
ownership, the reason why theydo not want to be in ownership
typically is not because theydon't wanna work for themselves
and have their own practicewhere they can provide the scope
of care that they wanna provideto their patients and their
community.
Everyone wants to do that.
The reason why doctors would notwant to be in practice,

(19:46):
ownership is running thebusiness.

Evon (19:49):
Right.

Erich (19:49):
where, that's where I point to, you know, the work
that we do within Akrinosrunning, I mean, our mission
make the business of privatepractice approachable,
accessible and profitable.
The way you did it back in 1995,it ain't gonna cut it in the
year 2025 very, for that matter.
Very few things done the way wedid 30 years ago are gonna cut

(20:11):
it.
I mean, sure you'll get by,you'll get by, but when we
really, when we really look, youknow, take that 30,000 foot
view.
I know you're involved in someof the online communities.
I don't do so much in the onlinecommunities these days.
Right.
Although you can't find me onLinkedIn where business happens,
right.
But as far as you go into theonline communities and you can

(20:32):
kind of, you can kind of see howthe, how the deck is cut, You
can only continue doing thingsthe same way that we've always
done them until, quite frankly,that way just absolutely fails
us.
that's where I think gettingback to the whole, being
proactive, that's where.

(20:52):
this whole industry consultants,of software companies, of
equipment companies that haveamazing new modern ways of doing
things can eliminate so manyheadaches and drive so much
profitability for the business.
It's, it's shocking.
And you can see it again in theonline communities.
You can see those people thatare chiming in that figured it

(21:14):
out.
They aligned with the rightconsultants, with the right
equipment companies, with theright software companies.
They were proactive and judigging into their business as
opposed to those that are kindof more, Hey, I'm gonna keep
doing this the old way.
it's where we kind of feelcomfortable.
It's the way it's always beendone.
I mean, a really good example ispaper charts, you know?
And, and there are members ofour audience out there where

(21:36):
there's a lot of folks thatthink like, wow, at one time
there was a paper chart.
Yes, yes.
At one time, there was a timebefore EHRs.
Okay.
But I use that as an examplebecause although the adaptation
from paper to electronic.
There were some headaches, therewere some learning curves in it.

(21:56):
99% you asked, 99% of them aregonna say, would you ever go
back to paper?
Heavens no.
Because there are now so manyworkflows that are, that are
hinged on that EHR, and theseare workflows that in the paper
days, wanna talk about staffbeing irritated with having to
do mundane, busy work.

(22:17):
Holy cow.

Evon (22:18):
Hmm.

Erich (22:20):
let's go back in our time machine and see the mundane busy
work that people were doing

Evon (22:24):
Right,

Erich (22:24):
ago.

Evon (22:25):
right.

Erich (22:25):
so where I'm going with this is the reason why folks
would not want to be inownership of the business is not
that they don't want to autonomyin their patient care and
autonomy in their decisions.
Everybody wants that.
The hesitation is in running thebusiness.

(22:48):
Because what comes to mind isthe way that the businesses were
run by the past generation, andI'm here to say that if you
embrace modern approaches tobusiness, a lot of these
headaches and hangups that yousaw the old generation dealing
with, you're not gonna have todeal with.

Evon (23:04):
So where, where my, where my brain might go to, okay,
there might be ODs out therethat simply don't want to ever
think about the business.
They wanna show up to theclinic, work with patients, go
home and not think about itafter that where you're saying,
well, no, if you improve theprocesses and technology of the
business, you can remove.

(23:26):
Maybe not entirely, but you canat least limit the burden that
the optometrist would face,getting into ownership and, and
make that ownership opportunitymore enjoyable.
Is that, is that what you'resaying?

Erich (23:37):
Exactly.

Evon (23:38):
Okay.

Erich (23:40):
more accessible, and more profitable.

Evon (23:42):
Okay.
Interesting.
I'd be fascinated to hear fromthe listeners what your, your
thoughts are on that and maybewhat you've done to see those
improvements in your ownbusiness, or maybe if you were
an OD that stepped in thatposition, what you, what you saw
as well.
But, one follow up questionthen, out of this sort of same
scenario in that it seems thatthere are ways to do this either

(24:03):
simply by being the sole ownerof the practice and hiring great
clinicians and stepping awayfrom full-time patient care and
managing the business and.
and then at time of exit, whenyou're sort of thinking about
that time of exit later on inlife, that's when you sort of go

(24:25):
through that, that's sort ofthe, maybe the older way or, or
one of the common ways you seethat done.
And then there's the more of theearlier, earlier journey,
co-owner pathway where there areco-owners earlier in that
there's more of a built-insuccession plan earlier.
What questions would you ask ofa current owner to sort of lead

(24:46):
them and help them decide whatmakes the most sense for that
practice in that situation?

Erich (24:52):
Yeah.
that's a really, really bigquestion.

Evon (24:56):
Yes.

Erich (24:57):
But, but, but the number one, number one is timeline.
Number one is the timeline,because the timeline determines
well Evon just about everything,right?
And, and we can think, I mean,obviously look at the work that
you all do, Optometry WealthAdvisors, I mean, it's all about
that time horizon.
You know, how how far are wefrom, from that?
And, you know, consider theplanning and the approaches

(25:19):
that.
That you all take with clients.
Say they're early, maybe, youknow, early in their career
expecting their first child youknow, I'm 15 years in and I've
got a couple of school agedchildren, maybe early teens, and
then, oh wow, you know, I'm 25,30 years in and I got kids in
college or out of the house.
You know, it's all about thetime horizon, number one.

(25:45):
And then from there, all ofthese different fascinating
combinations that these, thatthese deals can come together,
right?

Evon (25:53):
Right.

Erich (25:53):
it's also continuing that time horizon that we understand,
okay, what is the timing ofthat, of that path to
partnership going to be, you

Evon (26:01):
Hmm.

Erich (26:01):
it appropriate for someone to start as a junior
partner or become in 50 50?
I mean, really what we'rewanting to stay away from is
finding situations where doctorsare forced into asset sales.

Evon (26:12):
Yes.
Right.

Erich (26:13):
and I say forced into an asset sale.
It's one thing to.
Proactive, full asset sale.
But it's another thing whereyou're in your mid late sixties,
your spouse has been houndingyou for years to hang it up.
And now you've finally gotten toa point where you're just,
you're just done.
You're worn out.
And that is so real.
Life Evon.

(26:33):
And that's actually, I mean,that's a big thing.
That's a big thing.
That why, why I'm so passionateabout the work that we do, you
know?
because we want to be sure thatfolks that have poured their
life, their life into buildingtheir businesses have something
amazing to show for their workin that business, and also have
something amazing to, to, tobless their community with

(26:55):
moving forward.

Evon (26:57):
Yeah.

Erich (26:58):
happen when it's that next generation of the
independent owners that arecoming in, and we see it across
the board.
Look, I that essay that thereview published a few months
back.
I think we actually

Evon (27:08):
Yeah.

Erich (27:09):
our last recording was right around the time

Evon (27:10):
Right after that.
Yeah.
Yeah.

Erich (27:13):
you know, we're looking

Evon (27:14):
Yeah.

Erich (27:14):
And the stats are this y'all.
we look at healthcare here inthe us, we know that provider
burnout rate is through theroof.
Cost of care continues to climbthe overall quality of care and
patient experiences in theskids.
When we look at private practiceas a segment of that broader
healthcare system, see that therate of provider burnout in

(27:34):
private practice is less thannational benchmarks.
The cost of care is lower andthe quality of care and patient
experience is through the roof.
As a matter of fact, patientsprefer going to private practice
at a rate of four to one overcorporate big box, private
equity, you name it.
So we're talking about, we'retalking about stakeholders here.

(27:56):
We're not talking about onedoctor selling this business to
another doctor, how much is thisone gonna retire with?
How nice of an opportunity isthe new incoming doctor gonna
have to grow in this to grow inand thrive in this business?
But we're talking aboutstakeholders.
These stakeholders are acrossthe board.
It's doctors, it's the team theyemploy.

(28:17):
'cause small business drives theworkforce and communities all
over in private practiceemploying.
And then third, the patientsthere in the community.
So we're talking about privatepractice.
It's truly, it's truly rich asfar as all of the stakeholders
that are gonna be impacted bythese decisions.

(28:37):
And, and, and I would challengein which environment are all the
stakeholders best served?

Evon (28:45):
Hmm.
What do we know with certainty?
We know with certainty that you,listener will exit your
practice.
At some point.
We know that it's gonna beunexpected or it's gonna be
expected, planned for,

Erich (28:56):
I.

Evon (28:57):
but at some point you're going to exit your practice.
And the question is, how and howwell are you thinking about that
ahead of time and how well areyou planning for that?
'cause it can be on your terms,it can be exactly as you desire,
assuming that you've done wellto plan financially leading up
to that and that you've donewell planning on the business
side leading up to that.
It can be on your terms and youcan plan for the unexpected as

(29:20):
well.
The, the question is how.
And as I think about thistimeline, you talk about, and,
and we can, we can move on fromthis question that I'm asking,
but as I think about thistimeline, I, I do feel like
earlier, mid-career owner isgonna be more motivated by, by
separation of duties, by theskillset of another owner

(29:41):
complimenting their own.
I, I feel like earlier in acareer, the motivation for
co-ownership is to me, verylikely going to be more
motivated by, by complimentaryskill sets and growth
opportunities of the businessor, or time, you know, time
management for, for the ownerthat later in the career as
they're, as they're gettingcloser to exiting, it's, it

(30:02):
sounds like it's gonna be muchmore.
Motivated by, not only skillset,but more motivated by exit of
that initial owner, doctor and,and just planning that
succession outta the business.
Does that, do you feel likethat's what you've seen as well?

Erich (30:16):
Yeah, absolutely.
And as a matter of fact, I thinksomething that speaks remarkably
well to that is the following.
So, Evon, you know, I, I'm verygrateful and privileged to have
the opportunity to do some workwith the American Optometric
Association Center

Evon (30:30):
Hmm.

Erich (30:30):
Independent Practice.
And in working with their teamsspecifically what I do is I will
go into the Optometry schoolsand teach the students,
business, as a matter of fact,next month, April 25, can't wait
to get out to the, I,

Evon (30:42):
Kentucky

Erich (30:43):
College of Optometry there

Evon (30:44):
Ooh.

Erich (30:44):
up in Pikeville.
And, what I've, what I'vewould've picked up in doing
these, these speaking events,these campuses, is that there is
a ton.
Of interest in practiceownership, mean a ton of
interest in practice ownership,Evon.
And the fact is, is that wherethere's this huge interest in

(31:08):
practice ownership, to build onthat, it seems that a lot of
these emerging practice ownersare interested, not so much in
going and cold starting theirown thing and kind of
reinventing the wheel, a lot ofthem are looking to become a
partner and or purchase apractice that's already
established.
So it's fascinating youmentioned that regarding

(31:29):
earlier, looking forcomplimentary skillsets, you
know, kind of, you know,distribution of duties and
stuff.
So we definitely see, I believein our up and coming generation
of practice owners, a rabiddesire and excitement and
interest in getting into privatepractice.
I.
also they are looking foropportunities to come in, join

(31:49):
an established practice, learn,learn how to run a business,
learn how to run a profitablebusiness, and go from there as
opposed to perhaps generation ortwo ago, heck, maybe even as,
as, as simple as, say, 15 yearsago,

Evon (32:09):
Yeah.

Erich (32:09):
there was a less interest in practice ownership and
perhaps more interest in, in theCold Start piece.

Evon (32:15):
Gotcha.

Erich (32:16):
to build on that, also something else that I wanted to,
to, wanted to, to, to, tomention that kind of plays into
this, and that is later incareer when looking for, for
partner.
And this whole context of kindalike, when is the right time to
start doing this?
If we're waiting, if we'rewaiting as our, as our window of

(32:37):
opportunity is closing shut onour career, funnels getting
smaller and smaller and smaller.
What does that mean?
Less options.

Evon (32:45):
Mm

Erich (32:45):
Which means what?
You could have worked your tailoff for decades and decades and
decades, but every year you waitto share it with the world to
promote it, to find someone tocome in.
Every year that you wait, yourability to actually sell that
thing at a really good price isgetting smaller and smaller and
smaller.

Evon (33:05):
mm.

Erich (33:06):
Right.

Evon (33:06):
Yeah.

Erich (33:07):
especially if a prospective buyer is working
with consultants, right?

Evon (33:12):
Yeah.
Right,

Erich (33:13):
works.

Evon (33:14):
right.

Erich (33:14):
So, so the message to the, to the owners do not wait.
Do not wait until you're readyto do it.
To do it, because gonna take iton the chin.
You're gonna be leaving dollarson the table, as opposed to if
you do it earlier when you're, Imean, ideally when you're still

(33:36):
in the peak earnings years, theultimate would be to pull a
partner in when you're stillactually growing those peak
earnings years.
That's the ultimate, that's thewin-win, win for everyone
involved.
You can get top dollar for yoursale.
That top dollar for your salewill be fully justified through
the valuation and through thedue diligence of the buyer.
Again, if this things arecontinuing on a growth

(33:57):
trajectory, then if that buyerhas a complimentary skillset
where then we can then open uprevenue even more.
This is just a super win-win winfor all parties involved.
But it doesn't happen if we'resitting on the sideline waiting,
waiting, waiting.
Right.
Evon, the Heartbreakers, theHeartbreakers are when it's gone
too long.

(34:18):
And to that end, actually, I'll,I'll share with you something
that we just learned of, towardsthe end of last year in that, we
came to connecting with a doctorwho owned a practice or owns a
practice, brought in anassociate on a path to
partnership.
That associate was working twoor three days a week with them.

(34:41):
And then that associate was alsoassociating the other two or
three days, a week, two townsover

Evon (34:47):
Mm.

Erich (34:47):
in a practice that so happens to be a good friend of
the other practice that this,this young doctor's associating
in Fast forward couple years goby bye, associate buys, practice
B.
Now get this Evon associate cameto town to associate with

(35:12):
practice A this practice on apath to partnership.
This practice didn't have thevolume to support five days a
week.
So this associate then went andassociated the other two or
three days a week, two townsover where they were

Evon (35:27):
Ah, interesting.

Erich (35:29):
the way, that introduction came from Practice
A.
Oh yeah, you need some moretime.
My buddy, two towns over inpractice B, could use some help.

Evon (35:38):
Hmm.

Erich (35:39):
Two years in associate bought practice.
B.

Evon (35:46):
Leaving owner a without many options.

Erich (35:49):
Owner A effectively gets this associate to come to the
region to employ this associateon a path to partnership
,associates looking for morehours, they start associating
practice B.
Two years later they buypractice B.
What did practice B do?
That practice A didn't do.

Evon (36:07):
They, they had that conversation.
It sounds like

Erich (36:10):
the question,

Evon (36:11):
They asked the question.
Yeah.

Erich (36:12):
Evon.

Evon (36:13):
Yeah,

Erich (36:15):
And that's, you know, that's, that's, that's gotta
change man.
That has got to change and

Evon (36:22):
yeah.

Erich (36:23):
so often and it's heartbreaking, right?
It's absolutely heartbreaking toall parties involved.

Evon (36:32):
And I, it, it, I think it even goes further than that.
Yes.
Market your PR, market, yourbusiness.
I mean, you are selling anasset, right?
You are presenting it for sale.
You need to market your businessso that you can get the best
qualified candidates forpurchase, but you also have to
present it in a way that showsthat the cash flows of this

(36:52):
business are not super risky.
You think about that owner goinginto it, what are the stresses
of that new associate?
Well, the stresses are family,life, mortgage, potentially
student loans.
Are they going to, they're goingto feel the risk of taking on
additional debt, potentiallytaking on business ownership
duties, the uncertainty ofbusiness ownership, and so well,

(37:14):
how do we help that associatedoctor feel better about that
transition?
Well, you present your practiceas an opportunity that doesn't
carry substantial risk.
Well, how do you do that?
Well, number one, you have,we're gonna go down the road
here.
We have clean, accurate, timelyfinancial statements so you can
present clean, accurate data.
You can track data about.
How that practice is doing.

(37:36):
Number two, actually, have apractice that's worth buying.
Have an Optometry practicethat's working well, working
with your peers, working withconsultants like Erich to make
sure that your practice isoperating in a way that a
buyer's going to want to buy it.
And we can start to go down thisroad.
You do have to present yourbusiness as something, another,
another associate doctor isgoing to want to buy.

(37:59):
Understanding that you as aseller probably built the
business from scratch, has allthe attachments of the identity
of being that business owner ofthose years, those, that capital
built up in that business, thoseyears with the patients
understanding that there's twoparties to this transaction and
each one has to feel comfortableabout the risk and opportunity
of that transaction.

(38:20):
And we talked a lot abouttiming, motivation, purpose in
doing this.
Let's talk a little bit aboutstructure.
Let's say that owner doctorbrings on that associate and I,
I didn't even ask about what theassociate should look for in
the, in the practice to know, toknow that it's a good
opportunity for the associate,but maybe we'll save that for

(38:42):
another conversation.

Erich (38:44):
A due diligence.
You know, Evon, we should do

Evon (38:46):
We did a due diligence episode.

Erich (38:48):
due diligence.

Evon (38:49):
We, I think we've done one already.
If we have, I'll throw it in theshow notes.
So listener, please listen tothat.
'cause there is some duediligence on your side too,
buying associate.
But let's talk about structure.
That hire happens.
Both parties agree, it's a greatfit, everyone's happy.
How do they structure thattransaction?
Where do they start?

Erich (39:08):
Yeah, that's a's a really, really great question,
right?
Because there's all sorts ofways to go about doing this.
Okay?
For starters, this is gonna bea, a stock sale, right?
So that, that, that associatesbe buying stock in this
business.
So far as structuring this goes,a lot of it ties back to

(39:29):
timeline.
And in so doing, we come tothinking that timeline and we
think of our clinicalperformance, clinical
production, right?
We think of executive duty andthen we think of profit like as
being a shareholder of thebusiness.
And this is where things getreally fascinating when you
start talking about what youwere mentioning a moment ago
regarding how is business cashflowing?

(39:51):
know, what is an appropriateprice based on how it's cash
flowing?
Can an associate afford this?
But it's not until we, we lookat the business from those three
angles, we understand our, theclinical production, clinical
responsibilities of the partner.
In, in meeting those needs,right?
We think of the executive dutyand executive function of the

(40:13):
partner.
'cause when you are in businessownership, it's more than just
seeing patients and going home,know?
Although now more than ever, Iwill argue now more than ever,
you can absolutely do it.
You know, thanks to a lot ofresources and tools that are out
there.

Evon (40:28):
Hmm.

Erich (40:29):
And then the third piece is gonna be the profit share.
Now the reason why I bring thoseup in filling this question
regarding how to structure it isbecause there's gonna be a debt
service that that incomingbuyer, that that junior partner
is gonna have to meet inaddition to debt service.
They also have to put food onthe table for their family.

Evon (40:49):
Yeah.

Erich (40:50):
that's how and why when you're looking at the actual
feasibility of this stuff.
And by the way, there's a lot ofthings that, that play into
this.
I mean, there are personalassets.
There's, you know, debt toincome ratio.
You know, do you own a home?
How many dependencies?
I mean, there's a whole world ofunderwriting that banks will get
into.
We're gonna stay away from thatfor, for these purposes.
We're gonna focus on thebusiness, right?

(41:11):
So in as much as underwritingwould include analyzing the
business, we need to understandthat there's gonna be those
three streams of income comingto that junior partner.
And it's not until we can reallyunderstand how are they
impacting clinicalprofitability?
What is their share of executiveresponsibility, and what is

(41:33):
their share of the profit share?
Then we can see how much moneyis flowing to the partner.
And then you figure out, okay,based on what's flowing to the
partner, what is appropriate forthem to be covering in debt
service, realizing they stillwill likely have a house note to
pay if they have a family, theygotta put

Evon (41:51):
Right.

Erich (41:51):
et cetera, et cetera.

Evon (41:52):
Right.

Erich (41:53):
So in that regard, that then will set us up for an
appropriate tranche for thatfirst step into partnership.
Ideally, you go at 50 50 or 5149, like get as close to 50 50
out of the blocks.
there's a variety of reasons forthat.
I mean, but primarily it's,it's, it's a simplicity thing.

(42:16):
However, there are occasionswhere in smaller tranches is
appropriate and typically thatappropriateness ties back to
what kind of lending, how is thebusiness cash flowing today that
the junior associate can buy in?
What's an appropriate amount?

Evon (42:33):
Gotcha.

Erich (42:33):
where, you know, and, and it all ties back to there,
there's a fascinating worldaround all of this with so many
options available, Evon, and Igotta tell you, I feel also very
confident that if were awarethat there's all these different
ways that this stuff can go.

Evon (42:50):
Right?

Erich (42:51):
think simply basing that awareness, more doctors would be
more comfortable and moreconfident in being proactive in
speaking up.

Evon (42:56):
Yeah.

Erich (42:57):
But I think right now a lot of people kind of think
like, oh, it's an all ornothing.
Like

Evon (43:01):
Yes.

Erich (43:02):
until I'm ready to sell my business and retire.

Evon (43:05):
Yeah.

Erich (43:05):
typically retirement is something we don't plan until,
know, very short time horizon.

Evon (43:13):
Yes, yes.

Erich (43:14):
of, and when I say, you know, you wanna plan for your
retirement through your entirecareer.
By the way, if you're not, youabsolutely gotta connect with
Evon

Evon (43:21):
Reach out please.

Erich (43:22):
But, but in the context of planning it over your career,
to draw the line in the sand andsay that's gonna be the year,
that's usually something thatpeople are doing two, three,
maybe five years max.
What we are talking about inpartnership starts even before
that.

Evon (43:42):
Gotcha.

Erich (43:43):
Maybe a five to 10 year, or heck, perhaps even longer
than that.
I mean, if you ask my, my, my,my good friend and collaborator,
GRT Summit, Dr.
Paul Morman, how they're doingthings, it's fascinating how
Paul, you know, he's, he'sactually, that perhaps he should
actually have him on the showEvon, Dr.
Paul Morman, to talk about alittle bit about how, how

(44:03):
they're structuring it to get

Evon (44:04):
I might need to, yeah.

Erich (44:06):
to get these, these really, you know, get younger
doctors on this path topartnership very early on in
their career.
And this also means that as thesenior doctor, it's not like
you're in your sixties as asenior doctor, but now this
really kind of, kind of changesthe script for doctors in
bringing in partners.

Evon (44:27):
It sounds like timeline of the selling doctor.
How long do they want to beinvolved in the business?
What is their timeline to exit?
That might dictate a little bitof that timeline of the
structure.
And as you mentioned, it isn't,it doesn't need to be all or
nothing.
It can be if that's what thesituation calls for, but it
doesn't need to be.
There might be this anchorpoints, as you mentioned,

(44:49):
somewhere close to 50 50 and I,I've heard varying opinions on
some people wanting to keep 51%to maintain control.
Others are saying no, make it 5050.
So I.
Both owners have a say in thebusiness.
I, I don't know if you have anyparticular thoughts around that,
but there might be this anchorstarting point, and then you can
structure the length of it fromthere.
Knowing the, the sellingdoctor's time horizon, and as

(45:13):
you mentioned it, that it, italso seems like it depends on
the, maybe the size of thepractice or maybe just the, the
business goals of the currentowner in that, I, I'm thinking
about some relationships I'mfortunate to, to serve and work
with in that it's a largerpractice, but they're bringing
in multiple owners, and somultiple owners are buying
smaller chunks.
Over a longer period of time,for a much larger practice.

(45:37):
And that works for the currentowner's timeline, as you
mentioned, it works for thecurrent buyer's cash flow and
timeline as well.
It works for all parties and itobviously works for patients
'cause there's just continuityof ownership and continuity of
care.
So have you seen that?
It also depends on sort of thatbusiness goal, ultimate business
goal or the size of the practiceas well.

Erich (45:58):
Yeah, absolutely.

Evon (46:01):
And what are your thoughts on financing?
Because it, it can be thirdparty financing through a bank,
could be owner financing throughan installment sale.
Maybe there's some taxconsiderations involved there.
What are your thoughts on that?

Erich (46:16):
You know, that's very much, that's very much a case by
case

Evon (46:21):
Gotcha.

Erich (46:22):
right.
I.
Yeah, I mean, you'll see it all.
We'll see using banks, we'llsee, you know, fully bank
funded, fully owner financed,some sort of combination.
If the bank is this, but theowner's saying, I want this for
my business.
And, you know, they'll get thisfrom the bank for, for that bill
of sale, and then have somethingworked out for owner financing

(46:42):
piece.
So it's really, it really tiesback to everyone's goals in
endgame.

Evon (46:50):
Gotcha.

Erich (46:54):
it does make it cleaner when banks are involved and you
can get the funding from a, froma third party and that transfer
of that, those funds can happenlike that.
It just, it does make for thingsto be nice and clean.

Evon (47:11):
Yeah.

Erich (47:12):
and that's not, that's not saying that there aren't
amazing things.
Again, I mean, we've, we've gotclients that use, we've worked
with projects and have activeclients that are using all these
different combinations.

Evon (47:21):
Yep.

Erich (47:22):
a case by case.
But, when you have a third partythat's provided that financing
so that the seller can get theirmoney, it's just, it just makes
for things to be really, really,really clean.
especially Evon.
And this doesn't apply so muchto this conversation as we're
talking about, like partnershipand stuff, you know, associate
to partner.
But think of that next stepwhere say it's a full asset

(47:46):
sale, right?
Or that, or that partner buysout that chunk from the retiring
doctors.
So now you have one, one owner,what have you.
Anytime an owner is gonna stayon the payroll as an employed
doctor.
We would definitely want tohighly recommend encourage those
funds coming from a bank

Evon (48:08):
Gotcha.

Erich (48:08):
because things can get kind of complicated when it's
owner financed and that owner isnow employed in the business.
It can just kind of get sticky.

Evon (48:19):
You think about that, okay, you've sold your practice,
you're working in the business.
Your ability to get yourpaycheck from that sale relies
on the decisions of the currentowner.
No longer you, you're seeingthose decisions probably going
to be second guessing a lot.
Hey, that's not how I would'vedone it.
I would've done this.
And so you can see how there'ssome complicated dynamics that

(48:40):
could unfold when the sellerdoctor's still involved in the
practice in that situation.
And I agree from a financialperspective, I'd want to model
these different variations tosee how it impacts the planning
for, for the selling doctor,particularly the retirement
planning and tax planning.
How are we gonna create incomein what order are those things
and come in.
But it, it's, there's sort of abalance between risk and

(49:03):
accessibility for the buyer.
Risk for the seller.
If you're doing owner financing,the longer it takes for you to
get your dollars, the more riskthere is to that, especially if
you're not involved.
Meaning if it's not aninstallment sale while you're
currently an owner, if it's aninstallment sale when you and
you're gonna be exiting, thenthose dollars are entirely up to

(49:25):
the ownership abilities of that,that buyer.
And so there's some risk to you,the seller, if you're doing
owner financing, especially ifyou're no longer involved in the
practice at all.
So you need to make sure thatthe interest rate on that owner
financing is appropriate.
but there's also someaccessibilities, meaning the
buyer can more accessibly buyinto the practice and take over,
even if it's over time.

(49:46):
And so there's sort of a tradeoff.
I do think it's cleaner when theseller can get their money from
a third party bank and everyonecan kind of just move on from
there.
what about structuringcompensation for both sides?
If you have two doctors stillthere, two owners.
Is it really just looking at theduties of each and then sort of
structuring that together?
What, what are your thoughts onthat?

Erich (50:06):
Yeah.
It, it kind of ties back to, sowhat we touched on earlier in
the conversation as well withthose, those, those kind of the,
the three responsibilities,right?
So the three responsibilities ofco-owners are gonna be clinical.
We gotta be seeing patients toget dollars come in the door,
right?
They're gonna be executive duty.

(50:26):
Okay.
So as from a running thebusiness standpoint, now we kind
of have this division of laborfrom an executive standpoint.
And then the third is gonna bethe profit share, right?
So as far as structuring thecomp, think clinically you get a
piece of what you see.
So, and it would make sense thatif one partner is seeing more

(50:47):
patients than another partner orhas higher rev per patient,
whatever the case may be, itwould make sense that you're
more based on the work thatyou're doing.
Okay.
So clinical comp based onclinical production, executive
duty based on duty.
So make a list, you know,sometimes it's typically, it's a

(51:09):
list of about 10 duties, andthen you can find ways to, you
know, kind of distribute theseaccordingly.
And definitely as it pertains toexecutive duty, definitely want
to play on strengths.

Evon (51:20):
Hmm.

Erich (51:20):
a matter of fact, you look at a lot of partnerships
where you have a senior partnerand a junior partner, and it's
really, it's beautiful to seehow organic those strengths are.
Right.

Evon (51:29):
Yeah.

Erich (51:29):
There's a lot of newer things, particularly in the
marketing front and some otheroperational things where younger
doctors are really plugged intonew modern ways of doing this.
versus when you look at say,cash flow and finance and
finance management, that'stypically one of those areas
where a younger Dr.
May be maybe wanting to learn abit more from that established
doctor.

Evon (51:49):
Gotcha.

Erich (51:50):
So that's our executive GD piece.
And then the third is gonna beprofit share, and that's just
purely based on percentage ofownership.

Evon (51:58):
Yeah.
That, that's a, that's a greatframework and a lot of it there,
there's going to be a tax aspectof how that entity is taxed.
With an S corporation, you areessentially, you're essentially
adjusting the wage.
I mean, that's, that's yourbiggest lever.
The, the profit distributions tothe owners have to be pro rata
primarily for the most part.
So the, the biggest lever youcan pull there with an S
corporation is gonna be the wagewith a partnership, whether it's

(52:20):
an LLLC tax, as a partnership,or otherwise, you have a lot
more leverage to pull and a lotmore flexibility.
And so.
How that entity's taxed dedetermines a lot of that.
there are some attorneys thatwill, will layer the underlying
entity as a partnership to giveyou more flexibility and will,
will, each owner will have theirown separate entity.

(52:42):
So for tax, tax playingpurposes, I mean this, this
really just goes to show thatyou, you do need a really good
team around you as you're goingthrough these conversations.
Have a great attorney in the mixso they can review and create
good legal documents.
Have a good tax planningprofessional in the mix, whether
it's a CPA or Enrolled Agent,EA.
See, can talk about thesedifferent levers, these
different opportunities fordoing this as, as well as you

(53:04):
can.
legal aspects.
We talked about the attorney.
I'd love to hear if you haveany, any insights on this.
Some things that come to mindfor me.
This is gonna be an immediatereview of, operating agreements,
if it's an LLC or if it's acorporation shareholder
agreement.
States, certain states ofCalifornia, you're gonna have to
be a corporation, professionalcorporation.
So, shareholder agreement, buy,sell provisions in these

(53:26):
documents are really importantso that if certain triggers
happen, death, disability,divorce, conduct detrimental to
the team, all these D words,there, there's a clear trigger
to purchase someone else'sownership.
And then how is that gonna befunded?
So for example, if it's death ordisability, you can very often
insure that through insurance,life insurance, disability

(53:49):
buyout insurance.
very often there's gonna beother provisions like, the
ability to purchase over xamount of years at x interest
rates.
So all of those provisions inthese documents are really
important, which the attorneyis, it needs to be really
involved in.
Erich, do you have any otherthoughts on the legal documents
involved here?

Erich (54:07):
Yeah, you hit on a lot of really remarkable things.
Okay, so you're gonna need thebill of sale.
That bill of sale has got toexplicitly state everything
that's gonna be involved inthere, right?
So that's basically saying, sobill of sale is, hey, this is
what percentage of the businessis being sold to them and this
is all, what's all included inthat?
Right?
Second to that, I love how youtouched on the operating

(54:29):
agreement Evon and, and tolisteners out there, get it all
sorted out on the front end inthat operating agreement.

Evon (54:38):
Yeah.

Erich (54:39):
You know, the calls that we love, the calls that teams
like Akrinos and Evon, I wouldimagine yourself also like the
stuff that we love is whenpeople are like, Hey, we wanna
enter our partnership.
This is super exciting.
Get it done for us.
Okay.
Those are amazing.
Those are exciting.
The calls we hate, Hey, I'm in abad business marriage and one of

(54:59):
the first things you do when youdiscover you're in a bad
business marriage, it ain'tworking out, is you go to that
operating agreement.

Evon (55:04):
Yeah.

Erich (55:04):
real heartbreaker when you, when we're getting calls,
people that are in, in, in, inincongruent partnerships

Evon (55:12):
Yeah.

Erich (55:12):
you go to the operating agreement and there's like
nothing there.

Evon (55:15):
Yeah.

Erich (55:15):
operating agreement is so absolutely vital, right?
The third thing, Evon buy, sell.
That's something also that isabsolutely vital and know that
the bank is gonna require buy,sell and funding a buy sell.
But above and beyond that, it'simportant that the business
also, and, and for partnersperhaps to have their own

(55:37):
arrangements and otherinsurances that are gonna put
money directly into thebusiness.
That's a very big disconnectunder understand that that buy
sells.
They come in differentfunctions, there's different
ways to fund these things.
And really, really important.
There's also, there's a lot ofmisinformation out there around
insurances as well, Evon, so I'm

Evon (55:56):
Yep.

Erich (55:57):
bring that up.
Then another piece also that'sreally important on the legal
side of things, you need alease.

Evon (56:04):
Hmm.

Erich (56:05):
you're on one of these month to month, and this perhaps
applies more to doctors that arelooking to totally sell out as
opposed to a partnership.
But even, even so, if you're ona month to month or you're, you
know, within a year of yourlease and you are not yet
renewed, you're not gonna beable to sell that business.

(56:29):
You're not gonna be able tobring in a partner.
That partner or that buyer isnot gonna be able to secure
financing.

Evon (56:34):
Hmm.

Erich (56:34):
You have got to have a place to call home for this
business, for

Evon (56:38):
Yeah.

Erich (56:39):
future.
So, I mean, look, Evon you,everything, everything else
could be lined up and then youhave a landlord.
That's been on a lease to leasewith the tenant.
Why?
Oh, the tenant's been there fordecades.
The last official lease expiredtwo years ago, but the
landlord's keeping theoptometrist around.

(57:01):
So they've been a great loyaltenant for all these years, but,
oh, why don't they wanna renewthe lease?
'cause when they do a renewal,those rates are gonna go up to a
market rate.
You're not gonna be able to sellthat thing.
You're not gonna be able toremove a partner, at least not
within your sort of conventionalfinance.
And you're gonna have to figureout some sort of owner financed
arrangement.
Evon, I love how you mentionedrisk, right?
There's more risk in ownerfinancing than there is in

(57:23):
working those traditional banks.

Evon (57:24):
Yeah, there is.

Erich (57:26):
risk if you don't have a place to call home for this
business.

Evon (57:28):
That's right.

Erich (57:29):
these things line up.
So, yeah, be sure you have alease in addition to all these
other legal documents, thatlease has got to be to

Evon (57:36):
Yeah.

Erich (57:37):
of that business.

Evon (57:38):
Yeah.
I, I, I love, I love what youmentioned.
I, I've actually not seen that,where there's a month to month
lease going into the sale.
One thing I'll add is that iffor, for the buying doctors.

Erich (57:49):
it because the sale went with, the sale fell

Evon (57:51):
Okay.
Okay.
Okay.
Yeah.
Interesting, interesting.
And one thing I'll add for, forthe buying doctor, as soon as
you take full ownership, havethat operating agreement looked
at again, I've seen situationswhere whether it's a single
doctor or a husband and wife,doctor, team fully purchase out

(58:12):
their ex co-owners, theoperating agreement was too
strict on how it required themto send out dollars to the
owners.
Didn't give them enoughflexibility now that they owned
it fully.
So that is another trigger.
Okay.
As soon as you own the, thebusiness fully.
That's another trigger to gotalk with the attorney, review
that, make sure that thatoperating agreement allows the,

(58:33):
the rules of the business allowyou to do what you need to do.
And it fits the currentsituation now.
And so we've, we've talked aboutErich, we've talked about
motivations, timing, we'vetalked a lot about structure.
And I think one big takeaway forme is that there are a lot of
ways to structure this.
It doesn't have to be all ornothing.
You can tailor to thesetransitions in a way that makes

(58:54):
the most sense for the seller'stimeline, the buyer's ability,
and what makes the most sensefor, for everybody.
And so I, I'd like to just talkabout final wrap up thoughts,
what, you know, something you'dlike to leave with the, the
listener.
And I'll, I'll, one thing I'llsay, I'll, I'll, I'll go first
'cause it's my show.
So, so I'll go first.
Why not?
Um.

(59:16):
The earlier you can prepare forthese things, the better it's
going to be.
Both fa from a, from a businessperspective, you can make
improvements to the businesswhere they need to be made.
But from a financialperspective, the earlier you can
plan and the better you can planfinancially outside of just the
business equity, the moreoptionality you're gonna have
when you want to exit yourpractice.

(59:36):
If you do not prepare well,meaning if you are not regularly
taking the cash flows of yourpractice to first reinvest into
the practice and then to balanceout your net worth with other
assets.
If you're not doing thatthroughout your career leading
up to this point, and you arereliant entirely on the value of
that practice, you may not havethe options you need.

(01:00:00):
If your entire ability to befinancially independent relies
on a certain valuation that maylimit the type of sellers you
can sell to, and you may notlike the deal that you're gonna
get in order to get that price.
And so.
The earlier, the better you canplan financially outside of the
business and in it, the betteroff you're gonna be.
The more options you will haveas you get to that point.

(01:00:23):
And as I say that, I fullyunderstand that there are
optometrists out there, maybelistening, that are very
intentionally building up largemulti-location practices,
purchasing locations, buildingin locations with the sole
intention of selling for a veryhigh sale value.
And so you're buildingenterprise value and the
difference is that you're takingon that dynamic intentionally.

(01:00:47):
That's not always the case.
Very often the business ownerfinds him or herself.
At that point, later in theircareer, just simply having not
been well prepared financiallyfor that point.
And so, the earlier you canstart preparing, the more
options you're gonna giveyourself.
And then please rely on yourteam.
This is me now talking as anadvisor.
Yes, the financial Advisor'simportant, yada, yada.

(01:01:09):
Make sure you have a goodconsultant walking you through
the business aspects.
Make sure you have a good taxprofessional, a good attorney, a
good banking partner.
Make sure you have these peopleon your team.
'cause this is a big, a bigtransaction.
This is a big career move, a biglife decision for everybody
involved and so have the peopleyou need to have involved there.

(01:01:29):
Erich, final thoughts from you.

Erich (01:01:31):
Final thoughts, and to build on that.
'cause I could not agree morewith that.
Evon.
It really is.
Look it, it's about the team.
It's about a team, right?
I mean, just like patient carelisteners out there, you can be
the most amazing doctor eyecarehas ever seen.
But you can only go so farunless you have that good team

(01:01:52):
in office, right?
Your experienced technicians,your opticians, your front end
team and all that, right?
So thinking the same way there,you can't go alone when you're
taking care of patients.
You can't go alone when you'redoing these sorts of business
milestones.
So that is absolutely vitallyimportant.
And Evon, I suppose my, myleaving thought if yours is,
build your team, work with ateam.
My leaving thought is all aboutproactivity.

Evon (01:02:16):
Hmm.

Erich (01:02:16):
Be proactive.

Evon (01:02:20):
Got it.
Love it.
Well, Erich, I appreciate yourtime.
This was great.
we'll throw all of these links,resources, anything we mentioned
in this episode in the shownotes for the listener.
And appreciate listener,appreciate you listening.
Would love to hear your thoughtsor experience about going
through this yourself.
Questions you have, send thatover to us and we will catch you

(01:02:41):
on the next episode.
In the meantime, take care.