I am a practice manager contemplating buying a vet practice in partnership with a Vet friend. We are currently looking into how our income should be split and paid. We are going into this venture as 50-50 partners - could you please advise on what the recommended or appropriate wages/income split would be, given we will both be engaged in different roles within the business, of which one is usually paid higher than the other?
I wrote a response on this exact scenario in the previous question.
My clients pay wages to each partner based on the role they take on within the business then split profits based on ownership.
I suggest talking to your accountant as they will be best placed to advise you.
This is a very important question and one you both need to consider carefully.
Like James suggested speaking to your accountant is a great starting point. I’d also recommend getting in touch with a business coach or a trusted advisor to go through your thoughts, business objectives and what you're both hoping to achieve in the next 1, 2 and 5 years and even beyond.
There are many questions or issues that need to be considered, here are a couple.
• Are you wanting to keep the business small, with just the two of you or do you have visions to grow the business and bring in other vets?
• What are the monthly operating expenses outside salaries and how are they going to be paid/split?
• Is the business designed to make a profit or the vehicle for you as individuals to generate your own revenue less the expenses.
• What happens in one partner's revenue isn’t enough to cover their month's expenses. Does the other partner have to cover the cost of the rent or other expenses?
• How will both partners feel after 6 – 12 months if they are generating 70% of the revenue but their income does not reflect their contribution?
• Do you have a shareholders agreement in place and what has been agreed should one partner choose to leave the business?
• If you are looking to grow who will be responsible for marketing, recruitment, website and so forth and how will that impact their time or opportunity to generate their own revenues?
• What discussion has taken place in regards to holidays and how many weeks per annum?
As mentioned there are many more questions you need to go through. They are, by all means not insurmountable or designed to put a damper on things. They are simply a guide to what you both need to be considering and chatting about as it’s the reality or operating a business in partnership. Being able to discuss openly with a business coach or trusted advisor will help you both in your decision-making process.
I hope this helps and all the very best in your business journey.