Keeping It All in the Family
Bennett Family Eyecare has laid the foundation for a successful practice and a bright future for the family.
BY LINDA BENNETT, O.D., AND REBECCA MAIDA, O.D., BELMONT, MASS.
It is probably every practice owner’s dream to have their son or daughter follow in their footsteps into the profession of optometry and become a partner in their practice. It is probably every optometric student’s dream to have a job, and even better, a fully functioning, financially stable practice waiting for them upon graduation.
However, when entering into a family partnership, there must be an ever-present awareness that a misstep may impact both business and family life, and that this dream could easily become a nightmare.
Bennett Family Eye Care is a growing optometric practice that exemplifies the challenges and rewards that family business can hold.
In 1987, Linda Bennett, O.D., bought a small optometric practice, which started out with only one exam room and one staff member. Rebecca Maida, O.D., was 7 years old when Linda, her mother, went into private practice in Belmont, Mass., a suburb of Boston. Rebecca learned about private practice optometry from the ground up while working her way through the positions in the office.
The office grew, and in 2005 moved to its present location, now with five exam rooms and 14 additional staff. When Rebecca decided to go to optometry school, she did so with the understanding that a place was set for her in Linda’s already thriving practice.
Upon entering the practice, Linda and Rebecca discovered many valuable lessons about working with family and in partnership in general. Along with the vital ingredient of good communication, the following steps laid the important foundation for a positive business and family future.
In 2005, Bennett Family Eye Care moved to its present location in Belmont, Mass.
Start as employer and employee.
Before beginning the process of partnership, set the appropriate tone for your new business relationship by entering into a contract that outlines terms of employment. Starting as employee and employer also gives both parties time to test working together to ensure that a partnership is possible.
Linda: I knew I wanted my daughter to join my practice, but the reality of this decision brought up concerns about finances, decision making and the future direction of the practice. Before we even got started, I could already see the possibility for countless disagreements. Testing out our business relationship before jumping into partnership allowed us to feel more confident about our ability to work together.
Rebecca: It was important to me that I work as an employee at my mother’s practice before buying in as a partner. From watching my mother’s practice grow, I thought I had a pretty good idea of what ownership involved, but you never know until you are actually there.
Start making decisions together right away. Being able to successfully work together on small decisions encourages both partners to trust each other and feel valued throughout the process of joining together.
Linda: Before our partnership was solidified, I included my daughter in choices regarding purchasing new equipment, aesthetic choices in our office and establishing a practice name. These kinds of decisions gave Rebecca a sense of ownership in the business from the start and a feeling of responsibility in the direction of the practice.
Rebecca: Most of the staff knew me as the “boss’s daughter” when I entered the practice. Being involved in decision making helped to establish me as an authority among the staff and established my intentions to be a leader in the office.
Hire an objective third party.
Working to develop a family practice is likely to cause both parties to think less objectively and more emotionally.
Bringing in an outside consulting firm to assess the value of the business provides an objective view of the practice. You can use this plus some industry standard calculations to negotiate the ultimate value of the practice.
Linda: Hiring a consultant helped to make the process of evaluating the practice feel less overwhelming. The consultant explained what information was relevant and how to pull that information together in a way that was helpful.
Rebecca: It was very important to me that I pay a fair price for partnership in my mother’s practice. Not only was equity a part of my business ethics, I also wanted to ensure that my parents’ plans for retirement were not hindered by selling the practice at a lower rate than was appropriate. Having a third party’s evaluation felt valuable, because it reduced the possibility that either of us might feel resentment about the practice’s price years down the road.
Consider all options for the partnership.
It is unlikely that a new partner will have the up-front capitol to buy into the practice outright. Speaking with an accountant, consultant or lawyer can help you consider all your options, which include:
► Companies that grant a loan to the buyer so that the practice or a percentage of the practice can be paid for out right.
► The option of a salary and days worked differential that would allow the buying-in partner to work more hours instead of coming up with the cash directly.
In this instance, the owner takes home a higher salary and works fewer days for a set amount of time. There is an agreed upon length of time for this relationship and an agreed upon percentage of the practice that the buyer will earn by the end of each year.
Then, the practice profits are shared based on percent owned.
► An option only available to family partner is gifting. This amount does not need to be the entire sum. There are tax advantages associated with this option.
Linda: Gifting was the first possibility that we explored, but, as I have two daughters, I had to consider the potential family conflict that such a large gift might create.
Rebecca: I would have considered taking a loan to pay for half the practice immediately. However, this would have had significant tax implications for my mother, as she would have had to report the loan payments she received as income. Linda’s income would have risen very high for that year, and much of what Linda would have received would have gone to the government as taxes. In addition, repayment of the loan would have created a large financial burden for myself and my husband.
In the end, we decided on a differential in salary and days worked through five years, equal to half the practice’s worth.
The differential worked this way: Each year, I would buy 10% of the agreed value in the practice in salary differential. At the end of the year, the profit, if there was any, was divided by the shares owned. We valued a day of work equally, but I was required to work 40 days more that Linda each year.
Develop a thorough, written partnership agreement.
The partnership agreement should include all aspects of the business relationship and should focus on any legal and financial considerations.
Assuming that a legal, written agreement is unnecessary because you’re working with family is a big mistake and a good way to damage family relationships down the line.
Use the help of a lawyer. However, going to a lawyer can be expensive, so it is financially beneficial to discuss all aspects of partnership, and write these before entering a lawyer’s office.
There are books and online resources to help draft the important parts of a partnership agreement. A lawyer can identify any areas that may not have been addressed yet and draft the agreement to ensure its legality.
Linda: We used my father’s book, Optometric Practice Management (Butterworth-Heinemann, 2002, by Irving Bennett, O.D.*) to help us write our agreement. It gave us a list of topics that needed to be discussed. Some areas we knew, but others we had not considered.
Rebecca: We scheduled set times out of the office to discuss the partnership terms. We found it helpful to discuss the points of contention first and get those out of the way.
For example, prior to establishing the partnership agreement, Linda had always fully funded the profit sharing plan. However, Rebecca was more interested in having the profit immediately as she has a young family. It was agreed that funding for the plan would be the minimum required per year unless both parties agreed on greater funding.
It’s not for everyone, but…
There are many aspects of any partnership that can cause it to thrive or fail. The stakes are high when mixing business and family, because more can be lost than just a business relationship.
Not every family can work together. But, when family business succeeds, the rewards can be powerful. OM
*Irving Bennett, O.D., is the father of Dr. Linda Bennett and the grandfather of Dr. Rebecca Maida. The publisher and editor of Optometric Management during the 1970s, Dr. Bennett is an inductee into the National Optometry Hall of Fame. He is often referred to as “the father of optometric practice management”
Dr. Bennett established her private practice more than 25 years ago. Her primary eyecare practice sees patients of all ages. She participated in two VOSH trips to Armenia, served on the Massachusetts State Board of registration in Optometry and is a former president of the Massachusetts Society of Optometrists. E-mail her at firstname.lastname@example.org
Dr. Maida joined her mother in practice in 2008 adding vision therapy to the services already rendered by the practice. In addition to everyday patient care, she uses her managerial skills to oversee the running of the business. E-mail her at email@example.com, or send comments to firstname.lastname@example.org.