Hi everyone! Welcome back for another episode here at Modern Acupuncture. Today we’re talking with Natalie Mich, a licensed acupuncturist in Oregon, about her experience creating and dissolving an acupuncture business partnership with a friend of hers.
I know a lot of students out there consider going into business with friends. As you near graduation, things start to get a little intimidating, yes?
You realize that you’re about to leave school and be responsible for your own income. Federal Students loans will not longer be supporting you. And starting a business becomes real – really real – for the first time. You might think to yourself that it would be easier, and less scary, if you start a business with a friend.
To be honest, there’s nothing wrong with this. But. You have some pretty big decisions to make before you dive into an acupuncture business partnership. Something I’ve read over and over again (because I read a lot about business on the internets) is that right from the beginning of any business partnership, you must build into your paperwork an exit strategy.
That’s right. Even as you’re just beginning, you need to decide how things will be divided up should either one of you need to leave the partnership.
I know what you’re thinking! That’s like signing a pre-nup before a wedding! It’s like saying you expect things not to work out.
But in reality, it’s just good business practice. Hopefully a marriage will last a lifetime; but it’s not reasonable to expect a business partnership to last a lifetime. So in five years, or 10, expect that one or both of you will be ready to move on to a new business model or a different city.
Today we’re discussing all of this (and way more!) with Natalie.
Natalie joined a friend of hers in a business partnership soon after graduating acupuncture school and the partnership was dissolved roughly two years later.
I’m excited to pick Natalie’s brain to discuss the whole process and give you some important things to think about; for those who are trying to decide what kind of practice to set up after graduation, as well as for anyone who is currently in a partnership agreement.
Today we’re discussing:
- Why Natalie and her friend entered into a partnership
- How patients were assigned/divided between them
- What she wishes they had done differently from the beginning
- How assets were divided between them after closing up shop
- Her advice for preparing to dissolve a partnership
Let’s chat with Natalie!
When you first graduated acupuncture school, you decided to start a practice with an acupuncturist friend of yours. What made you decide to go for a partnership right out of school, as opposed to sole proprietor?
I took a leap of faith with a friend and jumped at the first reasonable opportunity that came my way. In retrospect, there were a lot of signs that it wasn’t the best fit, but I wasn’t able to distinguish between my fear, my self-doubt, and my discomfort with the business partnership.
Can you describe that arrangement for us? How did you decide who got new patients? How did that work for your partnership?
The arrangement was if the patient asked for one of us by name, then that patient goes to the named provider. If it was a random, it was assigned to whomever had a slower week, which is the typical set up for most partnerships, based on my professional conversations.
However, there were a lot of problems with miscommunication, which then lead to mistrust, and over time it eroded the relationship. I also think that the added stress of life – struggling to pay bills and working side jobs – added additional challenges to the partnership.
Did you have a receptionist (a neutral party) who handled assigning those patients to the person with the slow week? Or was that determined by whichever one of you answered the phone?
We didn’t have any staff; assigning patients happened based on who answered the phone or voicemail.
Once the new patient was assigned to one of you, did you make 100% of the income from that patient? Or was a percentage taken out to pay overhead?
In regards to calculating overhead, we basically divided the clinic expenses evenly: rent, electric, security system, linens, internet, gas, liability insurance, etc. On top of those communal expenses, we were each responsible for our individual business expenses, such as malpractice insurance, continuing education costs, specific supplies that would be only used by one provider in the office, and things of that nature.
The business, technically, received all the money. However, we tracked our income individually by patient transaction. We typically didn’t share patients in regards to acupuncture services, and everything I received from my patient billing counted towards my part of the overhead. We made enough profit to stay in the black as a business, but I never made enough money to consistently pay myself.
You mentioned that the money you both made was deposited into the business account. Then I’m assuming, because you were keeping track of whose patients were whose and how they paid (insurance vs. cash), you then distributed the money out of the business account based on those records?
We were barely making overhead, so there weren’t really any personal distributions. Theoretically, we were planning to pay ourselves based on our individual income, but we had not arrived at that point before dissolving the business.
In that case, what about months when you didn’t make enough to cover overhead? What if one of you had, for example, 12 patients that week, and the other only had four – but there’s no extra money at all after overhead, so neither of you get paid?
Luckily, we didn’t have to cross that bridge. We were in the black from the first month onward, which I attribute to the retail sales model we developed for the clinic.
Did you take insurance? How did you divvy up insurance payments to whomever they were meant for? Seems like it would be difficult, especially because insurance payments often come in lump payments for multiple patients.
Getting networked with insurance was a high priority and was included in our start up costs. The business got paid by insurance, and we separated and tracked our individual income based on who did the treatment. So the lump checks were deposited, and we just documented our individual contributions on a spread sheet. Separating the lumped EOPs and storing them was more cumbersome than documenting the individual income.
Now that you have the benefit of hindsight, would you manage patient assignment differently?
I don’t really know. If you set your systems up with the intention of fairness, theoretically things should work well.
Regarding your startup costs for the partnership, and how did you determine who would pay for what? Was it 50-50?
It was not 50/50. I had some money left in my retirement account, and I invested $10,000 in start up funds for both parties to furnish the clinic. I transferred the funds in the business account, and we used those funds to finance the start up costs.
What did you partner bring to the table?
Her parents offered to cosign the lease for the property. The lease was for 5 years, and we split the costs for the security deposit. The cost of building out the space was added to the rent per the terms of the lease. We needed to add sinks to the treatment rooms, and that expense was to be paid over the term of the lease. She also brought the treatment room supplies from her previous office to the new office. She didn’t contribute anything financially to the start up costs.
How did you know it was time to transition to solo practice?
My partner asked to dissolve the business.
Before you got started, did you include in your partnership contract any kind of “dissolution” agreement? In other words, did you decide beforehand (when you were on more neutral territory) who would get what, how the dissolution would work, etc.?
Sort of. The dissolution basically said that it would get split 50/50. However, we weren’t invested 50/50 in start up funds, so it got complicated and I obtained legal counsel. For legal services, I reached out to the Lewis and Clark Legal Clinic and was connected to legal services throughout the dissolution.
I now know a dissolution document needs to be detailed and specific. As in, I take all items in my treatment room, I take the blue bowl in the waiting area, and I get all items I brought into the building that I purchased with personal funds.
Consideration about what happens to the phone number, linen contract, website, etc. are also important. Detail every aspect of the business and don’t assume anything. Having a lawyer was very important for the dissolution in regards to filing the paperwork and clarifying the process.
Does that mean that you got back all of the items that you initially purchased to furnish the office? Or did you come to an agreement to leave certain items?
We agreed that specific items would remain at the location. I was compensated for the value of the items I left at the office, which was detailed in our dissolution documents.
When you dissolved the partnership, did you make back the money you invested?
I walked away with approximately two thirds of the investment; this was based on the value of the items left on the property.
What did your partner end up with after the partnership was finally dissolved?
When we dissolved the business, we agreed to retire everything, including the name, logo, phone number, and website. She wrote a document giving options for dissolving the business, and I chose the option I found most agreeable. Part of the option I chose was that she would maintain the lease on the building. Beyond the physical address and furniture items she retained, we both started fresh with new brands.
How did you and your partner go about dissolving your shared practice? What was that transition like?
It was very hard. Because we agreed I would leave, I was entitled to have a reasonable amount of time to a new space and get re-credentialed so I could stay in network with my patients’ insurance for continuity of care and payment. Also I legally had to give 30 days notice to my patients for an address change. You can’t just stop going into your office.
Is there anything you would do differently if you were getting ready to join a partnership agreement again?
The person would really have to add a lot of value to the business for me to consider joining forces. I also have a really good understanding of the dissolution process now, so I know what’s at stake if things don’t work out. Knowing that piece makes me hesitant to think along those lines. I’d rather work with others in the capacity of independent contractors than as legal business partners.
What advice would you give for acupuncture students who are considering going into a partnership arrangement right out of school?
Make sure you really know the person you want to partner with. If you don’t trust them with your life, your financial security, and all your passwords, don’t partner with them.
Don’t partner with someone just because you are afraid to do it alone. It’s better to take an extra three months to figure out the right move than to have to start over again after two years.
Make sure you balance your life outside of the partnership. The business can be very time consuming, and it’s important to nurture the relationships outside of the business, so they will be there for you when the business is in an ebb phase, or you hit burn out, or your self esteem falls apart, which will happen from time to time.
It sounds like you would also recommend getting a lawyer right from the beginning to set up your partnership paperwork and the dissolution agreement in case that should ever happen, and making the dissolution agreement incredibly specific. What kind of lawyer should people look for when they need to create this kind of partnership contract before signing anything?
An attorney who specializes in small business would definitely be helpful. Startup is very expensive, and it can be difficult to find the money for legal services, especially when everything is exciting, collaborative, and positive. But having a strong dissolution plan will really alleviate your stress about what happens next if things are not working out.
What advice would you give, in general, to any acupuncture student who is about to graduate and go into practice?
- If anyone tells you it’s easy, don’t listen to anything else they say.
- Don’t give up on yourself when it feels like the world is crashing down on your head. Again, if you’re doing it right, it’s going to be hard, and you are going to have road blocks. Building a practice is a continuing evolution; it keeps changing. When things aren’t working, you have to do something different.
- Most new businesses fail, and many acupuncturists aren’t practicing five years after graduation. That’s reality. To beat the statistics, start slow and don’t over extend yourself spiritually or financially.
- Get in network with insurance as soon as you have a practice address. First thing.
- Put your business card in everyone’s hand. Be shameless.
- Be tough, be brave, do the right thing, work hard, and be tough again, and you can make it happen.
Thank you for being so transparent and sharing your experience with us, Natalie!
I’m certain it will help other acupuncturists ask more questions and be more informed before deciding to enter into a legal partnership with another practitioner.
If you have questions for Natalie, feel free to email her at email@example.com
Are you in a partnership arrangement with another practitioner?
We want to hear about it! The pros and the cons; any info you share helps others by allowing them to see the variety of ways an acupuncture practice can be run. The more we share, the better off we all are.
Leave your story in the comments, or let me know if you’d like to be interviewed!