Money is one of the top reasons why partnerships fail. It is one of the top reasons that
associates leave a practice. And money is one of the top reasons that sellers end up closing their doors without a buyer. Let’s face it, many of us would not put up with the stress of long hours and managing staff if it wasn’t for the financial reward of private practice. Being an optometrist is much more difficult and stressful than the average person thinks and money can make those “big pills” easier to swallow. For you and your partner to enjoy the fruits of your labor and be rewarded fairly, consider these 5 ways of dividing the income.
- Percentage – This allows for the most freedom as competition is minimal and patients can be seen by either doctor without affecting the financial
arrangement. Each individual doctor’s income would not be affected by how much or how little a doctor worked. This method promotes teamwork and the partners divide the percentage by an agreed upon amount. It is recommended that the percentages are reviewed yearly. The main disadvantage is the doctor that produces more money may become resentful toward the doctor that produces less. - Productivity – This works very well if all doctors are not all working the same hours. In practices with a senior doctor working fewer hours and a new
doctor with less production, this method divides the income to reward the partners who generate more of the gross revenue. You should consider duties such as accounting, staff management, or internet technology; these tasks do not produce direct revenue from the patients. If these tasks are divided evenly amongst the partners then productivity works well. This method does encourage competition. - Percentage & Productivity – If the partners are concerned about the additional tasks listed under productivity then this method works good. You could divide by 60 percent percentage based and 40 percent productivity, giving extra an additional percentage amount to the partner involved with non-revenue generating management.
- Point system – This system allows greater flexibility for the partners to distribute the income. Choose a certain number of points, say 100. Then give each task throughout the office a point total. You may give points to years in
practice, or days worked in a week, or time spent on administrative duties. The profits would then be divided by the total points and then distributed according to the dollar amount per point owned by the doctor. If a point is worth $500 and a doctor has 20 points then they receive $10,000 of the profit for that month. - Percentage & Points – There are four components to this method of dividing the income: percentage, productivity, patient load, and management duties. This method can be very complex and involves dividing the percentage of new income by the cash value of each point.
Finding a way to divide the income that all the partners agree upon is the most important component of a healthy partnership. It doesn’t matter if you use one of the methods above or if you make up your own system that incorporates all five. It is recommended that you keep it as simple as possible and make sure that all partners understand the pros and cons of the agreed upon method.
