Graham Hutton, specialist financial planner at Wesleyan Financial Services, shares how partnership agreements benefit from being reviewed as part of the process of moving from NHS to private.
When transitioning from NHS to private practice – whether through a full conversion, gradually shifting patients over, or transitioning specific dentists – it’s crucial that all decisions about the practice’s future are made collaboratively and with full agreement among partners.
In the fast-paced world of dentistry, effective partnerships lead to thriving practices, enhanced patient care, and a harmonious work environment. However, a successful partnership isn’t just about shared goals or complementary skills. It’s also about the foundation built on a well-structured, clear, and comprehensive partnership agreement.
For dentists entering into partnerships or working with existing partners, regularly reviewing and updating this agreement is crucial. Particularly when going through significant change within the practice, such as moving away from the NHS.
Here’s why reviewing partnership agreements during the transition is so important:
Protecting financial interests
In dental partnerships, financial matters are at risk of becoming a point of contention. Profit-sharing, ownership stakes, compensation and the allocation of business expenses should be clearly outlined in the partnership agreement. Over time, changes in the financial landscape of the practice may necessitate adjustments to how revenue is distributed or how costs are divided.
Disagreements between partners are common in any business, and dental practices are no exception. Whether the issue revolves around financial management or the direction of the practice, a comprehensive partnership agreement outlines how conflicts should be handled.
Regularly reviewing the partnership agreement ensures that financial arrangements remain fair and reflect the contributions of each partner. It can also help protect the interests of all involved if the business undergoes a change like a partner’s exit.
This can be especially important if the practice expands, brings in partners or the dynamics of the original partnership change. For example, changing from NHS to private provision.
A safety net for the unexpected
Life events such as illness, personal circumstances, or death can affect a partner’s ability to continue in the practice. It’s important to periodically review and adjust the agreement to account for these changes. A partnership agreement should have provisions in place to address situations where a partner is temporarily or permanently unable to fulfil their duties. This will ensure that the practice continues to operate smoothly.
Ask yourself, what if you or your partner were to suffer a terminal illness or pass away suddenly? It’s a difficult scenario to consider, but it carries a great deal of financial risk if not fully addressed. Would you or your partner be in a position to buy out that share of the practice? The implications for the deceased’s family are a huge cause for concern if the answer is ‘no’. The financial legacy that’s been built by the deceased partner can quickly fall in value.
The remaining partner could face a challenging situation if the family becomes a silent partner, unable to actively contribute to the practice’s operations, or if the business is sold to an unsuitable dentist whose vision doesn’t align with theirs.
By periodically reviewing the agreement, partners can ensure that the agreement reflects their current personal and professional circumstances and provides a plan for handling any unforeseen changes.
Smoothing succession plans
Partnership agreements should include a clear plan for the future. Particularly in case one partner decides to retire, sell their shares, or exit the partnership for any reason. A well-drafted agreement will outline the steps for succession and how the remaining partners will handle the transition.
Regular reviews provide an opportunity to update these plans as circumstances change. If the practice grows, or if there are new plans for expansion, the partnership agreement can be modified to reflect these new realities. Establishing a strong succession plan ensures that the practice can continue to thrive after key partners leave or change roles.
Speak to the specialists
Strong communication helps prevent misunderstandings and builds trust among partners. It also sets a positive example for the entire practice, fostering a healthy culture of collaboration and mutual respect.
There are types of cover that can protect partnerships from the risks highlighted. Speaking to your solicitor and a dental specialist financial planner means you can place the missing puzzle piece in your practice’s protection strategy. This means when big changes occur, such as moving from NHS to private, the due diligence has been done to ensure you and your partners are on the same page and the provisions are in place to ensure the smooth continuity of the business.
The first step is to review what you have in place, or even better, to develop a strong partnership agreement from the start if you are buying an NHS practice that you wish to convert. It’s a smart investment in the long-term success of your practice.
Book a conversation by visiting wesleyan.co.uk/dental or call 0808 149 9416 to see whether a referral to a specialist financial planner at Wesleyan Financial Services can help strengthen your partnership agreement.
Charges may apply. You will not be charged until you have agreed the services you require and the associated costs. Learn more at www.wesleyan.co.uk/charges.
This article is sponsored by Wesleyan Financial Services.
