P.T. Barnum’s American Museum (New York City, 1841-1865) was incredibly popular. So popular that 38 million people visited themuseum. Keep in mind that the total population of the United States in 1860 was under 32 million! People would spend the entire day there going from one exhibit to the next, and then back again. This cut into profits, as the museum would be too full to squeeze another person in. In classic Barnum style, P.T. put up signs that said “This Way to the Egress.” Many customers followed the signs, not realizing that Egress was an elegant word for “Exit.” They kept on looking for this strange new attraction, the “Egress”. Many patrons followed the signs right out the door! Once they had exited the building, the door would lock behind them, and if they wanted to get back in, they had to pay another admission charge!
If you are forming (or are already in) a partnership, you need to have plans for an egress. How do you or your partner exit the partnership when the time comes? We see too many partnerships where the partners have not planned for the exit, and it causes huge problems later.
One example that we at OptiRova worked with is two optometrists who wanted to sell a great practice. The senior doctor was in his mid-60’s and had been very successful and was ready to cut back to working 2 days a week for about 20 weeks a year, and travel the rest of the time. The other doc was in his early 50’s and had married later in life, and had a middle school-aged child. He was not ready to cut back, and needed to work full time for another 10 years. We received an incredible offer for the practice of 122% of their average annual gross sales! The senior doc was ecstatic and ready to sell. However, the younger doc looked at what he would earn after the sale, and decided he couldn’t do it since he made more as an owner than he would as an employee. As a result, the senior doc was stuck in the partnership since they didn’t have a clearly defined exit plan in their partnership agreement.
When we are setting up or revisiting a partnership agreement, we have to understand that life happens, and we need to have a clearly defined exit plan. All of us have a “truck coming down the road” with our name on it, and we never know when it is going to hit us! Make sure that your partnership agreement defines how you or your partner will be able to exit, and under what terms, should a life event happen. Disability, death, illness, family emergencies, etc. can and do happen – hopefully not to you or your partner(s), but be prepared just in case. As Gunnersen’s Law states: “The probability of a given event is inversely proportional to its desirability”.
If you need to draw up a partnership agreement, or revisit your current partnership agreement to include a well thought out exit plan, visit our consulting page to get started. We’ll listen to your concerns and help you to prepare a solid and forward-thinking plan to ensure that when life happens, your practice will be prepared to move forward. Make sure you know where the Egress is!