Associate buy-in
An associate buy-in is when a professional already working in a practice — a dentist, doctor, veterinarian or lawyer, for example — purchases an equity stake in it rather than the practice being sold outright to an outside buyer. The price is usually set by a formula tied to collections or earnings and often paid in over time.
An associate buy-in lets a practice bring in an owner gradually instead of selling all at once. The associate, often already treating clients or patients under the existing owner, purchases a percentage of the practice — sometimes a minority stake as a first step, with an option to acquire the remainder later.
How the price is usually set
Because most professional practices don’t trade on an open market the way a typical small business does, buy-in price is commonly calculated using a formula specific to the profession — a multiple of trailing collections, adjusted earnings, or a blended approach that discounts for the associate’s own contribution to recent growth. The formula is usually set out in a shareholders’ or partnership agreement negotiated up front.
What to watch for
- Whether the buy-in price is fixed now or recalculated closer to closing.
- Vesting and departure terms if the associate leaves before buying the remaining stake.
- How goodwill tied to the founding practitioner is valued versus goodwill the associate has personally built.
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaIndustryHow to sell your business
- 02Treadstone LawLegal commentaryBuying & Selling a Business
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