Exploring Co-Ownership

Throughout history, private practice owners have faced many of the same fundamental challenges. The need for capital and, just as importantly if not more so, the need for time.

For healthcare professionals, time spent negotiating a lease, comparing equipment, interviewing employees, reviewing insurance options, managing vendors, or solving operational problems is time that cannot be spent seeing patients and generating revenue.  Many successful healthcare providers starting their own practices produce well over $1million per year when doing what they do best with patients.  As practice owners, these same individuals often find countless hours absorbed by administrative tasks – ranging from ordering supplies to dealing with broken equipment.  This unaccounted for time comes with a cost – either lost revenue or lost time outside of work, potentially leading to burnout.

While many private practice owners have taken on these challenges and succeeded admirably, but the landscape of ownership is evolving. The choice is no longer limited to working for someone else or taking on every aspect of practice ownership alone.

Today, healthcare professionals looking for the opportunity to have not only a greater piece of the pie, but more control over everything from culture to operations, have access to a growing range of ownership models designed to combine entrepreneurship with varying levels of financial, administrative, and operational support.

If you’re considering ownership now or down the road, let’s talk.  Above all, we’ll help you understand what questions to ask.

Franchise Ownership vs. Co-Ownership

A franchise is a business model in which an individual or group purchases the right to operate a business using another company’s established brand, systems, processes, and intellectual property. The franchisee owns and operates the local business, but does so within the framework established by the franchisor.

In exchange for access to the brand and business model, franchisees typically make an initial investment and may pay ongoing royalties, marketing fees, technology fees, or other charges. The franchisor generally establishes standards governing how the business operates, which may include branding, marketing, technology, purchasing, staffing processes, facility design, service offerings, and other aspects of the organization.

The primary appeal of franchising is that the owner is not starting entirely from scratch. The franchisee may receive an established brand identity, operating procedures, training, marketing resources, technology, vendor relationships, and ongoing business support. This can reduce some of the uncertainty associated with developing an independent business.

That support, however, generally comes with limitations. A franchise owner is an entrepreneur, but not a completely independent one. The franchise agreement establishes what the franchisee may and may not do, and certain decisions that an independent business owner could make freely may require adherence to franchise standards.

In healthcare, these distinctions deserve particular attention. A physician, veterinarian, dentist, or other healthcare professional evaluating a franchise opportunity should understand not only the economics of the arrangement, but also how the structure affects professional judgment, clinical decision-making, staffing, purchasing, pricing, patient or client experience, and the ability to adapt the business to the needs of the local community.

Co-ownership generally means that two or more parties hold an ownership interest in the same business. Rather than purchasing the right to operate someone else’s branded business system, the healthcare professional acquires an actual equity interest in the practice or business itself alongside one or more partners.

The structure can vary considerably. A clinician might own a practice with another healthcare professional, enter into a partnership with an established healthcare organization, or hold equity alongside an operating or investment partner. Ownership percentages, voting rights, financial contributions, management responsibilities, and profit distributions are typically established through the governing agreements for the business.

Depending on the arrangement, a co-owner may participate directly in decisions involving clinical strategy, hiring, equipment, services, culture, growth, budgeting, and the overall direction of the organization. The supporting partner may provide resources such as financing, recruiting, human resources, accounting, marketing, technology, purchasing support, or operational expertise while the healthcare professional maintains an ownership stake in the underlying business.

Co-ownership, however, should not automatically be equated with complete independence. A person can own equity in a company without having equal authority over every decision. A minority owner, for example, may have significant economic participation but limited voting or governance rights.

For that reason, the percentage of ownership tells only part of the story. Prospective co-owners should understand what they own, what decisions they control, how profits are distributed, whether additional capital contributions can be required, how their ownership interest is valued, and what happens if they eventually want to leave or sell.

At its simplest, the distinction is this:

A franchise generally gives an individual the contractual right to operate a business using someone else’s established brand and system. Co-ownership gives an individual an equity interest in the business itself alongside one or more other owners.

That distinction can have significant practical consequences.

With a franchise, the relationship is primarily between franchisor and franchisee. The franchisee receives the benefit of an established system but agrees to operate within that system and typically pays for continued access to it.

With co-ownership, the relationship is primarily between business partners or shareholders. Rather than paying for the right to participate in another company’s system, the parties share ownership of an underlying business, although one partner may still provide extensive operational infrastructure and support.

Importantly, neither term by itself tells a prospective owner whether an opportunity is favorable. A well-structured franchise can provide substantial resources and a proven pathway into entrepreneurship. A thoughtfully designed co-ownership arrangement can provide meaningful equity, professional autonomy, and long-term wealth-building potential. Conversely, either structure can be unfavorable if the economics, restrictions, governance rights, or exit provisions are poorly aligned with the individual’s goals.

The better question, therefore, is not simply “Do I get to be an owner?”

It is “What exactly do I own, what control comes with that ownership, what am I paying for, how do I participate in the financial success of the business, and what happens to the value I build over time?”

Those questions are especially important in human and veterinary healthcare, where ownership decisions can affect much more than financial returns. They can influence professional autonomy, workplace culture, the ability to invest in people and technology, and ultimately how care is delivered to patients and clients.

Yes—but affordability works very differently depending on whether a healthcare professional chooses co-ownership or traditional financing.

With traditional financing, the clinician generally funds the purchase or startup of the practice through personal capital, a bank or SBA loan, seller financing, or a combination of sources. The advantage is the potential to retain greater ownership and control. The tradeoff is that the individual may assume substantially more debt and financial risk and may need to personally fund working capital, equipment, real estate improvements, payroll, and other startup expenses.

With co-ownership, an outside partner may provide some of the capital, infrastructure, or financial backing required to establish or acquire the practice. This can significantly reduce the amount of money the clinician needs to contribute personally. However, lower upfront costs usually come in exchange for sharing the equity, profits, appreciation, and/or decision-making authority with the co-owner.

So, co-ownership can make ownership more financially accessible, but that does not necessarily mean it is less expensive over the life of the investment. A clinician who borrows money to own 100% of a successful practice may ultimately build more personal equity than someone who contributes less capital but owns only a portion of the business.

The most useful comparison is therefore not simply, “Which option costs less to get started?” It is:

How much capital do I need to contribute, how much financial risk am I assuming, what percentage of the business will I own, what portion of the profits will I receive, and how much of the value I create will ultimately belong to me?

Those questions provide a much clearer picture of whether traditional financing or a co-ownership opportunity is truly affordable—and financially worthwhile.

Steps to Co-Ownership: Where Do You Start?

The idea of owning a healthcare practice can be exciting—and a little intimidating. Co-ownership has created another path for physicians, veterinarians, dentists, advanced practice providers, and other healthcare professionals who are interested in building equity and having a greater voice in their professional future, but who may not want to take on every financial and operational responsibility of traditional private practice ownership alone.

If co-ownership has caught your attention, you do not need to begin by choosing a company, signing an agreement, or even deciding that ownership is definitely right for you. The first step is simply learning what your options are.

Step 1: Start With a Conversation

Consider talking with Sterling Recruiting Services.

Our team is happy to walk you through some of the co-ownership opportunities and business models currently available within your industry. There is no expectation that you need to be ready to make a move. In fact, we believe it makes more sense to understand the landscape before deciding whether you want to pursue an opportunity at all.

We can talk through how different co-ownership arrangements are structured, what may be expected of you financially and professionally, and some of the differences you are likely to encounter from one organization to another.

Just as importantly, we can help you develop realistic expectations about the process. What might it look like to build or acquire a practice? How long could it take? What decisions might you need to make along the way? What could your first year as a co-owner look like once the doors are open?

We can also help you develop a list of questions to take into your conversations with potential partners. Any reputable organization offering co-ownership should be prepared to explain its model clearly, including the financial investment, equity structure, decision-making authority, ongoing support, potential additional capital requirements, profit distributions, and eventual exit options.

The goal at this stage is education. Before deciding whether co-ownership is right for you, it helps to understand what “co-ownership” actually means from one organization to another.

Step 2: Talk With Multiple Companies

Once you have a better understanding of the co-ownership landscape, the next step is to talk with multiple companies about what they have to offer.

Co-ownership programs are not interchangeable. Organizations may differ significantly in their investment requirements, equity structures, financing options, operational support, governance, professional autonomy, growth strategies, and long-term expectations of their partners. The best way to understand those differences is to hear directly from the organizations themselves.

Sterling works with co-ownership partners that are willing to walk prospective owners through their internal pathway to partnership—not simply discuss the benefits of becoming a co-owner.

That conversation should give you a much clearer understanding of what happens between saying, “I’m interested,” and actually opening or acquiring a practice.

Depending on the organization, that process may include helping you evaluate markets, identify a community in which you would like to practice, analyze potential locations, secure real estate, develop a business plan, obtain financing, design and build the facility, select equipment and technology, recruit a team, develop branding, and even choose the right name for your new practice.

In other words, you should have an opportunity to understand not only what ownership looks like once the practice is successful, but how the organization intends to help you get there.

How will your salary be determined and when will it start?  When do you get paid out any dividends or extra profits?  Will you, and/or your staff be able to access healthcare, retirement plans and additional benefits that will make your practice competitive to perspective employees?

Step 3: Talk With The People Who Have Already Done It

Ideally, chat with people who just started and those who have been with the company for a while as owners.

One of the most valuable conversations you can have may not be with a recruiter, executive, or business development representative at all.

It may be with an existing co-owner.

Our partners can provide prospective owners with opportunities to speak directly with healthcare professionals who have already traveled the pathway to partnership within their organizations. Whenever possible, those conversations should happen candidly and privately—without “Big Brother” listening in.

Ask the questions you really want answered.

  • What was the development process actually like?  What were the biggest hurdles?
  • Were the financial projections realistic?
  • Were there unexpected expenses?
  • How much support did the organization provide when it came to building, hiring and training staff, marketing and post-opening operations?
  • Do they have competitive purchasing power as part of the larger organization, you wouldn’t have as a single practice owner?  Are the vendor relationships advantageous?
  • What was the first year like?  What surprised them?  How many hours per week were they working?  How many hours on average per week do they work now?  Of those hours, what percentage are spent on non-revenue generating tasks vs. production producing appointments?
  • How much influence does the co-owner really have? What happens when the partners disagree?
  • How quickly did they break even?  How long did it take for them to regain the funds they invested and (any interest those funds costs them).
  • What do they wish they had known before signing?
  • And, perhaps most importantly: knowing what they know today, would they make the same decision again?

Those conversations can provide a perspective that no brochure, presentation, or financial model can replicate.

Step 4: Understand How You Get Out Before You Get In

It is natural to focus on how much it will cost to become an owner, what percentage of the practice you will own, and what your potential earnings might be.

But there is another question that deserves just as much attention:

What happens when you are ready to stop being an owner?

Retirement may be decades away, but the provisions governing your eventual exit can have a significant impact on the long-term value of the opportunity you are considering today.

Ask what happens to your ownership interest when you decide to retire. Are you responsible for finding another physician, veterinarian, dentist, or healthcare professional willing and financially able to purchase your interest? Does your partner have the right—or obligation—to purchase your shares? Can the company buy your ownership interest back? If so, how will the purchase price be determined?

Words such as “fair market value” may sound reassuring, but it is important to understand how that value is actually calculated. Is there a predetermined formula? Is the practice independently appraised? Who chooses the appraiser? Are there circumstances in which the value of your shares could be discounted? Are there different rules if you retire versus voluntarily leave the organization?

And retirement is not the only scenario worth discussing.

What happens if you become disabled and can no longer practice? What happens to your ownership interest if you die? Can your interest pass to your estate or family, or must it be sold? What if you want to relocate? What if you and your business partner simply decide that you no longer want to work together?

These may not be the most exciting questions to ask when you are dreaming about opening a new practice, but they may ultimately become some of the most important.

A good ownership opportunity should provide a clear pathway into ownership—and a clear, understandable pathway out of it.

Step 5: Compare the Entire Opportunity

After speaking with several organizations, resist the temptation to compare opportunities based solely on the percentage of equity being offered or the amount of money required upfront.

A larger ownership percentage is not automatically a better opportunity, just as a smaller initial investment does not necessarily mean an opportunity is less expensive over the long term.

Look at the entire relationship.

Consider how profits are distributed, who provides additional capital if the business needs it, how major decisions are made, what fees or management expenses are charged, what services the partner provides, how future growth is funded, and how the value of your ownership interest can grow over time.

Then consider the other end of the investment. If you spend 10, 20, or 30 years helping build a successful practice, how do you ultimately realize the value of what you helped create?

Two opportunities requiring similar investments today could produce very different outcomes at retirement depending on how shares are valued, transferred, or repurchased.

You are not simply comparing investment opportunities. You are evaluating potential long-term business partners.

Step 6: Build Your Own Advisory Team

When an opportunity begins to look serious, surround yourself with professionals whose responsibility is to look out for your interests.

Sterling is happy to help prospective owners identify experienced legal, accounting, and financial professionals when requested. Ideally, these advisors should understand healthcare businesses, partnership agreements, taxation, financing, and the financial considerations associated with buying, building, co-owning, and eventually selling an interest in a practice.

An attorney can help you understand what the agreements actually say—not simply what everyone believes they say. An accountant or financial professional can help evaluate projections, assumptions, tax implications, capital requirements, debt obligations, distributions, valuation provisions, and potential returns.

Ask these professionals to review not only how you enter the partnership, but also how you exit it.

The organization offering you the opportunity will have attorneys and financial professionals protecting its interests. You deserve to have qualified professionals protecting yours.

Step 7: Decide Whether the Partnership—and Ownership—Fits You

By this point, the question should no longer simply be, “Do I want to own a practice?”

It should be, “Do I want to own this practice, under this structure, with this partner?”

Think beyond opening day—and even beyond the years you plan to spend practicing.

How involved do you want to be in business decisions? How much financial risk are you comfortable assuming? How important are professional and operational autonomy? What happens if the practice struggles? What happens if it becomes extraordinarily successful? Do you want the opportunity to open additional locations?

And someday, when you are ready to retire, will the equity you spent years building be relatively easy to turn into an asset you can actually realize?

There is no universally correct ownership model, and exploring co-ownership does not obligate you to pursue it.

At Sterling Recruiting Services, our role is to help make the exploration process easier. We can help you understand the landscape, prepare the right questions, introduce you to multiple organizations, and connect you with independent professionals who can help evaluate an opportunity before you make a commitment.

You do not have to know whether you want to become an owner before starting the conversation. You simply need to be curious enough to explore what ownership could look like—and informed enough to recognize the right opportunity when you find it.