Part one of this article introduced you to the concept of a Practice Continuity Agreement. In this installment, we’ll explore some of the mechanics behind putting a successful agreement into place.
One of the main challenges to establishing a PCA is finding a firm that is willing to make the commitment to take over a practice with little or no notice; and for good reason. First, a firm that has made that commitment must have the capacity to handle 200-300 new clients all at once. Second, a properly structured PCA needs to address the same issues in the same detail as a purchase agreement. This might mean a lot of time spent dealing with a matter that is contingent upon a set of specific (and sometimes unlikely) circumstances. What’s more, many of us find it difficult to address mortality issues and risks that don’t seem at all pressing. Finally, it is extremely important that while your current team may not be the ultimate successors of the firm, they are motivated to remain with the Company during and after a transition period.
If you decide a PCA is for you, you’ll need to explore strategies to ensure the agreement’s success. Here are some pointers.
Choose the right successor firm. Critical factors include, but are not limited to:
Structure the deal. Like any agreement, the right documentation has to be in place. Make sure your PCA addresses these areas:
Be transparent. It is a good idea to regularly provide the successor firm with the information needed to successfully step in and manage the practice:
While a PCA should not be used in lieu of life or disability insurance – or a formal succession or retirement plan – they can be a successful means to keep a practice going until you recuperate or a successor is found. What’s more, this agreement can help to ensure that you receive the appropriate compensation for the years of sweat equity you put into building the practice.
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