Taking over another MT's business - form of agreement?

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Taking over another MT's business - form of agreement?

Postby healer611 on Fri Oct 09, 2009 2:39 pm

Can anyone provide me with a template or form of agreement outlining terms of assuming the clients of another MT's when she moves?

We have been colleagues for 9 years and she is now leaving the area. We are outlining our "wish lists" to incorporate into a formal agreement. I have agreed to pay her 50% of each session when seeing any of her clients, for one year in lieu of a cash payment. What else should be included in this agreement? She will be leaving the area soon, and all I will be doing is seeing her clients, if they chose, when she moves.

Any thoughts are much appreciated.
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Re: Taking over another MT's business - form of agreement?

Postby Shannon on Fri Oct 09, 2009 4:06 pm

I am sorry but I don't get the 50% you will be giving her when you see her clients. How will she know for sure? Why should she be getting paid for the people that have chosen to go to you and not someone else? Will the other MT's be paying her as well when "her"clients go see them?
IMO we don't own our clients,therefore we shouldn't be "selling" them.
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Re: Taking over another MT's business - form of agreement?

Postby healer611 on Fri Oct 09, 2009 4:21 pm

You are right, we don't own our clients, and because we both feel that way also, the objective is to offer the clients a referral in the event they want one. Rather than just up and leave her clients without anyone to see them, she wants to be able to refer them to someone, and that would be me. She and I went to the same school, have similar styles of work and share the same philosophies. I am not buying her business...rather I am agreeing to see her clients if they so chose, and will compensate her 50% of the session rather than paying her a sum of money for her client list.
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Re: Taking over another MT's business - form of agreement?

Postby GreenDragonfly on Fri Oct 09, 2009 9:02 pm

So you are wanting the list to contact the existing clients she has, or are these people just coming to see you and how do you determine if they wouldn't have found you anyway since she is leaving and they would have to find another therapist on their own.

It seems to me, much more professional practice for her to contact her clients and give them a name of a person they can trust to see to their needs. (YOU) If you want to split the cost of that type of mailing, newsletter, ect or maybe pay it all yourself, that would seem a more appropriate way to 'pay' her. This way also leaves her clients feeling cherished instead of abandoned or having their personal info given to someone they may not know. This puts the control where it belongs - in the hands of the client.

I may sound as if I am on a soap box with this, but since I am a paying client out in the world, this is how I would feel from the client POV. I do not like my info sold or shared with others. I would appreciate a heads up from a provider and a referral would be very nice.

As is obvious.. it's just my .02 :)
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Re: Taking over another MT's business - form of agreement?

Postby healer611 on Sat Oct 10, 2009 5:45 am

Thank you both for your input. I may not be expressing myself clearly, so let me try again.

Green Dragonfly -

What you say is understood and agreed with. I am not "wanting her client list" as you put it. The massage therapist who is leaving the area plans on contacting her clients to inform them and wants to be able to "refer" them to someone who she feels would be a good fit for them (me). She will give them my contact information and it will be left up to them. She is trying to create a seamless transition for them because she is concerned and wants them not to feel abandoned. Obviously it remains to be seen whether the clients will come, but the referral is coming from their own therapist with whom they have formed a relationship with, and with that comes a level of trust and the likelihood they will at least try me out.

The main point here is to take care of the client. They may well have found me on their own ... but it has been my experience that being referred by someone you trust lends itself to a more likely positive outcome. I have agreed to compensation her 50% for each client of hers I see, for a year. I will log her clients monthly and send it to her along with a check. There is no way to be sure how to track this, of course, but we have agreed to work it this way. She is not "selling" her clients, and no other MTs are involved. The clients may "buy" my services, and I am thanking the referring MT for her "referral." If this is illegal in any way ... please let me know. It certainly is the opposite of my intent here.

Now you can say what you will, but I understand building a business for 9 years, in her case, and then having to leave and have nothing for your efforts. She is going through a very difficult time right now, and I want to help her. We are in the healing business after all, and it may not sound like a good "business" decision to some, but I know she appreciates it and I feel good about helping her out and her clients, if they so chose to come to me - it's totally THEIR decision. It's good karma.

I understand your point about having your information given to someone they don't know, but this is not what is happening here. The clients have total control. The clients may also appreciate the MT's concern and feel "cherished" because they are being referred to someone who is similar and a good fit for them without their having to go searching for a new therapist on their own.
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Re: Taking over another MT's business - form of agreement?

Postby JLWmassage on Sat Oct 10, 2009 8:27 am

I am just wondering, if you are not buying the business than why are you offering to pay her for a referal? And if you are planning on buying the business why not just have her get a salary for a certian amount of time till the debt has been paid. I could see keeping track of 50% of her clients get very complicated quickly
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Re: Taking over another MT's business - form of agreement?

Postby JaeMarie on Sat Oct 10, 2009 8:34 am

The massage therapist who is leaving the area plans on contacting her clients to inform them and wants to be able to "refer" them to someone who she feels would be a good fit for them (me).


So, would the referral be because she feels you're the right person, or because you're going to split your income generated from her clients? Would the money you send her be considered a "kickback" for her referral?
kickback
- 4 dictionary results
  /ˈkɪkˌbæk/ Show Spelled Pronunciation [kik-bak] Show IPA

–noun
1. a percentage of income given to a person in a position of power or influence as payment for having made the income possible: usually considered improper or unethical.
2. a rebate, usually given secretively by a seller to a buyer or to one who influenced the buyer.
3. the practice of an employer or a person in a supervisory position of taking back a portion of the wages due workers.
4. a response, usually vigorous.
5. a sudden, uncontrolled movement of a machine, tool, or other device, as on starting or in striking an obstruction: A kickback from a chain saw can be dangerous.


I know "referral fees" vs kickback has been discussed before, but I think it may depend on your state as to the legality of it.

All that aside though...

I could possibly potentially maybe see offering something for the *first* direct visit one of her clients makes to you (since they would be there based on her word) but after that, they would become repeat clients based on the work YOU do, not because of her. I think paying her for the period of a year is too much. Remember, since she's moving, she's going to be losing these clients no matter what - it's not like you'll be "stealing" business from her. Also, if you don't come to a financial agreement to pay her $ per massage/referral, is she still going to refer clients to you? If not, then is it truly about whats best for the clients, or about what's financially rewarding for her?

The whole thing doesn't quite sit right with me. :undecided:
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Re: Taking over another MT's business - form of agreement?

Postby healer611 on Sat Oct 10, 2009 8:55 am

It does seem like it could get a little complicated over time, and if the kickback perception is in fact illegal, then I will obviously not go this route. I need to check with my attorney.

So does anyone have a suggestion for the best possible scenerio for all concerned? If it was me, I would want some compensation for my business if I was leaving, yet "selling" a client list is frowned upon in this forum, I know, and if I do not need or want any of her personal property, then what is left?

I just am trying to do the right thing here. Suggestions welcomed.
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Re: Taking over another MT's business - form of agreement?

Postby JLWmassage on Sat Oct 10, 2009 8:59 am

Are you going to be using her business name too? Website, Space? Are you going to be taking over the rent?
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Re: Taking over another MT's business - form of agreement?

Postby healer611 on Sat Oct 10, 2009 9:20 am

JLW -

No, no, and no. The ONLY association I would have with her is to see her clients if THEY so chose. Period. I am not moving into her space, buying any of her furnishings, associating with her in any way. We are completely separate entities.

I have my own business down the street, my own office, my own phones, my own website, etc. I have been in business longer and am well established. Our connection is that we went to the same school, and when she first started out, she was going to rent space from me. When my circumstances changed, I suggested there was space on another floor of the same building that I was in and that she could find space there, and she did. We were in the same office building for a while, but not sharing office space together. We have always been separate and apart, but we have gotten together socially and through Chamber events.
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Re: Taking over another MT's business - form of agreement?

Postby JaeMarie on Sat Oct 10, 2009 9:29 am

If it was me, I would want some compensation for my business if I was leaving


See, that I don't understand.

Whatever the circumstances of her moving is, she's leaving. She is removing herself from her availability to the clients. Does it suck that she won't be there to work on them and enjoy the income from that? Sure. Again though, the circumstances really don't matter - truth is, she's moving. I don't see why another therapist should owe her from income generated by her clients because she left. It's not like she's selling her business packaged with the name, facility etc.

There are 2 convenient stores in my neighborhood. The owners of one are going out of business because sales are slow and they're hitting retirement age. Does the other convenient store owner owe them anything because they'll benefit from the reduced competition after they close? No. It's just part of what happens when a business closes. That doesn't mean not to be thankful or grateful, but I don't think anything is necessarily "owed".

What about instead of purchasing her client list, you instead compensate her for the time and cost it takes her to mail the referral to her client list? Again though, if this is about the good of the clients, would she still be referring to you if there was no financial incentive to do so? If someone else came along and said they'd pay her 60% of what they make from her former clients, would she refer to them instead?
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Re: Taking over another MT's business - form of agreement?

Postby healer611 on Sat Oct 10, 2009 9:40 am

For anyone to have started a business, worked hard to grow it and then have to close their doors - the feeling of wanting to be compensated is not that unusual. People sell businesses all the time, but our business is different, I realize, but the feelings are the same.

I get your point about the convenience store analogy, although again, our business is more personal and not quite the same. One business is likely to benefit regardless because the other is closing ... I see that.

I didn't realize it would be this complicated when I offered to help. Now I'm not sure what to do.
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Re: Taking over another MT's business - form of agreement?

Postby GreenDragonfly on Sat Oct 10, 2009 10:58 am

JaeMarie, I agree with your comments completely.

Healer, I understand you want to help your friend. It is a noble gesture and I can tell you are a caring person. I believe that the points brought up by others regarding HER reason for referral are worth thinking about. Your friends situation might be clouding her judgement and the proper (well, what *I* think is proper) handling of her clients.

It is true that a client might be inclined to see you the 1st time, after that, it's all about your skills and if they like you. So, to compensate her for the first visit only might be reasonable. For her to even consider taking 50% of income for seeing those clients for a full year is really outrageous. (again of course my opinion)

What if you don't want to pay anything? What will she do with her clients then?
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Re: Taking over another MT's business - form of agreement?

Postby JaeMarie on Sat Oct 10, 2009 11:25 am

Actually, I think I just realized why I'm having trouble wrapping my brain around this one.

If this person who is moving wants compensation for referring her clients, then she's essentially selling her business. If she's selling her business, she should be stating what she wants in compensation. From there, some negotiations to agreement could be made as to the sale of her business - particularly WHAT is for sale and how much.

On the other hand, if she's decided to refer to you because she feels you're the best suited to work with her clients, then I'd guess you'd simply owe her a "thank you." Now, if you wanted to say "thank you" and offer her a gift as a thanks, then I guess that would be whatever you feel like giving her. If it's simple as a thank you or some show of appreciation, then why the need for a contract or other agreement?

So I guess the question is, is she selling you something or are you saying "thanks"?
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Re: Taking over another MT's business - form of agreement?

Postby Rose of Sharon on Sat Oct 10, 2009 2:58 pm

I think it doesn't have to be *quite* so complicated as many are making it sound. I do agree with JaeMarie's assessment that you are, essentially, buying out her business. If you go from that perspective, it makes complete sense to compensate her for that. Buying a business generally means paying a dollar amount, but that is very legitimately done by going with a percentage. It's called buying on contract, or owner-financed. We once bought a house that way - we paid a monthly amount for a specified number of years. You could set the percentage with a final dollar amount, and even a minimum monthly amount. If you hit the dollar price the two of you have agreed on before the end of the year, you have fulfilled the contract. If it looks like it will take more than a year, have it already written into the contract how you will handle that. If neither of you wants a specified amount written in, but want to just go with your 50% for a year, that is your right - as long as you both agree to it.

A business is a business, and as you said, she put a lot of time, money and work into it. You are not buying people when you take over the business, and you can take over the business without merging names, websites, or any such thing. You are buying her business and incorporating it into yours. It happens every day and it is legitimate. Sometimes we get notified when someone we trust sells a business, sometimes we find out when we walk in after the sale.

I think the "form" you are looking for would probably be found here: http://forms.lawguru.com/cash-or-seller ... ing_c.html Just select your state. You can read through the form/s and rewrite to fit the situation, then definitely you should each have an attorney look over the final contract before signing it. If you don't like one of these forms, just google "legal forms owner financing" and tons come up.

I would suggest keeping it as simple as possible, and keeping as much client privacy as possible - such as having all new clients fill out your intake forms rather than having charts transferred. If there is a client you find you need more information on, handle it just like you would with any other professional - a signed release form from the client authorizing the previous MT to share notes with you.

Good luck to both of you!
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Re: Taking over another MT's business - form of agreement?

Postby healer611 on Sat Oct 10, 2009 3:10 pm

Sharon,

Thank you so much! Just what I needed to hear. Blessings to you.

Donna
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Re: Taking over another MT's business - form of agreement?

Postby Rose of Sharon on Sat Oct 10, 2009 3:21 pm

healer611 wrote:Sharon,

Thank you so much! Just what I needed to hear. Blessings to you.

Donna


You are very welcome. I think this will be a HUGE boon to your business! I know you are already established, but this will be great for you. If I had walked into this town with referrals from another MT, it would have been SO worth 50% of each massage for the first year! It was a ton of work and money to get started.

We hear on this board that people don't generally appreciate what is given to them for free. That applies to us, not just our clients, and I think you will SEE and really, truly enjoy and appreciate each client you gain from this transaction. If you went into it with an attitude of being entitled to the additional business, you would get *some* new business, probably, but not nearly as much as if the other MT refers you to her clients, and you may or not experience any real joy from the benefit. Your attitude is so important!
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Re: Taking over another MT's business - form of agreement?

Postby GreenDragonfly on Sat Oct 10, 2009 8:20 pm

I still think that 50% for a year is a lot. Of course 'value' is a relative term and only applies to the people who are paying or receiving.
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Re: Taking over another MT's business - form of agreement?

Postby softy515 on Sun Nov 01, 2009 9:43 am

I am curious as to what happen with this situation?

50% for a whole year? To much! 50% for the first session is more reasonable.

And this women should offer more then one referral to her clients. I would never just refer to ONE therapist. People need choices.

Also don't assume that all these clients will come to you. I have seen it time and time again and trust me, once she ends the relationship with her clients, many will cease getting massage or go to someone else but I sure do hope they all come to you!
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Re: Taking over another MT's business - form of agreement?

Postby RelaxandRejuvenate on Sun Nov 01, 2009 11:59 am

The prospect of selling your business leaves one faced with one of two uncomfortable realities:

1) I can't really sell it, so everything I worked for over X years is not worth anything to anyone but me. There was no pay off. I lived a subsistence life.
2) I can sell my business/client list -- but in order for the buyer to get real value out of it, they are likely to be able to retain 3/4 of the clients, which means I am replaceable.

We often think about what will happen 10 years down the road with our hotel services business. It has provided a good living for us, has grown considerably, but is anyone else crazy enough to buy this and try to run it! It is also relationship based-- granted much fewer of them.

Our spa is an easier sale -- has assets, established clients who come back for the experience and treatments and products, not specific technicians and is a demonstrated concept.

If nothing else, getting a list of known massage clients in your town is very valuable. Maybe not worth 50% of revenue of the first year.

If you know how many clients came in and on what frequency, you could estimate what the impact would be to your business if X, Y or Z % migrated to you. Then figure out how much advertising that would buy you towards new client acquisition -- Electronic / print ads, mailers to a commercially available list, etc. Then calculate what # of clients would have to come from new client advertising to = your other estimate levels, and see which would be a better investment -- paying for the warm leads or putting that $$ into new client acquisition.

A major benefit of paying a % on all retained clients, is you pay as you go, whereas ads are upfront expenses that could take months to pay off
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Re: Taking over another MT's business - form of agreement?

Postby healer611 on Mon Nov 02, 2009 4:42 am

Well, we had structured an agreement based on the 50% of each client and a "pay as you go" scenerio, plus a 25% payment for any "new" client she would refer to me. I know this was generous, but I wanted to help out a friend without any financial investment up front from me, especially because it's an unknown how many of her clients actually would come to me. Those same clients are likely to find me anyway if they want to continue with massage therapy in the same town.

More than that, however, is now the issue that the payments may appear to look like kickbacks - which is illegal. We have yet to work this out.
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Re: Taking over another MT's business - form of agreement?

Postby JasonE on Thu Nov 05, 2009 11:20 pm

healer611 wrote:Can anyone provide me with a template or form of agreement outlining terms of assuming the clients of another MT's when she moves?

We have been colleagues for 9 years and she is now leaving the area. We are outlining our "wish lists" to incorporate into a formal agreement. I have agreed to pay her 50% of each session when seeing any of her clients, for one year in lieu of a cash payment. What else should be included in this agreement? She will be leaving the area soon, and all I will be doing is seeing her clients, if they chose, when she moves.

Any thoughts are much appreciated.


Probably the worst thing you could do is go ahead with this arrangement, especially without working out all the details in writing beforehand. 50% for a year???? Have you done the math on that? I can see this being acceptable only if it's 50% on the first time you see one of her old clients. After that, nothing. You will retain that client (or not) based on your own merits, not hers. Paying her for referrals is a kickback and should be avoided.

What makes more sense [to me] is this:

Buy the business Assets and agree upon a fixed price. Base it on a percentage of her gross sales over the last 12 months. No more than 30-40%. Write up an agreement that says you will pay x amount each month until you have satisfied the agreed-upon price. This is known as seller financing. She can choose whether to charge interest on the unpaid balance each month (she should) and she should have legal recourse to recover damages should you stop making payments.

The agreement should spell out exactly what you are getting in return for your money and define the terms of transfer of those assets. It will also spell out that she is not responsible for your success/failure, and that she will not attempt to contact any of those clients in the future.

Have the sales agreement written by a lawyer once you have had input on how to structure the Asset Sale from an accountant. The accountant will help you determine how much of what you pay is for depreciable assets. This can provide you with some significant tax advantages, especially during your first year.

If you need more guidance on this, contact your local chapter of SCORE or some other small business advisory service. It may sound complicated, but it is to your (and her) benefits to do so. It's really not that complex, and is absolutely worth doing if you are looking at a significant expense.
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Re: Taking over another MT's business - form of agreement?

Postby healer611 on Sun Nov 08, 2009 4:52 am

Update:

Everything has been put on hold. Because there were a lot of significant life changes going on with the owner of this business, she has decided to rethink her situations. Slowing down and having the time to really think things through will help her in all of her decisions, including this one.

Thank you all for your input.
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