Practice Owners and Understanding Relationships

 

A private practice owner should never assume that everyone involved in a transaction is operating from the same incentives. In a practice sale, acquisition, refinance, or transition, the referral source, broker, and lender may each serve a legitimate function, but they may also have financial relationships, compensation arrangements, or referral expectations that materially affect how the transaction is presented to the owner. Understanding those relationships is not paranoia. It is sound business judgment.

At the most basic level, owners need to know who is being paid, by whom, for what purpose, and whether that payment is contingent on a referral, a closing, or a financing outcome. A referral source may introduce an owner to a broker. A broker may steer the owner toward a particular lender. A lender may receive business through consultants, loan packagers, or intermediaries. None of those facts automatically means something improper is happening. The problem begins when compensation is hidden, poorly documented, tied to referral volume, or structured in a way that creates incentives that are misaligned with the owner’s best interests.

For healthcare-related transactions, the stakes can be especially high. Practice owners should understand that “compensation” is broader than an obvious commission check. It can include consulting fees, lead fees, “marketing” payments, discounted services, free administrative support, excessive management fees, or other financial benefits. A payment described as “consulting” does not become harmless simply because it has a professional label attached to it. If the real purpose is to generate, reward, or influence referrals, that should concern the owner.

This matters because referral economics can distort advice. A broker who is paid only if a deal closes may be incentivized to maximize price and speed. A referral source who receives compensation for sending a buyer or seller into a transaction may be incentivized to direct the owner toward a particular broker or lender whether or not that recommendation is truly in the owner’s best interest. A lender or intermediary participating in a compensated arrangement may be incentivized to preserve deal flow rather than challenge assumptions aggressively. The owner may believe they are receiving objective guidance when, in reality, they are moving through a chain of parties whose compensation depends on the same result: getting the transaction done.

For SBA-financed transactions, owners should be especially careful. Compensation surrounding financing is not a minor detail. If an owner is told that a referral fee, success fee, packaging fee, or consulting fee is “standard,” the next questions should be whether it has been fully disclosed, whether it is permitted, and whether it is proportionate to the actual services performed. Owners should not assume that every fee built into a transaction reflects legitimate value simply because it appears on paper.

A private practice owner should also understand the difference between a genuine professional service and a payment for access. Paying a lawyer to draft documents, an appraiser to value the practice, or a consultant to perform clearly defined due diligence is fundamentally different from paying someone because they can “send deals,” “steer financing,” or “make introductions.” One is compensation for measurable work. The other may begin to look like compensation for influence. That distinction matters both from a compliance standpoint and from a business ethics standpoint.

There is also a practical business reason to care even when no law is violated. Hidden paid relationships can compromise trust and decision quality. If the owner does not know that the broker and referral source have a side arrangement, the owner may overestimate the objectivity of the recommendation. If the owner does not know that a financing intermediary is being paid out of loan proceeds or seller funds, the owner may misunderstand the true cost of the deal. If the owner does not know that a valuation source, broker, and lender have recurring cross-referral relationships, the owner may not realize how much supposedly independent advice is being shaped by repeat-business economics. That is not just a compliance concern. It is a governance concern.

The safest course for a practice owner is straightforward. Ask for written disclosure of any referral fees, commissions, shared compensation, packaging fees, consulting fees, or other paid relationships among the referral source, broker, lender, or related parties. Ask who is paying each fee, whether the fee depends on a closing or a successful financing, and what actual services are being provided in exchange. Ask whether the arrangement has been reviewed for compliance with applicable lending and healthcare-related rules. Those are not hostile questions. They are responsible questions.

Private practice owners should remember one simple principle: undisclosed financial relationships create risk long before they create litigation. They can distort recommendations, inflate transaction costs, weaken trust, and expose the owner to compliance and reputational problems that could have been prevented with transparency. A sound transaction should be able to survive direct questions about who is being paid and why. If the answer is vague, defensive, or hidden behind euphemisms, the owner should treat that as a warning sign, not a formality.

At Vision One Credit Union, we believe the better approach is transparency: clear roles, clear compensation, clear documentation, and clear alignment of interests. Owners do not need to assume every paid relationship is improper; however, they do need to understand that not every paid relationship is harmless. In a transaction involving a lifetime asset, that distinction matters. 

Vision One Credit Union has been serving private practice optometrists since 1951 reinvesting over $500 million into private practices nationwide.

If you have any questions regarding this information or would like our feedback or assistance in reviewing your agreement, please feel free to contact Ken Ferreira, Chief Executive Officer and certified practice appraiser at kferreira@visionone.org. 

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