The illusion of partnership: why minority shareholding in dentistry rarely works

One of those periodic calls yesterday from a Principal who has been approached by a friend, The Associate, who is working in a city 30 miles away and wants to talk about setting up a practice together.

Context:

• The Principal has built a very successful dental business - a dilapidated old practice that he bought for a song and has transformed into a Champions League operation in just a few years;

• The Associate has stated that he is interested in ownership but "wouldn't want to do it on my own" - so he wants The Principal as majority shareholder and financier, although he (The Associate) would put some money in as a minority shareholder.

The Principal thinks it would be a good idea to have a satellite business, run by The Associate (because he would have skin in the game).

I was asked for my opinion:

• In 30+ years I've had this conversation many times and have only seen it happen in less than a handful;

• Minority shareholding in business are like trying to be half-pregnant;

• If The Associate was a true entrepreneur, he would want to do it on his own, and raise the money from savings, family or a lender, to retain 100% control;

• My cynical self says that The Associate wants the "prestige" of Ownership, without the long hours and sleepless sweaty nights;

• The Principal will find himself with 100% responsibility for the satellite;

• Even before that, when The Associate's family and professional advisors look at the minority shareholding terms, they will advise him either against it or to ask for more control than his shareholding deserves.

The exception, of course, proves the rule and I have been wrong over the years.

But my advice is to not waste too much time on this.