Guide
The Comp Reset: The Line Item Nobody Models
Your post-close compensation is not a salary. It is the mechanism that recovers a meaningful share of the purchase price from you over the employment term.
The mechanism
Before the sale, you take home the practice's profit. After the sale, you take home a contractual percentage of collections, typically 25 to 32 percent, and the buyer takes the rest.
For a practice collecting $2 million where the owner nets $650,000, a 30 percent comp rate produces $600,000. That is a $50,000 annual reduction. Over a five year employment term, discounted at 10 percent, that is roughly $190,000 of present value handed back.
Why it scales badly
The gap widens as practice profitability rises. A high-margin practice where the owner nets 40 percent of collections loses far more in the reset than a practice netting 25 percent. The most profitable practices, the ones buyers want most, are the ones with the worst reset math.
What the employment agreement controls
Price your own structure instead of reading about someone else's.
Run the Offer DecoderRead the term length, the compensation formula, the definition of collections, and what happens to the rate after the initial term. Some agreements step the rate down in years four and five. Some define collections net of adjustments the buyer controls.
Also read the restrictive covenant. A five year term with a two year, twenty-five mile non-compete means you are effectively committed for seven years.
The correct framing
The comp reset is deferred purchase price paid by you, to the buyer, out of your own labor. Model it as a negative line in the consideration stack. It usually is one.