Prepare for your retirement or career transition now to prevent headaches later
One of the most troublesome aspects of being a physician—particularly one in a solo practice—is that of succession or transition. Thinking about who will take your place is like taking action on a will or a living trust. We know we have to do it, but it isn’t something to which we’re really looking forward.
But the simple truth is that sooner or later, you will face a time when you will no longer be practicing. The more you do now to plan for your departure, the more you stand to benefit when the time comes.
One well-known financial-planning firm estimates that waiting until retirement or near-retirement to plan for your exit from practice could cost you as much as 1 million dollars.
Transition is an ongoing process—that is, it starts the moment that you begin your practice or become a partner. If you intend to exit at retirement age, ideally you should start planning at around age 45.
If you are older than that now—even much older—don’t let that discourage you. There are still steps you can take to boost the value of your practice.
Think of your practice as an automobile. For many of us, maintaining that car to maximize its resale value years later is a factor in how we drive and care for the car. Likewise, the way you care for your practice could reap benefits for you years later when it is time to move on.
Forks In the Road
Transition can occur even before your retirement. As you no doubt know, life can throw us curves when we least expect them. Here are some other scenarios that could arise long before your retirement but could cause you to have to take your practice through a transition:
An opportunity elsewhere. No one can predict what will happen or when, but it could very well be that there is another practice for sale somewhere—or the chance to join a group—and you just have to take advantage of the opportunity. Here, think of your ideal practice in, say, Tahiti. It may not even be the location that causes you to move; it could also be the types of patients and cases you will be seeing.
A merger. More and more, solo and small-group practitioners are consolidating and leveraging the power of size. One day, you may find yourself overwhelmed by your competition and may be forced to make a move. Or, you could meet a group that is presenting you with a package that you just can’t resist.
Illness or death. We do not like to think about such things, but the practice graveyard is filled with practices that—upon a physician’s serious illness or death—were sold or transferred for far less than their market value due to poor planning.
The chance to live your dream. Many physicians reach a point at which they reach their professional and financial fulfillment and wish to embrace another passion. For some, it may be teaching. For others, it may be research.
Partner issues. Another subject we cannot foresee and don’t care to entertain is that a falling-out with a partner or partners will force a transition.
Protection and Growth
So what can you do now to help ensure a worthwhile transition? You can start now by protecting what you’ve built so far. This is a defensive posture that helps you maintain the status quo, but it cannot be counted on for viable growth.
In a protection mode, you play it safe. There is very little risk-taking, either with advertising and marketing or with the equipment you buy or lease. The latest figures from the American Academy of Facial Plastic and Reconstructive Surgery show that, for example, 51% of facial patients have more than one procedure per year. So by systematically maintaining communication with your existing patient base, you will protect your current business.
A growth mode could help you increase the value of your practice, but there is almost always a price to pay. That price often takes the form of more of your time in matters with which you lack enough experience and are not particularly fond of involving yourself. Growing your practice for transition is important, but it is also best left to those with specific areas of expertise—whether it is practice management or practice marketing.
The growth mode also allows for the entrance of an associate with a path to partnership followed by a step to ownership. If your practice were real estate, this arrangement would be likened to a lease with an option to buy.
In either scenario, money management is key. Again, that is best left to the experts. Just because you bought Starbucks stock at $11 per share in 1989 or own a rental property that is a gold mine does not mean that you are the best person to help maximize the value of your practice. You must be objective.
Very few practices, if any, have no value whatsoever. The good news for you is that the amount of that value and the pace at which you increase it are almost entirely in your control. That control is one of the long-term benefits of being both an entrepreneur and a physician.
So how do you find the best advisers for your own transition? The same way your patients find the best plastic surgeon: Ask around. Become an informed consumer and know what questions to ask.
And who knows? If you work it right, you could be practicing in Tahiti before you know it.
Steve Smith is vice president of marketing for Practice Builders, Santa Ana, Calif.