Planning for succession — who will succeed you when you no longer can or are not wanting to do the work — will provide a seamless transition for patients and everyone else who deals with your practice, as well as minimize disruption to you and your family.
Succession planning is one of those proactive initiatives that many practitioners feel they simply don’t have time to undertake. The problem is, if you don’t make time now to address the issue, you may be hit with it head-on in the not-too-distant future.
Most medically trained professionals work extremely hard at achieving their qualification in order to practice. Once they finally arrive at being a practitioner, however, they often give very little thought to the exit requirements – until it’s too late. We all know someone who spent their entire lives serving the community, often selflessly, only to end up unable to support themselves or even to afford the care they so generously bestowed on their patients.
The question often asked of me is: what are the options? Essentially, there are a several… but what is critical is that you start planning for your exit from practice regardless of which option you choose. Most professionals believe their exit will be governed by their choice. Unfortunately, it isn’t always the case and accepting that disability or disease will precipitate an unexpected course of action long before you intended will also require an entirely different focus.
It is important to have a plan in place, both for unexpected absences and for when you want to leave your practice — either to pursue other opportunities, or to enjoy your retirement.
Now is the time to start working on the succession of your practice and its continued success. It is the only insurance you have to ensure your years of investment have not been wasted. To put things into perspective, consider the following: financial advisors suggest you will need between 70% and 80% of your current annual income in your retirement years. Most people are living beyond 70 and very few can afford to retire at this age.
In addition, consider how many patients want to see an elderly medical professional. Unfair? To be sure, but it’s a fact of life.
Succession planning is subjective. Like your estate planning, it’s about what you want and need. No one size fits all and no one plan is better than the next.
Where to start
Succession planning is estate planning for your practice – it’s the responsible next step for where you are at, and the sooner you start the better your chances of success.
First, you need to have in place a will for when you’re gone, and in this case a plan for retirement and, secondly, you need to formalise practice coverage for when you’re incapable of looking after things yourself.
Your options as a sole practitioner or a partner in a group are numerous; grooming a successor, sale to partner, sale to buyer, winding down or sale combined with an extended handover as the mentor.
Grooming a successor – often a family member – is a popular form of business succession with the successor meeting the financial requirements of the exiting partner.
In today’s economy and fragmented society structure, family succession is less common. Most practices have to take on junior partners who possess the attributes and characteristics required to take over the lead role. This option, however, does not translate as smoothly into financial arrangements and this is where sound professional advice becomes critical.
Designing a plan where the exiting practice lead partner/owner sells their stake with a long-term hand over as business mentor is one of the most effective means of exit for those professionals who need to continue earning and who wish to enjoy continued occupation.
As the business mentor with a significant stake in the business and its continued success, your involvement and control are based on a sliding scale aligned to your remuneration to a point of finality when you exit. This ensures the ongoing success of the business for all stakeholders and most importantly valued patients.
To sell or not to sell?
Selling a practice can be a real challenge, primarily due to the complexity of valuing your business. It requires the assistance of skilled financial professionals and, even then, the buyer has to often obtain financing from a third party who does not always see the value you perceive.
Financing new equipment for a new practice is often a preferable choice for practitioners starting out. If, however, you can demonstrate a viable successful business option with sound sustainable performance, your options of sale are much more appealing.
Most practitioners have a highly inflated perception of the value of their practice. The real test of your practice’s value can only be assessed by what a willing buyer is prepared to pay (or, more accurately, obtain financing for) based on solid financial information of your performance and, more importantly, what it will generate in the event of you not being there.
When these facts are examined, many practitioners fall short on being able to demonstrate performance due to poor practice management and in adequate financial records available to verify business performance. Too many practitioners in business today just don’t pay enough attention to the business aspects and leave the running of their businesses to someone else.
When disaster strikes, these are the practitioners forced into a corner with limited options and who often lose everything. Don’t be one of them.
Failing to plan is planning to fail
Not planning is foolish and following the crowd is futile. If you are serious about succession planning and unsure how to take the next step, contact Vizibiliti Management Services. We have extensive experience working with health care professional practitioners and provide easily accessible support and guaranteed confidentiality.
BY ALISON MAYTHAM
“There are many different factors that determine the success of your practice – but, as a busy healthcare professional focusing on the needs of your patients, you may not always have the time to focus on the many demanding, and often complex, facets of managing your business. Vizibiliti provides you with easy access to insightful, comprehensive practice and business management solutions and advice across all stages of your business journey – from establishing, growing or closing your practice.”