To transition means to change from one state, location or phase into another state, location or phase.
For a practitioner, this can mean going from being an associate to now owning their own practice, or it can be moving from rented premises into their own building, or it can be getting ready to “exit” the practice and turn it over to someone else. This can also mean moving from being the sole practitioner to now having an associate or partner added into the scene.
The question is: When is the right time to do this?
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Buying a practice:
In helping our clients in any of the above transition phases, the most common concern or question is whether it is the right timing to make this move. For instance, sometimes associates jump too soon for ownership and stretch their finances in order to get into their own practice before they are really set up well enough financially to do this. Sometimes they get caught up in a bidding war and pay way too much for a practice given what it is actually producing and what the profit margin is. The result: crushing debt and excessive stress.
Talking to your consultant and planning out what the move will mean financially can help give some idea of when might be a good time. The consultant can also give you guidance on how much to pay for a practice so that after you pay the bank for the purchase loan, there will be enough profit left over to live on personally.
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Buying Own Premises:
Similarly the transition from rented premises into owning your own location can be leapt into prematurely. From coming up with the down payment, the cost of the mortgage, the ongoing expenses of property ownership, and the expense of renovation and then of moving into the premises, these can often exceed what
you might imagine. This is not to say that you shouldn’t do it … instead, it is a question of “are you ready for that financial burden without stress”?
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Hiring an Associate:
We often see doctors hiring associates before they should. Sometimes it is a solution to poor scheduling (making you feel overworked), or it is a practice that is underbilling, and instead of getting their house in order and making it profitable first, an associate is added to the scene “to bring in extra profit.” However, this can end up in a scenario where neither doctor is making enough money, because the real problem was that there was not enough marketing to drive in enough patients for the practice owner in the first place.
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Retirement:
Let’s not forget about the doctors nearing their ideal retirement moment. How does one know when is the right time and then prepare ahead of time for optimum practice sale potential, not to mention leaving the feeling of leaving their “baby” in the right hands. There is no written, cookie-cutter approach to this one.
There is no exact formula to work out how much money you are going to need for the 30 or 40 years after you retire at age 60 or 65. No one can predict the rate of inflation into the future.
Besides, if you have been running a fun practice with good skills and still have a passion for what you do, who says you have to retire completely. There are many options available, such as: hiring the right associate who is going to buy the practice from you one day and taking off a day or two per week from your schedule. Take more vacations, develop other hobbies or interests or volunteering opportunities, but still own your own practice.
In Summary:
The possibilities and options are endless, and the choices need to be uniquely yours. Having an excellent consultant who has “seen it all” and helped many hundreds of doctors make their own decisions can be a godsend. Our consultants can help you make any transition run more smoothly and less stressfully.
For help with your practice,
contact us at 416-466-6217 or click here
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