Creating a strategic exit plan from your practice is an important step that many physicians put off since a lot of them focus on growing their practice and serving their patients.
Considering when and how they will inevitably exit their careers and more importantly, creating a strategic exit plan doesn’t tend to be a priority.
Certainly, focusing on serving patients is to their credit, but many doctors over time slip into a “die at the desk” mentality.
Their practice is who they are and their last day in the office has a greater chance of ending with their being carried out than exiting gracefully with a retirement party.
During their lifetime work, doctors do everything in their power to keep patients healthy, but they also know more than most that life is not always predictable; yet, successful practitioners often don’t make any preparation for ending their practice if their lives end earlier than expected.
If there was any lesson during the COVID-19 pandemic, things happen many times outside of what was planned, and doctors and other medical professionals were frequently exposed to danger.
What happens if you don’t make it to the office tomorrow?
Patients, staff, and a lifetime of work dissipates into the air since a contingency plan isn’t a planning option but a necessity?
Whether you are a solo practitioner or part of a large, complex medical group, a “buy-sell” arrangement is a must-have for private practices to protect their family, employes and patients.
Your family deserves the economic value of your life’s work, your employees deserve the assurance they will remain employed and your patients need to know that their medical needs will be met.
There must be a plan of buying-selling agreement that addresses the following 5 situations:
Death: Premature death is the most common item in a buy-sell, whether a solo practitioner or part of a group.
Disability: If you can no longer perform in your area of practice, disability insurance may cover a portion of your income and overhead, but if you can never return to the practice of medicine you have to make sure your agreement covers this possibility.
Divorce: In the event of a partner’s divorce, the shares of the practice cannot be left in jeopardy of going to the person who divorced a partner.
Disagreement: If partners can’t agree on major business decisions, a clause must be exercised to settle the agreement and potentially divide the practice.
Departure: If one doctor decides to retire while others want to continue, what is the valuation method and payout structure for the doctor who is retiring?
Many great businesspeople and certainly highly educated don’t realize the inherent value of the practice they have created. It’s also important to recognize the value of the after-tax income the business produces and that it may be your largest asset. It’s critical to plan the eventual exit of your medical practice, just as you would a business and the appropriate time, attention and team are necessary to ensure maximum value.
