We recently had a client who owns a medical practice ask when he should think about a succession plan. When we told him “at least 10 years before you want to leave or sell the business”, he felt a bit overwhelmed. Similar to other business owners, the client’s interest in a succession plan was ignited in order to secure his retirement, which he hoped would include days filled with golf. However, while succession planning for doctors or dentists is vital to a secure retirement, it should be put in place long before retirement approaches as a way to secure their families’ future in case of an unexpected event.
If you’re the sole proprietor of a small business, such as a doctor with your own practice, ask yourself what your family would do if you passed away unexpectedly. What if you don’t have a partner to see your patients? Will your patients wait to see who buys your practice, or will they immediately go to other doctors in town? Would an external buyer be interested in a practice with families unlikely to continue using its services?
Will your family be faced with the reality that after all the time, blood, sweat and tears you put into your practice, there is actually very little value that can be extracted to provide for your family?
With a succession plan in place, these questions are easily answered. Legacy can help you to build a plan that creates value for you and your family and allows your business to be “counted” on your balance sheet. After all, for many business owners, the business itself is the most substantial asset. The last thing we want to tell an entrepreneur is that we can’t assign any real value to their “baby”.
After working with us, the client’s succession plan resulted in him bringing a younger partner on board, with an agreement that this junior associate would take on more responsibility every year as ownership was transferred to him. The primary owner of the practice has now been paid by the bank, and his younger partner now has a revenue stream that will allow him to pay back the note as he slowly transitions to running the show. The client’s patients are seeing value knowing their services won’t be interrupted by a stranger joining the group when he finally does retire. Most importantly, the client now has more time to work on his golf game, which, to be candid, he needs!
All joking aside, the Legacy team would love to help you value your business in a manner that helps you reach your personal retirement goals. In addition to calculating how much money you need to get out of your business to retire successfully, we can also help with a valuation. Afterward, we’ll work with our strategic partners to figure out the cost basis for your business, tax considerations and required documents to create a successful plan. Meet with us to see how we can help you!