Author: omniadmin

By Corey Young, DDS, MBA, ABI

Are you ready to transition?
Is your practice ready to transition?
What is the market like?

These are all key questions to ask yourself. When is a good time to start thinking about all of this? The real answer is as soon as you buy or start your practice, but the more practical answer is dependent on you. If there any chance you will want to transition in the next five years, you should start working on your transition today.Personal readiness and practice readiness are both more important than current market conditions; however, considering the COVID crisis, I am going to focus on market timing.

If any of the following sounds even slightly familiar, raise your hand:
I was ready personally, and my practice was ready in August 2019. I choose to wait because (pick one or more):

• I have a kid with one year left in college
• I have one year until I can draw Medicare
• There is one more room in the house I would like to finish
• My spouse retires in a year
• I pay off my house in a year
• I turn (insert round number like 60 or 70) next year and I would like to wait until then
• Etc.…

Now, for those of you that raised your hand, consider the reality of August 2020. How does that August 2019 decision to wait look? Questionable at best.

My intent is not to beat up on those of you that this struck a chord. Rather, I want to emphasize the need for starting early and getting help.
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Transitioning is a difficult process. Do not go it alone. Contact an experienced, qualified transition specialist and get the ball rolling. We are here to help.

I know. Running a business seems daunting. You just want to be a doctor and not have to worry about the rest. I understand. That said, it is wise to consider what is left on the table by being a career employee, or by waiting for that perfect practice to show up.
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Let us consider a fictitious practice:

• Overhead: 60%
• Gross: $550,000
• Net: $220,000
• Acquisition price today, due to COVID environment: $300,000
• Interest rate: 4%
• Loan of $330,000 (acquisition price plus one month of working capital) over ten years: $3,341 monthly payment/$40,000 annually/$400,930 over life of loan

Let us assume 10% growth in the first two years and 5% growth in the next eight, all while maintaining overhead percentages.

• Total income over those ten years $2,600,000
• Estimate of practice value in ten years $700,000

Sum of income and asset value $3,300,000
As an associate, how does this compare your compensation package over the next decade?