Every professional in private practice will transition out of ownership at some point during his lifetime, by force or by choice. Transition planning, however, does not only mean the transaction of selling a business – IT IS MUCH MORE THAN THAT!
Let’s define a few things first. Transition; noun: “a passage from one state, stage, subject, or place to another.” Within a private practice, this means the passage of the Technician, Executive and Ownership functions over the course of one’s professional career to others, whether gradually or suddenly. Therefore; Results-based transition planning™ means “the creation of the Maximum Transition Value over one’s entire career to the end result of the ultimate transfer of control, income and ownership to others based on a well-formulated and executed plan that optimally benefits the owner(s), successor owner(s), employees, clients/patients and the community.”
A transition plan for the professional practice is part and parcel to one’s overall household financial plan considering the practice is usually the largest and most lucrative asset owned by the household. The income derived from the practice pays for current lifestyle and the funding of retirement savings that will ultimately replace income from daily production. Because the practice has a market value to a potential investor, it becomes important to continually create a business that can realize that value at any time, not just at retirement—one cannot predict some life events that may require an immediate sale.
My advice – Start preparing now. Here are 9 steps to get you prepared TODAY:
The results-based transition plan starts with the statement of the ultimate goal of the practice and how it serves the intentions and purposes of the owner(s), which includes a blueprint on how to transfer that value to others.
Begin your collection of experts who advise in their areas of expertise to assist in the creation of the Maximum Transition Value. This includes financial advisors, attorneys, accountants, industry consultants and educational program providers.
Establishment of personnel to handle the executive and technical functions of the practice. This includes organization, staff training and production.
Create business systems. This includes the policy and procedures for every position and function of the practice including strategic planning, finance, marketing, public relations, sales, treatment and quality control.
Income is then created more stably and abundantly in the organization with the implementation of these systems, which is the value of the practice to the investor—the predictable cash flows relative to perceived risks in the market.
Valuable property is then created such as real estate, intellectual property, equipment and goodwill. The more valuable the property, the greater the value of the practice.
If the financial transactions are handled properly, then the practice will operate profitably with all of its books and records in good order. A financially sound practice with a long track record of profitable operation will be considered more valuable.
There will come a time when the owner(s) will become mentally and emotionally ready to transition a greater number of Technician, Executive and Ownership responsibilities to others. This can be done over time or in one event, but the transition will not occur unless the owner(s) are ready to exit the practice.
Finally, the transaction process itself must be implemented so that all of the due diligence, legal, tax and practice management considerations are addressed. This is the legal transfer of income, control and ownership to the successor owner(s) whether partially or in full.
These 9 elements make up the Econologics® Results-Based Transition Plan. A private practice owner who works through these 9 elements will create a business that has a greater transition value than the average. The economic value that will accrue to the household will be in the form of higher annual income through profits and compensation and a greater transition value when the practice is transferred in the future. This is a WIN-WIN for the Practice and the Household. This new plan will help you — Live Your ART!™