Is Your Personal Life Plan Aligned with Your Practice Lifecycle? Key Success Factor For All Practices
You have worked hard to build your practice. For years, you have deliberately focused on caring for your patients, maintaining your professional reputation, developing, and supporting your staff, and building scale in your clinical business. Perhaps, it is now time to consider what’s next.
Some of you have actively considered selling your practice, perhaps to a larger group or to outside investors. Others have not. Regardless of which camp you are in presently, it is wise to plan to add value to the practice, whether or not you will ultimately sell it, or simply reap the rewards as the owner of a more profitable practice.
In this endeavor, a crucial success factor is “alignment.” Specifically, it is a clear alignment of personal and professional objectives. This typically requires intentional planning that ensures requirements in these two critical areas are satisfied by timing and transaction terms that allow a practice owner (or group of owners) to confidently move on to the next phase of their life – whether that involves a practice sale or a well-thought-out retirement plan.
Although contributing factors are extensive, below we share the most basic – and specific – steps our clients take to align their personal life plans with their clinical business plans and the lifecycles of their practices.
Although one’s “life plan” may be very extensive and detailed, thoughtful reflection on areas such as future financial needs, lifestyle preferences, and timing is important to planning.
Financial Needs – Seemingly obvious, it is important that any seller of a clinical business seriously considers the financial resources that he or she will require post transaction. This is applicable in both sale transactions and transition into employment models. Extensive and advanced financial planning, including understanding of tax implications, is necessary to ensure that future life-long income streams will be adequate to support personal needs.
Lifestyle Desires – A common mistake in retirement or a sale is to assume that lifestyle desires and income are one and the same. They are not. Take time to plan for what you want your daily life activity to look like, both the month after and the year after a change in practice ownership. What is your vision for where and how you will spend your time? Transaction terms and structures will often dictate whether you need to work more hours or if you will have more flexibility. Will you travel, spend time on hobbies, or become active in new or different professional roles? Seek an exit that satisfies your interests and desires.
Timing – We have seen optimal outcomes when clients plan ahead and pick a date for transition well in advance of exiting a clinical role. Factors that influence timing may include, yet are not limited to, family situation, health, partner plans, and market conditions. What’s important is to determine and plan for what you believe is best for you. You can always move it forward!
Long-term clinical business plans may also be very complex. Still, a few common categories can help ensure good exit outcomes.
Practice Valuation – When seeking to maximize clinical business valuations, there are several practical steps a group may take. Baseline values are high in the current environment. They may be even higher for the practice that generates above-market profitability, productivity, and quality. Consciously creating positive trends typically garners market reward. Buyers also pay premiums for competent and broad back-office infrastructure, optimal payor mix, favorable and stable provider demographics, and good data. Purposefully take steps to make these things happen.
Succession and Continuity – Preemptive actions taken to ensure smooth clinical and business continuity through any transaction tend to lead to less stressful and more rewarding transitions. Focus on this area to create more alternatives for exit in the form of partner buyouts, exits to system acquisitions, consolidation into larger practice groups, and private equity interest. As an intangible factor, knowing that a practice may continue to capably care for patients post departure may also provide psychological benefit.
Constituent Communication – Finally, having a sound and well-communicated business plan maximizes probability that financial partners in a practice are aligned on objectives and timing, employees are not surprised, and patients are well cared for post exit.
If you are already working on the objectives above, congratulations! You are well ahead of most physician practice owners and leaders. If not, its never too late to get started in your process of planning for great outcomes. Although the endeavor may appear overwhelming, identifying and accomplishing your objectives is within reach. Engage and connect your personal and professional advisors who stand ready to assist you on your journey to aligning today’s practice and business activities with desired personal outcomes!
Jerry L. Kelsheimer is President of Medic Management Group and MMG Healthcare Solutions. His background includes extensive work in areas including leadership development, strategic planning, process improvement, capital markets, financial management, and mergers and acquisitions. MMG is a national provider of advisory and consulting competencies, transaction support services, and back office administrative support to independent and system owned physician practice groups.