Home Well-BeingFinancial Well-Being Have You Really Planned for Retirement?

Have You Really Planned for Retirement?

by David Moffet

Over the past 10 years as a transition consultant, I am amazed with the number of dentists I meet that are over 55 years old and I discover that most are “just considering” retirement within the next five to ten years. It is interesting to note that none of them had made any definitive plans for converting one of their most valuable assets, their practice, into retirement capital. Even worse, most don’t have an estate plan or financial planner to tell them how and when to pull the trigger.

Many though have already begun the “traditional” approach to their retirement by decreasing clinical time spent in the office resulting in, of course, a decline in office productivity and profitability. After all, most doctors at this point in their career do not have the financial demands they once did in earlier years, and start “taking it easy.”

I discovered that a great many of these dentists had already begun to:

• Refer out dental services that they previously enjoyed providing for their patients, but now find these procedures quite tedious and tiring!

• Dramatically reduce the number of hours they are spending in the office each day, and some have even cut back on the number of clinical days they work each week!

• Stop accepting new patients into their practice!

• Stop raising their fees and keeping their office updated.

I have often wondered why it is that doctors spend so many years diligently building a practice to a point where it is worth hundreds of thousands of dollars, and then spend the final few years in practice “running the practice into the ground!” So many dentists slow down to the point where they eliminate much, if not all, of the market value of their practice. And, they do this at a time in their life when they probably need these funds the most… for retirement! Dentists frequently realize only a fraction of their practice’s value at retirement. And then there is the risk of a health or disability issue. Very few are in the lucky group who transition their practice at peak value.

By planning ahead, a doctor can transition his or her practice and continue practicing as much or as little as he or she wants to, and for as many years as they wish. By locating a compatible merger purchaser prospect (an existing practice owner in the area), the seller can protect the full market value of the practice by locking in the purchase price years before he or she plans to retire.

This method of practice sale turns a non-interest-bearing asset (the practice) into an interest-bearing asset while the seller continues to practice as much as he or she desires to work. An astute businessman would “jump” at a chance to “sell” his business and continue to derive an income from it for years and years after the sale.

Other advantages to this valuable program include: •

Increased personal freedom – You are no longer tied down with costly overhead expenses when taking those long awaited vacations or while pursuing other career possibilities or hobbies.

• Security – Sudden death or disability will not diminish the practice value. It also eliminates one of the hardships faced by the grieving widow and family, the “graveside sale” of a dental practice.

• Assured Income – No matter how much or how little the seller decides to work after the sale, he or she will enjoy an income by receiving a percentage of his or her personal production.

• Transition – The patients will greatly appreciate the time to get familiar with the purchaser as the seller “phases out” of practice over time, instead of abruptly selling and retiring immediately.

There are substantial benefits to the purchaser as well. There is no better way to make a quantum leap in the growth of an existing practice than with a practice merger. The practice gross can be doubled without doubling the overhead, making the purchaser’s practice far more profitable immediately. The purchaser also enjoys the benefits of having a “built-in” seasoned veteran with whom the purchaser can work and share ideas.

Securing your future should always include plans for the sale of your practice, whether you are five, ten, or fifteen years from retirement. Studies have shown that the doctor who plans ahead will, on the average, enjoy up to $500,000 more income during the retirement years over the doctor who goes the traditional route of phasing out of practice without a transition plan.

Planning is the key and it is never too early to get started!

David A. Moffa, DMD, MAGD founded Willowbrook Dental Associates in 1980, transitioned the practice in 2002, and continues to practice three days a week as an associate. He has been the Western Pennsylvania Transition Consultant for PARAGON Dental Practice Transitions since 2005. Dr. Moffa may be reached at dmoffa@paragon.us.com or 866.898.1867. www.paragon.us.com

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