Preparing for Retirement: Don't Wait for the Unexpected to Happen
Drew Stevens, PhD
While attending to office items, the telephone rang and it was the office manager for a chiropractic practice informing me of the principle who was immediately taken ill and rushed to the hospital. After several moments, I uncovered that in December, Peter was having some bouts of forgetfulness - nothing urgent until he blacked out and was rushed to the hospital. In the analysis it was found he had a brain tumor and was rushed into emergency surgery.
This info comes on the heels of another practicing physician named Brian who recently discovered he had cancer. While he is able to fight it through treatment, he needed assistance with his practice. These stories then remind me - who minds the practice when illness strikes?
It is one thing to create a practice and develop it. But as with any other business, and yes you run a business, it becomes necessary to create succession or retirement plans. Indeed, just about the most frightening thing about your practice is losing it, but providing a succession plan enables you to create financial stability for your family and estate.
One of the most difficult decisions to think about is the transfer of your business - your pride, joy and, most important, your creation. Turning over management/ownership authority is not easy for any founder, nor is it easy for the successor. However, if you want your practice to continue to prosper, then you must seek a way to do it. Research shows that practices tend to fail after death and fewer than 30 percent are transferred successfully to a second generation or associate.
Getting Started
The first step in any transition is your ability to get your mind in the right context. Succession planning helps you prepare for two basic premises: a) crisis and b) retirement. While there are very few statistics in each of these areas, I will bet that less than ten percent of most chiropractors ready for these categories. The facts are these, one day your practice (heaven forbid) may get hit with a crisis and you will also need to or want to retire. When either occurs, what are your plans? There is an old maxim stating, if you "fail to plan then plan to fail." This is very true. Operating a business where you are the sole focus has its positives as well as negatives. The benefits are the financial freedoms and lack of bureaucracy, but there are negatives that can harm you such as if ill, you cannot bring in revenue. It is for these reasons that planning is so beneficial.
Convincing chiropractors to have a disaster replacement plan in the event of a tragic event is not too difficult; persuading them to prepare people for advancement years ahead of their actual promotions presents more challenges. Therefore, replacement planning is a start, but only a start.
What I personally believe is that succession planning is a deliberate effort for the chiropractor to plan a transfer of duties and revenue to that person or person's who can continue the culture and care of patients without hesitation. After all, you want to see the creation you developed continue and you may want to keep some of the future earnings as a means to support your retirement account.
Items to Think About
So, if the stories above concern you and there is a desire to position the practice for continuity, what are some areas of consideration? Ask yourself the following:
Should a crisis occur, who is my go to person?
What areas of the practice are covered in a crisis and where is there vulnerability?
Do I wish a one time payout or do I want an annuity if I retire from the practice?
Do my siblings desire the practice in times of a crisis, death or retirement?
What are my retirement and post treatment plans? Do I need one?
Have I paid off my property or have I spent foolishly on needless items?
What is my current debt to equity ratio?
As a society we are not getting younger and many media are reporting the amount of rising debt in America and lack of retirement planning. Chiropractic is no different from a professional athlete who quickly finds themselves in a pile of money. Almost immediately there is a desire to spend not save. Strange but true: an extra-big lottery prize means you've got an extra-big chance of going bankrupt.
Show Me The Money
When it comes to retirement planning,, money is where you need focus. First and foremost, retirement must begin early. Although many coming fresh from clinic and university have insurmountable debt, you must begin to place money aside beginning with the first patient. Starting the process early enough in the game will aid you in habitually placing money aside. As an example, Theodore began putting money away six months after passing the exam. Now, 31 years later he is getting fatigued and wants to retire. Based on his financial regimentation he has more than $1.6 million in assets, certainly a good amount for travel, for family and for peace.
If you are beginning later in the game, you will play catch up, but the process is more rigid. With the assumption that you are more than 10 years in practice and seeing more than 60 patients per week, my advice would be to review your income and use my 33 by 3 rule. I suggest taking 33% of your income and pay off debt, salaries, expenses and general issues of the practice. Then, take 33% and immediately place this money into a split savings and retirement account. And finally, the remaining 33% should be used to reinvest back into the practice.
As you continue to place money into savings, I suggest finding a very good financial advisor (I am not one nor am I dispensing financial advice) who can provide you with modalities for returns on your initial investment and can aid you in better planning for your future. To find the best available, it is best to speak with family, friends and peers that use these services and can best provide you with a trusted advisor.
The key factor of any practice retirement, succession or divestiture is planning. Without coordinating a solid plan of action and time frame, there will be little time to have to make up and you may get caught with a crisis (injury or disease) that hasten your plans. Therefore, in addition to beginning immediately, review, research and consult with attorneys, financial advisors, bankers and others whom can aid you in planning for the time when you do not or can no longer practice. Forming the proper alliances and having an orchestrated plan will lead to less headaches and the continuance of a wonderful future life.
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