By Christopher Kane
It takes hard work, commitment and planning to build a thriving eyecare practice. But there comes a point when practice owners begin to think about the next stage of their lives, from having a reduced stake in the business to pursuing full-blown retirement. In order to maintain stability in the practice and ensure its future success, it is imperative to develop an ownership transition plan.
To increase the opportunities for success, practice owners should launch the planning process well in advance of when the transition will take place. Practice owners need adequate time to strategically think through their decisions and identify a successor. Moreover, delving into the process when the business is at its peak can help to command a higher-value sale. The ideal period in which to start implementing a plan is several years prior to selling or leaving the practice. This will allow time to find a buyer or groom a future leader, as well as to prime staff and manage the transition of patient relationships.
Creating a Transition Plan
Prior to establishing a transition plan, practice owners should consider what their goals are for the practice. These can include growth goals, expansion of services and their vision for potential future leaders. Likewise, practice owners should determine what they envision for their own role.
Select Professional Advisors
Practice owners may want to enlist the help of trusted advisors who can assist in assessing financial and legal concerns. Bankers, attorneys, financial advisors, practice brokers and certified public accountants can provide excellent advice and guidance for these aspects of the process. Expert advice from a CPA or practice broker may also be helpful in valuing the practice, which is vital to its sale. These experts can also help the practitioner identify any red flags, some of which could prevent the sale if overlooked.
Identify a Successor and Type of Sale
When selecting a successor, the practitioner should look for a candidate that he or she would feel comfortable recommending to patients and who will be a good fit for office culture and current staff. Often, the successor will be an existing associate or an external practitioner who has a strong standing in the community. The owner may also want to consider his or her role in the practice once the transition is complete. For practitioners who are looking to retire, a complete sale is often the best choice. In this scenario, the outgoing practitioner sells 100 percent interest in the practice to an existing partner or external practitioner. If the practitioner is looking to have a reduced stake in the practice, a 50 percent purchase is a common choice. This agreement allows the outgoing practitioner to add a partner who purchases 50 percent of the practice, with the understanding that they will purchase the remaining interest in the practice at a designated time. The agreement should clearly state the length of time the outgoing dentist will remain at the practice and the date that the complete practice purchase will be finalized.
If the practitioner owns the property where the practice resides, it should be determined if the property will be included in the sale, whether the owner will sell the real estate to the third party, or if they will maintain ownership and collect rental income.
Carrying Out Succession
Once a transition plan has been put in place and a new practitioner has been selected, the transition should be clearly communicated to office staff and patients. This ensures staff is clear about how and when the transition will take place, and allows them to assist in communicating the transition to patients, vendors and other affected parties.
The new practitioner will need to be fully integrated into the business, including training on operations and finances. A considerable amount of time should be allotted for integration, as it can often take several months to a year.
Transition planning is vital for eyecare practitioners who are looking to retire or reduce their stake in their practice. Implementing a transition plan ensures their successor can maintain a healthy practice, with a strong client base and financial success for years to come.
Christopher Kane is vice president and commercial banking manager at Pacific Continental Bank. He can be reached at email@example.com.