Practice Pathways Principles of Practice Transfer

Transcription

1 Practice Pathways Principles of Practice Transfer Chad Fleming, OD, FAAO Wichita Optometry, P.A. Partner AOA Excel Business & Career Coach Cope#: PM The Fleming Family Chad Brenda Elias Kaleb The Path to Transition Text questions to: (316)

2 1 yr Associateship 2002 Research Understood what I was looking for Explored multiple options Associate OD Observed practice life of ODs Characteristics Distinct separation between identifying Needs vs. Wants Broken down into Short Term vs. Long Term with appropriate time frames Written down, reviewed, and revised process vs. event Benefits Clarifies options and opportunities Identifies areas of strength vs. weakness Focuses direction efforts tend to be productive rather than wasted 2

3 Setting Effective Goals Specific Measurable Achievable Realistic Timeframe The Impact of Assessment Financial Measurable Return on Assessment Income Expenses controlled Emotional Confidence Remorse Peace of mind Assessment Analysis Assessment must be performed Can be self-performed Using a Consultant/Industry Professional Only way of ensuring that game plan is intact and being followed Lack of analysis can lead to underachieving original goal set 3

4 Needs Buyer Seller Assessment Associate Agreement Page 1 Why now? Practice core values How you (partner/ owner) will help new associate be successful Page 3 Define what will occur if relationship successful Outline what occurs if relationship dissolves Page 2 Financial options Vision Responsibilities The specifics References: AOA News search What made my associateship successful Clear communication from the beginning The partners followed through on what was promised (Integrity) I was treated like a partner I felt valuable to them They worked to make me successful Never reminded me what I was costing them initially Diagnostic equipment current 4

5 Needs Assessment Must be one of the very first steps taken by both parties Must be specific Requires thought May require research Utilize resources (many free!) Needs Assessment Remember to differentiate Needs vs. Wants Much different, but often complimentary Sets priority of activities that must occur Helps to maintain game plan Short term vs. long term Continue to measure progress Assess both physical and emotional attributes of projected game plan Execute Follow plan Reassess/modify if necessary Be persistent Table of Contents Clinical Needs Professional Needs Economic Needs Employment Needs Social Needs 5

6 Clinical Needs Seller Areas of service currently provided Understanding current patient market Access Demographics Third party Technology employed Multi-disciplinary Community Buyer Specialty training Complimentary and/or redundant skill set Scope of practice Licensure differentials Local standards Knowledge of technology Third party Community Professional Needs Seller Association Membership Continuing Education Needs Inter-Practice Networks Buyer Association Membership Continuing Education Needs Inter-Practice Networks Economic Needs Compensation Salary Profit Sharing Funding Retirement Method of calculation Income differentials Expectation set Social strata differences Cost of Living Housing Food Insurance Transportation Education Other 6

7 Economic Needs Seller Status Equity Sale Legal organization Employment Independent contractor Tax/Accounting implications Buyer Status Equity Purchase Employment Independent contractor Tax/Accounting implications Employment Needs Owner Status Employee vs. IC Compensation Fixed Base + incentive Per diem Exempt vs. Non-Exempt Additional contract provisions Right to purchase Restrictive covenant Employee Status Employee vs. IC Compensation Fixed Base + incentive Per diem Exempt vs. Non-Exempt Additional contract provisions Right to purchase Restrictive covenant Social Needs Seller/Owner Quality of life Compensation change? Change in pace? Mentoring Control issues Staff acceptance Community acceptance Peer acceptance Buyer/Employee/IC Quality of life Urban vs. Rural environment Family needs Spousal/Partner employment opportunities Education Lifestyle needs Religious needs Staff acceptance Community acceptance Peer acceptance 7

8 Needs Assessment Critical step that most often helps to insure that reality and expectations are most closely aligned When performed properly helps to move both parties to much higher level of a successful outcome Developing Your Transition Strategyte valuation contract negotiation Payment method Associate Partner Sale of Stock 8

9 Table of Contents 4 key characteristics of successful sellers Assembling your transition team 3 key members Choosing your transition method & model Positioning your practice for optimum sale Ensuring a successful transition Developing Your Transition Strategy Two types of career exits: Intentional exit strategy Accidental exit (not a strategy) Put time/attention to intentional strategy Start preparing 3-5 years in advance Assemble transition team Position practice for optimal sale Prepare yourself, patients, staff for transition Network w/ students & young ODs Characteristics of a Successful Transition Careful Planning Has thought through transition process Has plan for practice sale or purchase Has researched buy-in/buy-out strategies Understands which option works best for them Has networked early and aggressively 9

10 Characteristics of a Successful Transition Realistic (seller & buyer) Understands value of practice in realistic terms Has had the practice professionally appraised Understands the emotional attachment to the practice Characteristics of a Successful Transition Financially Sound Has not based retirement on sale of practice alone (seller) Has not amassed a larger than necessary debt (buyer) Has invested and saved for retirement (seller) Has managed practice effectively & efficiently (seller) Understands professional strengths & weaknesses Especially important in associate buy-in situation where it s critical to balance skill set Characteristics of a Successful Transition Operates with Integrity Positions new buyer/practice for long-term success (seller) Respectfully walks seller to the door (buyer) Facilitates transition by providing personal consultation as needed Has win-win plan that fits personal values and practice needs, ensuring patients continue to receive outstanding care 10

11 Assembling your transition team Assembling Team Three key members of your team - CPA - Financial Planner - Attorney Will help you develop thoughtful approach to practice transition Certified Public Accountant WHAT THEY DO Develop tax preparations, plans and estimates. Prepare and file tax documents. WHY THEY RE IMPORTANT Help identify whether you have a healthy practice to sell. Identify a healthy practice to purchase. Can help establish financial procedures and collections practices. Advise on tax and accounting implications of business and investment decisions. 11

12 Financial Planner WHAT THEY DO Help establish retirement goals. Create long-term financial investment plan to fund retirement based on your savings, income, equity and investments. Develop retirement timeline based on your long-term investments. Help get you off to a great start in managing money WHY THEY RE IMPORTANT Ensure you have necessary funds to support your retirement as planned. Ensures that you can afford the purchase based on your life goals. Attorney WHAT THEY DO Negotiate and draft contracts and sale documents. Provide tax advice and planning. Provide estate planning and will preparation. WHY THEY RE IMPORTANT Represent your interests as your advocate. Assure contracts and legal documents comply with legal requirements. Provide other document review. Transition Team Members Help you define and develop your life plan Keep you focused on long-term goals Help you make disciplined choices that support your plan Contact practice consultant, professional organizations, or specialty practice lender for team member resources 12

13 Choosing your Transition Method Model Treated as equal Outside ODs opinion on contract Feeling of gratitude for opportunity CPA / Lawyer My CPA now office CPA We all agreed on one lawyer Patient access New patients Acute care Additional insurances Communication/ Marriage Paid partners according to month production (10 yr clause) Partnership Healthy tension 13

14 Choosing your Method - Equity Purchase Seller What are you selling? How much are you selling? When are you selling? How do you want your money? Tax implications Potential change in legal form of ownership Compensation/Lifestyle change possible Buyer What are you purchasing? How much are you purchasing? When are you purchasing? Do you have the right to purchase more? When? Financing options available Equity Purchase Seller Appraisal Who pays for it? Is it worth it? Buy/Sell Agreement Developing Understanding exactly what you are selling Restrictive covenants Financing Lump sum payment Providing seller based financing Buyer Appraisal Who pays for it? Buy/Sell Agreement Legal representation Accounting representation Using consultants Negotiation Review of agreements Coming up with the money Savings Loans Specialized company Traditional bank Relative Savings Choosing Your Transition Model Outright sale (business + building) Associate buy-in Partial sale (business only) Important to understand/plan in advance your preferred transition model 14

15 Outright Sale Sell practice & all related assets Patient files, equipment, inventory, building, land Advantages Can redirect all proceeds to retirement funding Enables complete retirement/no lingering association with practice or business activities Disadvantages Sale price contingent on whims/status of market at time of sale No option to hedge price with longer-term strategy Partial Sale Sell Practice assets only Patient files, equipment, inventory Retain ownership of hard assets Building, land, leasehold Advantages Ability to generate post-retirement income from building/land/ sublease rentals Partial Sale Disadvantages Less immediate proceeds for investment in retirement Risks of fluctuations in market rental rates Not fully disengaged from work; potential new headaches 15

16 Associate Buy-In Agreement to purchase remaining interest upon your retirement Starts as co-owner; transitions to full ownership when you retire Advantages Smooth transition for practice, patients & staff Two income opportunities at buy-in & at purchase Potential growth in practice value with addition of associate Increased chance of success as Associate already invested in practice Associate Buy-In Disadvantages Risk that Associate changes mind at time of purchase, walks away Requires expansion of operations as Associate brought in Must be documented by written legal agreement in order to avoid misunderstandings in the future about timing, price, etc. Choosing Transition Model Choose the transition model that fits you/your work style Greater assurance of positive outcome for everyone involved you, staff, patients Don t force-fit a model to increase financial gain Trading work satisfaction for an additional $10,000 - $20,000 is not a worthy tradeoff 16

17 Positioning your practice for optimum sale Associate succeeds, you succeed Mentoring View as long term investment Communication O.D. Employee Pay them good Positioning Your Practice Practice must be well-managed and efficient to command highest sale price Proven track record of stable revenue Well equipped with current technology in good repair Attractive office & inventory Staff understands importance of patient management 17

18 Positioning Your Practice Potential buyer looking for practice he or she can step into and immediately create positive cash flow If practice does not meet this standard Lower valuation/sale price More difficult or impossible to find buyer Positioning Your Practice Due diligence buyers will want to see: Insurance plans Patient maintenance software Per-patient value Patient demographics Clinical skill match Community involvement Licensures Positioning Your Practice Due diligence buyers will want to see: Equipment list Specialty equipment needs Professional referral relationships Clinical care philosophy Production report with procedural detail 18

19 Improving Practice Value Have a realistic view of practice value At least 3 years before your exit Update your marketing plan Provides valuable feedback that can help position business for increased profitability/sale price Still time to make changes if value is low Consider using a professional practice appraiser/ broker Improving Practice Value Ensure you have clean financial reports/tax returns Track income & expenses by profit center Remove items that are not true operational expenses, i.e. personal expenses Update office for better presentation Fresh paint/furniture as needed Contemporary frame inventory/displays Improving Practice Value Current technology/systems Equipment up-to-date, in good repair Current & warranted practice management software with follow-up marketing program Internal programs to remind patients of needed services, marketing program Current value-added website Invest in staff education Enhances patient experience while creating another business asset 19

20 Improving Practice Value Make changes 3-5 years in advance of buy-in or sale Investment will pay for itself when it s time to market practice Ensuring a Successful Transition Ensuring A Successful Transition Open communication key to smooth transition to new owner Approach staff/patients with openness, honesty, optimism Critical for retaining both staff and patient base 20

21 Preparing Your Staff Inform staff as soon as you have committed to exploring a practice sale Let them know approximate time frame E.g., could take 6 months or longer Keep them informed about details Are you working with a broker? Is this an internal sale to associate? Are you advertising in journals? What kind of calls can they expect to receive? Preparing Your Staff Once a deal agreed upon: Introduce new owner to staff in advance of transition Provide opportunities for them to get to know each other Q&A meeting onsite Lunch meeting offsite Preparing Your Staff Use training exercises to ensure staff communicates positively in answering questions about new ownership Over-simplified responses like Dr. Jones is no longer with us can lead to misinterpretation Enthusiasm, support for change is critical to retaining patient base 21

22 Preparing Your Staff If bringing in an associate: Ensure staff understands who to go to with questions/ concerns/issues Support new associate/owner in their role, avoiding criticism in front of others Informing Your Patients Critical to properly communicate your transition to ensure continued practice loyalty If new owner is a current associate: Take time to introduce him/her to as many patients as possible, even if they re already known Informing Your Patients Once purchase is complete: Notify patients of new ownership by personal letter Signed by both you and new owner Announce new ownership in practice newsletter/on website/facebook page Let patients know what to expect Continuity in quality of service/patient care 22

23 In Summary Sell your practice Enjoyment of your future Properly planning your exit strategy Funds for retirement Smooth transition for PATIENTS and Staff Humility Liability Associate OD Delayed gratification Lessons Learned Humility Liability Associate OD Delayed gratification Lessons Learned Healthy Tension Partner Communication Opposites should attract 23

24 Humility Liability Associate OD Delayed gratification Invest Lessons Learned Healthy Tension Be a leader OD Employer Partner Opposites should attract Be generous Communication Thank you Chad Fleming, OD, FAAO 24