For some people, the prospect of retirement could be years away and for others it could be just around the corner.
In my work with chiropractors over the years, I have helped many retire and others to start the process. As an illustration, consider the following two scenarios.
A long-term plan
Let’s say you have quite some time before you plan to “hang up your hands.” The ideal strategy in this case is to start setting aside enough money for your retirement. This article is not about how to invest it—that’s up to you and your financial advisor. This is about how to save the money to give to your advisor.
The first step is to evaluate the costs of operating your practice. This is the monthly expense of paying staff, overhead, and yourself. There are two factors to evaluate: How much it takes to operate the practice and how much you need for your lifestyle.
Let’s say your office costs are $25,000 per month and you need $10,000 per month for your household and family, for a total of $35,000. Add to this amount what you plan to set aside each month for your retirement.
At a younger age, try to set aside at least 5 percent of your total income every month after expenses like credit card fees, bank fees, etc. This is your “corrected gross income.” You can increase this percentage to a much larger number as time goes on.
There are some who eventually manage to put away 40 percent of their corrected gross income monthly and can retire early. Put your saved funds into a special account (not your business checking account). This is your “reserve account,” so make it difficult to spend from it.
Put it in a different bank from your business account with no debit card attached, so you have to see a teller personally to make a withdrawal. Then don’t touch it. This is not your tax set- aside or vacation money.
This account, once you start to put money into it, will grow and give you a good feeling because it’s the reward for your hard work. But like a stalactite in a cave, if you start to touch it, it stops growing. It is important to write a check to your reserve account first, before you pay your bills. Consider it a bill that you have to pay just as much as making payroll. Virtually any organization will be tempted to spend more than it makes, and strong financial controls have to be put into place to prevent that.
You will find that your practice will get by and you will make the funds you need to do well—but only if your reserve account isn’t used for your practice or living expenses. After many years, your retirement can be fully funded.
A last-minute plan
Now contrast the above with the situation of needing or wanting to retire in the near future. In this case, you’ve been working hard for many years and have built a successful practice, but you haven’t taken care of funding your retirement. You have two major options:
- Sell your practice. But a word to the wise: Once you decide to sell, it might take months—or even years—to find the right buyer. So the key here is to keep creating your practice while you are looking for a buyer. You are the source of the energy that created your practice and kept it going. Your energy and focus must be maintained to preserve your practice’s value. All too often a person decides to sell and the business drops off as the owner is no longer invested in its success.
- Get an associate. The idea is that he or she will buy the practice someday. You want an associate who will invest in the future of the practice; otherwise, they will just be delivering for themselves. Look for an associate with the type of adjusting style you use. (This is not a deal-breaker, but it helps.) This way, transitioning the patients from you to the associate is easier.
With an associate in place, your duties as the doctor shift more from treatment to sales, marketing, and quality control. Gradually turn your patients over to the new doctor and survey them on how they liked their treatment, making sure to address any quality issues that come up.
Admittedly, there will be some patients who say they only want your care and no one else’s. Even those can be turned over if you communicate to them your complete confidence in the associate and your assurance that they will receive the same quality of care as from you. Let them know you are overseeing their treatment plan every step of the way.
Once the new doctor has mastered the quality of patient care you deliver, you can train him or her on reports and re-exams. Once that has been understood, turn marketing over to the office manager so there is a continuous flow of new patients.
At this point, you should be working part-time and readying yourself to step down. You have the option to continue working part-time to ensure that the delivery of care and marketing are proceeding smoothly. This is semi- retirement, and you’ll only step in if there is an emergency.
You now have more time and freedom, and that may be all you want—still drawing a paycheck from the practice; or you can eventually sell the practice to the associate and retire.
Whether you start setting aside more money for retirement early, hire an associate, or sell your practice, the numbers need to be there to support your decision. If bills are too high and profits too low, it is hard to accomplish the target of retirement. Don’t hesitate to get outside help or training on how to be a better executive.
Edgar Sharp has been helping doctors have more successful practices though management consulting and life coaching for more than 25 years. He owns and operates Sharp management and Consulting. He can be contacted at 727-669-0655 or through thesharpmanagement.com.
