When and how to time your retirement, and what can happen when you don’t tackle succession planning
While I was attending to office items my telephone rang and it was the office manager for another chiropractic practice informing me that the principal had taken ill and was on his way to the hospital. I discovered that 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 needed to undergo emergency surgery.
This info came on the heels of another practicing physician named Eleanor who recently discovered she had cancer. While she is able to fight it through treatment, she needs assistance with her practice. These stories then remind me: Who minds the practice when illness strikes?
One of the most difficult decisions to think about is the transfer of your business — your pride, joy and, most importantly, your creation. Turning over management or 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 a death, and fewer than 30% are transferred successfully to a second generation or associate.
Foundations for success
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 10% of chiropractors are ready for these categories. The fact is, 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 if you’re ill, you cannot bring in revenue. If you have not placed anything in savings before you retire, this will harm you. It is for these reasons that planning is so beneficial.
Disaster plan in place
Convincing chiropractors to have a disaster replacement plan in the event of a tragic event is not too difficult — but 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.
Consider that many succession plans pertain to most large organizations such as hospitals or health care administrators; most small companies don’t have one, much less replacements for key positions such as chiropractic assistants, therapists, associates, etc. Succession planning balances the short and long-term needs and promotes the simultaneous analysis of each.
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 persons who can continue the culture and care of patients without hesitation. Done well, succession planning maintains a balance between overall patient care and the continuance of practice revenue.
Saving and retirement
As a society we are not getting younger, and many media outlets are reporting the amount of rising debt in America and lack of retirement planning. Moreover, my own observations of chiropractic classes when presenting keynote speeches seems to point toward a focus on the present and a lack of concern for the future.
Chiropractic is no different from a professional athlete who quickly finds him or herself 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.
That’s the implication of a paper published in 2010 by researchers at Vanderbilt University, the University of Kentucky and the University of Pittsburgh. The authors looked at lottery winners as separated into two groups: those who won sizable cash prizes (between $50,000-150,000) and those who won more modest prizes of $10,000 or less. They found that five years after the fact, the big winners were the ones more likely to have filed for bankruptcy.
So which is easier: playing the lottery and having the odds stacked against you, or playing it conservatively and doing some planning for your destiny and legacy? The easier method for getting started is simply deciding to move forward. Perhaps one of the easiest items before you have a full-fledged succession plan is to visit with an attorney and develop a will if you do not have one, as well as a living will. And, I also suggest visiting with a financial advisor who can provide advice and succession services.
As with any succession plan, using a professional approach is key to your success. It is prudent to think about who might take over when you are incapacitated, die or become involved in some other crisis. The idea here is to state, on paper, who will take over, what role they might fill (as not every successor need be a chiropractor) and what support and resources they will provide. However, not every chiropractic practice will have a family member ready, willing and able to take over. One study found that only 5% of all entrepreneurs were able to rely on family members to take over.² Not everyone desires to be a chiropractor or even work with patients.
Succession planning benefits
One of the most obvious advantages for starting a succession plan is understanding that you will be planning for your finan-cial future and ensure that it is set. Another thing to consider is that your staff, as well as your immediate family, will know that the practice will take care of you during times of crisis or instability. Proper planning for succession helps ensure that the practice will be ready for volatile periods. All businesses, large and small, have varying degrees of volatility and as such, each business needs to plan for these particular issues.
When staff recognizes that they will continue to be paid during some type of hardship and patients comprehend that they will be treated, there is less concern for the practice. Further, planning for your future should also provide some level of comfort in knowing that your family, your patients and your revenue will be protected. One cannot go through life not being concerned about the future. While I do recognize that living in the moment is vital for everyday happiness, planning is exceedingly important since your business depends on it.
Competencies to look for
The most difficult part of any succession plan is finding the right person or persons who can possibly jump in during crisis. The first concern is ensuring that there is a proper leader who can take over and guide the staff through daily activities.
The second concern is then ensuring that your patients gain high-quality care for the ailments they have. Realize, should you become incapacitated or die, the decisions will lie upon someone else to make. Therefore, you want to ensure that the competencies of the other person taking over your practice are congruent with your thoughts, feelings and, most importantly, your passion for curing the patient.
Finally, the successor must also ensure that proper revenue continues to flow into the practice so that your family is taken care of. No longer will their own efforts define their destinies; now they must rely on others, who may or may not do a good job, to determine their fates. And realize that during times of incapacitation or even death, there is no opportunity to jump in to save the day.
The person who is transitioned to take over your business has got to be one you trust and respect, no matter what.
Putting it all together
Researching and choosing the right person is no different from the steps included earlier in this chapter. However, once the decision is made, it will then become necessary for you to choose one of three paths:
- making the slow transition and offering assistance on a month-to-month basis;
- making a quick transition and cutting off all access; or
- making the transition and allowing the other person to take over completely while offering consultative advice on a monthly or periodic basis.
The notion here is that once you transition out and retire, then retire. Although you have a love for the practice and its people, your hanging around will interfere with the future progress of the practice. It’s unfortunate for me to say this as well as for you to read it, but when it is time for the new person to take over, you must let them.
I do recommend being available, but you really need to allow the new person to provide his or her own personality, core beliefs and principles if the practice is to continue and thrive.
There is no easy answer to any of the issues involving succession planning. The transfer of ownership in any practice is highly complex and is unique in every single instance. It is suggested that you use experts in law, accounting, business and consulting so that they help you identify the problems and organize remedies for success. In seeking out individuals, the best ideas will come from immediate family members, immediate advisers, immediate masterminds and even peer advisors.
Your role is to not wait until a disaster of any proportion to make a succession plan. Should something occur, your desires will then become irrelevant, so the sooner you plan, the better for you and your family. And the more you remain on top of succession, the more current the issues for transfer.
Drew Stevens, PhD, is an accomplished speaker, author, advisor and coach for chiropractors. He is also the author of the best-selling practice management book, “Practice Acceleration — Helping Chiropractors Maximize Patient Volume and Revenue.” © 2020 Drew Stevens, all rights reserved. He can be contacted at DrewsChiropracticMarketing.com.