- Email: [email protected]
What if “what if” actually happens
THE PRACTICE MANAGEMENT CONSULTANT What if ‘‘what if’’ actually happens Gary Gerber, O.D.
N
one of us like to talk about it. ‘‘It will never happen to me,’’ goes the rhetoric. But bad things do happen and the owner of a practice, or any small business for that matter, needs to have the necessary mechanisms in place should the worst case scenario (i.e., disability or death) occur. In a perfect world, everyone retires at just the right moment. It’s when the practice is at its greatest value and the old timer is ready to pass the keys to a young and eager successor before spending the rest of the time literally and figuratively playing the back 9.
The unexpected can and does happen, which is why practitioners need to have a contingency plan in place. Unfortunately, it does not always work out this way. Practice interruptions, whether temporary or permanent, do happen. Not being prepared for such a contingency can destroy a practice and have an impact financially on the practitioner and the family.
Planning ahead It comes down to planning ahead. This is particularly important with an optometry practice because many are sole proprietorships or incorporated with a single shareholder. If a solo practitioner is unable to work on even a temporary basis, the practice and the practitioner’s earning power are immediately threatened. Without a proper plan in place, little can be done after the fact to rescue a practice or to make sure the family is properly taken care of. Like putting in place an impenetrable lock after the contents of the safe have been lifted, it’s a case of too little, too late. There are no second chances. Here are the elements that should be included in any plan: Adequate life and disability insurance. This should be part of anyone’s risk management plan – whether the individual is single and right out of school or a family person who is well-invested in a practice. Premiums can be adjusted depending on the amount of insurance and how soon it begins paying after a disability. Additionally, business interruption insurance Gary Gerber, O.D., is the president and founder of The PowerPracticeÒ, a practice management consulting company. He can be reached at drgerber@ powerpractice.com or (800) 867-9303. Opinions expressed are those of the author and not necessarily those of AOA.
will pay the cost of running a practice when there is no way to generate income. In the case of a temporary disability, this will allow staff to remain in place and the business to continue to function in your absence. A buy/sell agreement. This makes moving forward much easier for everyone concerned. A buy/sell is a plan designed to protect a business from harm due to the death, disability, or retirement of the owner. It is enforceable by law regardless of the buyer’s circumstances or wishes at the time the seller ends practice. Typically, the agreement is based on a formula or percentage of revenues and the number of patients that remain with the practice. While, in most cases, a buy/sell is between an older and a younger optometrist, it can also be between 2 solo practitioners who agree to purchase the other’s practice in the event one of the practitioners can no longer work. For most practices, the value plummets without the doctor in place. With a buy/sell, heirs are protected with a selling price that was negotiated before the interruption. In the case of a practice that is jointly owned, disability buyout insurance should be purchased by all partners. This way, should a partner die or become disabled, insurance will cover the cost of their equity in the practice. Practice appraisal. The value of a practice needs to be appraised every few years. Using an old appraisal or waiting until after a partner has died or becomes disabled can affect the value of the practice dramatically. It can cost both the partners and the heirs valuable time and money. A practice plan and up-to-date manual. This will help the practice run smoothly in the owner’s absence. A trusted advisor. An individual who knows the practice and can be counted on to articulate the intentions of a practitioner in the event of death, disability, or illness, needs to be identified sooner rather than later. This person should be someone in whom the practitioner has complete confidence, can handle the affairs of the transition in a timely and decisive fashion, and should be alerted to any changes or updates in the practitioner’s contingency planning. Death and disability are not topics any of us like to talk or even think about. Yet, disaster can strike anyone, at any time. This is why the necessary arrangements for the practitioner, family and patients need to be made so that everyone is protected should the unexpected happen.
1529-1839/$ - see front matter Ó 2011 American Optometric Association. All rights reserved. doi:10.1016/j.optm.2011.03.012
N
one of us like to talk about it. ‘‘It will never happen to me,’’ goes the rhetoric. But bad things do happen and the owner of a practice, or any small business for that matter, needs to have the necessary mechanisms in place should the worst case scenario (i.e., disability or death) occur. In a perfect world, everyone retires at just the right moment. It’s when the practice is at its greatest value and the old timer is ready to pass the keys to a young and eager successor before spending the rest of the time literally and figuratively playing the back 9.
The unexpected can and does happen, which is why practitioners need to have a contingency plan in place. Unfortunately, it does not always work out this way. Practice interruptions, whether temporary or permanent, do happen. Not being prepared for such a contingency can destroy a practice and have an impact financially on the practitioner and the family.
Planning ahead It comes down to planning ahead. This is particularly important with an optometry practice because many are sole proprietorships or incorporated with a single shareholder. If a solo practitioner is unable to work on even a temporary basis, the practice and the practitioner’s earning power are immediately threatened. Without a proper plan in place, little can be done after the fact to rescue a practice or to make sure the family is properly taken care of. Like putting in place an impenetrable lock after the contents of the safe have been lifted, it’s a case of too little, too late. There are no second chances. Here are the elements that should be included in any plan: Adequate life and disability insurance. This should be part of anyone’s risk management plan – whether the individual is single and right out of school or a family person who is well-invested in a practice. Premiums can be adjusted depending on the amount of insurance and how soon it begins paying after a disability. Additionally, business interruption insurance Gary Gerber, O.D., is the president and founder of The PowerPracticeÒ, a practice management consulting company. He can be reached at drgerber@ powerpractice.com or (800) 867-9303. Opinions expressed are those of the author and not necessarily those of AOA.
will pay the cost of running a practice when there is no way to generate income. In the case of a temporary disability, this will allow staff to remain in place and the business to continue to function in your absence. A buy/sell agreement. This makes moving forward much easier for everyone concerned. A buy/sell is a plan designed to protect a business from harm due to the death, disability, or retirement of the owner. It is enforceable by law regardless of the buyer’s circumstances or wishes at the time the seller ends practice. Typically, the agreement is based on a formula or percentage of revenues and the number of patients that remain with the practice. While, in most cases, a buy/sell is between an older and a younger optometrist, it can also be between 2 solo practitioners who agree to purchase the other’s practice in the event one of the practitioners can no longer work. For most practices, the value plummets without the doctor in place. With a buy/sell, heirs are protected with a selling price that was negotiated before the interruption. In the case of a practice that is jointly owned, disability buyout insurance should be purchased by all partners. This way, should a partner die or become disabled, insurance will cover the cost of their equity in the practice. Practice appraisal. The value of a practice needs to be appraised every few years. Using an old appraisal or waiting until after a partner has died or becomes disabled can affect the value of the practice dramatically. It can cost both the partners and the heirs valuable time and money. A practice plan and up-to-date manual. This will help the practice run smoothly in the owner’s absence. A trusted advisor. An individual who knows the practice and can be counted on to articulate the intentions of a practitioner in the event of death, disability, or illness, needs to be identified sooner rather than later. This person should be someone in whom the practitioner has complete confidence, can handle the affairs of the transition in a timely and decisive fashion, and should be alerted to any changes or updates in the practitioner’s contingency planning. Death and disability are not topics any of us like to talk or even think about. Yet, disaster can strike anyone, at any time. This is why the necessary arrangements for the practitioner, family and patients need to be made so that everyone is protected should the unexpected happen.
1529-1839/$ - see front matter Ó 2011 American Optometric Association. All rights reserved. doi:10.1016/j.optm.2011.03.012