Exit Strategies-Disability/Retirement for Physicians and Dentists in Texas

If as a physician or dentist, you are ready to retire and have enough savings, your options for making a successful exit include making a complete sale, hiring an associate with a later sale, establishing co-ownership, forming a solo group arrangement, merging your practice with another, or walking away.

Before you begin the process of transitioning your practice to another entity or individual, you must first appraise it, evaluate its market price and decide if it is indeed the right time to make an exit.

In this first step of your exit plan, you need to assemble the team that will have your back. You will need an attorney experienced in Dental/Medical practice sales, a CPA, a practice broker, an investment advisor, an insurance advisor, and your practice consultant. This team will help you quantify your retirement needs and identify your current resources. They will need to perform a gap analysis, which will determine the amount of growth you’ll need in your retirement funds and practice valuation to meet your retirement objectives.

At the end of this phase, you should have clear priorities, goals, and benchmarks; set an exit date; determine the current value of your practice; and determine whether your retirement goals are achievable. In addition, this step will allow you to discuss with your CPA the tax consequences of selling your practice, and tax minimization methods. Ideally, you need to start this process at least two to five years before your planned exit date.

At the time of sale or transition of the practice it is important to document the understanding between the various parties regarding the terms of their transitions. The parties need to have a clear understanding from the beginning about when the transition will take place, how the practice will be valued, how much everyone will be compensated, how to define performance standards, and how to exit the deal if it does not work out. 

There are also times when your exit is not in your control due to circumstances you cannot foresee, such as premature death or incapacity. Having a contingency plan can help the family receive maximum value in cash for the practice owner’s interest, preserve the jobs of the employees, and continue the care of the practice’s patients. A buy-sell agreement is an example, in addition to using life and disability insurance products to fund a buy-sell agreement or pay for an associate to keep the practice going until it’s sold. 

Your estate plan should not only cover taking care of your heirs if something happens to you, but it should also cover taking care of yourself in the event you become disabled or incapacitated. Your attorney will need to draft or review your estate planning documents, advanced health-care directives, power of attorney, and other estate planning documents. In addition, if there is a shortage of assets in your estate to take care of you and your loved ones if something should happen, then insurance solutions might be necessary to help you fund those needs. Having a plan to reach your exit goals will clarify your objectives and help you reach them.

Having gone through the process of selling my dental practices, I have first-hand knowledge and experience of the pitfalls that must be avoided to make your exit as smooth and hassle-free as possible. Because it is never too early to have an exit plan, contact The Law Offices of Namrita Notani today to initiate such a plan.