Transitioning to Retirement: Keys to Prepare for Fun in the Sun Regardless of Your Age
By Steve Stalzer, PT, MBA
What is your retirement vision? Do you see yourself sailing around the world playing golf or volunteering for medical missions in underserved countries? Regardless of your goals, age, and current net worth, planning now will help you realize the future you envision. This article will outline guiding suggestions to consider when preparing to sell a practice and retire.
BUILDING VALUE: BEGIN WITH THE END IN MIND
Franklin Covey popularized this term more than two decades ago in his book The 7 Habits of Highly Effective People. While the concept is simple, clarity around the transition out of private practice ownership can be challenging. Rather than a focus on knowing exactly who you will sell your practice to, focus on building a highly successful practice that will provide you with lots of great options. Focus on the key strategic initiatives that will have the greatest impact on building practice value given your available resources.
Practice value is in large part driven by financial performance. That said, financial performance is the result of doing key items very well. These include providing quality care, creating patient and staff engagement, growing your impact on the community you serve, and establishing strong and proven leadership. Assess the areas defined below on a quarterly basis to clarify goals for improving the overall health of the practice.
If you are unfamiliar with assessing the value of your practice, talk with an adviser who specializes in the physical therapy industry, as they will be familiar with the most applicable valuation methodologies and acquisition trends within the industry. By knowing the current value of your practice, which may be your most valuable financial asset, you can better assess progress toward personal financial goals well before you start thinking about retirement.
SELLING: BE PREPARED BEFORE KICKING OFF
Most people will sell only one business in their lifetime. Making mistakes can be very costly, and you won’t likely get a second chance. Proper planning will ensure you get it right. Below are key questions to ask as you approach a transition:
- Do you know the value of your business and current market conditions?
- Do you have clear personal plans and goals for the future?
- Are you aware of all prospective partners options that are applicable for you (management, strategic partners, financial partners)?
- Are you prepared to assess cultural and strategic fit with a buyer/partner?
- Do you have a clear plan to optimize the value of your practice in a sales process?
Plan to interview two or three mergers and acquisitions (M&A) advisers who specialize in physical therapy. They will be helpful in the topics outlined above and will likely not charge you for an initial consultation. In addition to helping find the best partner and negotiating offers to optimize practice value, an experienced adviser will also assist in due diligence preparation and assessing equity options, working capital requirements, employment agreements, and escrow details to ensure a successful transaction.
The sales process itself typically takes five or six months if you are relatively prepared. During this time, you will likely feel as though you have taken on a second job. Be ready to unload lower priorities so you can focus adequate time to the sales process.
REDISCOVERING PURPOSE: BE PATIENT AND GET HELP
For many owners, their practice is the result of their life’s work. It is not only a large part of the owner’s identity, but it also provides purpose, challenge, and social interaction. If you are staying involved in the practice, those may still exist. If you are retiring, however, you may find voids that need to be filled moving forward. Identifying the key factors your practice provides in your life will assist you in developing a plan to maintain or replace those after a transaction.
Take time to reassess your purpose and what you want to accomplish in the next chapter of your life. Consider working with a life coach if you are considering significant changes or working in a new industry. Know your strengths and leverage them to provide value to others as a mentor or consider volunteering.
By intentionally building value over time and preparing well in advance for a sale, you will increase your chances of a smooth transition when the time is right. Take time to reassess personal values and purpose as you enter retirement, regardless of your age, and know that help is available from others who have previously walked in your shoes.
Steve Stalzer, PT, MBA, is a PPS member and founder of 8150 Advisors, a consulting firm that serves physical therapy clinic owners. Steve can be reached at email@example.com.