BLOG: Planning your 10-year countdown to retirement, part 3

ByJohn B. Pinto

Two blog entries ago, I kicked off the concept of making a 10-year plan as a run-up to retirement by first of all forcing yourself to sit down and have the discipline to write down everything you still have left to accomplish in this lifetime. In part 3, we continue with the year-by-year countdown to retirement.

Year 4

Take another look at your personal financial plan. If you have little margin to play with as you compare your net worth with your lifestyle costs, now is the time to get your household budget in order. A visit with any competent fee-only financial planner will inevitably circle around to an examination of your personal budget. As tycoon James Rohn loved to quip, “If your outgo exceeds your income, your upkeep becomes your downfall.” (For those of you reading this in your 30s and 40s, slight adjustments in your lifestyle costs today can accelerate the day when you are financially independent and can made decisions about how you work based on what you enjoy rather on what you must do.)

Year 4 is also the time to noodle out a formal business plan that will help sell potential new associates on the viability of your organization. This does not have to be a 50-page business school exercise, but a simple 10 pages outlining the practice’s prospects and likely trajectory. If you’re considering a partial sale of ancillary ASC facilities to a corporate partner (such as AmSurg) to reduce the purchase hurdle for new doctors or to take some of your investment off the table, you should start negotiating now. Such firms typically like to see the alpha-doctor stay in place for at least 5 years post-transaction.

Year 5

If you’re in a solo practice — or even a small group — it’s important to start recruiting at least 5 years before you actually plan to withdraw. That gives you a couple of years to flail around, find the right doctor, and get him or her profitable enough to be able to afford to pay you for the practice. So start the recruitment process. Until a decade ago, finding a partner-track associate for your practice was relatively easy and could be handled in-house. These days, with what seems to be an acceleration toward retirement thinking, you may need a headhunter.

Establish a formal internal search committee and get on with the preliminary steps of writing the position description or draft contract terms, creating and placing the ads, sending out the mailings, scanning the various available databases of prospects, and vetting the candidates. For strong practices with a fair offer in favorable markets, it may only take a few months to secure a pool of candidates and make a hire. Less attractive settings may take far more time and even more luck.

Year 6

Make sure any new doctors added to your practice as part of a transition plan are getting successful. Even before your new colleague arrived, you should have been front-loading his or her schedule. Unless you have a backlog of patients just waiting, some of this volume is going to have to come from the schedule of existing providers, some will have to come from new promotional efforts, and the rest must be left to time. Remember that unless your young doctors are super successful, they will be unwilling and unable to buy into the practice. In addition, nothing is more frustrating than having to dismiss a faltering associate and start all over again to find a new doctor to replace you in the practice.

Make sure that by now you have reached peak levels of operational and marketing improvements to enhance profitability, inasmuch as the practice’s value paid back to you by a buyer may be related, in part, to annual profits.

Also, in year 6, think through what you’re going to do after retirement. If you’ve been the average ophthalmologist with few non-practice interests and few friends outside of ophthalmology, are you cultivating the resources you will need to stay happily occupied after you leave the work-a-day world? Whether it’s golf or a second business interest, it may take real time to develop the skills needed to master your post-retirement passions.

Year 7

If you are transitioning a young doctor from associate to partner, complete the myriad housekeeping details and start his or her buy-in. Even after a couple of years as an excellent employee, there can be surprises. You may have been hanging your succession plan on unspoken assumptions about what your young doctor would be willing to pay for your practice. Until the deal’s inked, and even for some time after this, nothing is final about your plans. That’s why it’s critical that in your personal financial plan you build in the assumption that the value of your practice when you retire will be little more than the residual accounts receivable and the salvage value of the tangible equipment.

With the next installment of this blog, we’ll cover years 8 through 10.

John B. Pinto is president of J. Pinto & Associates Inc., an ophthalmic practice management consulting firm established in 1979. John is the country’s most-published author on ophthalmology management topics. He is the author of John Pinto’s Little Green Book of Ophthalmology, Turnaround: 21 Weeks to Ophthalmic Practice Survival and Permanent Improvement, Cashflow: The Practical Art of Earning More From Your Ophthalmology Practice, The Efficient Ophthalmologist, The Women of Ophthalmology, Legal Issues in Ophthalmology and a new book, Ophthalmic Leadership: A Practical Guide for Physicians, Administrators and Teams. He can be reached at email: pintoinc@aol.com; website: www.pintoinc.com.