The cost of failing to identify the economic factors that affect your practice:

Your practice valuation may change in line with economic trends, the needs of the community that you service, and the general perception of the value of your service to its community.

Staying abreast of market and patient demand can allow you to update your practice model, and taking those changes into account will be every bit as important as re-evaluating your practice value when seeking a buyer for your practice succession.

Practices operating in country and outback areas may have fewer potential succession options and eventual buyers, because many younger or up and coming GPs are reluctant to set themselves up for what they believe will be a life of isolation and a lack of social facilities frequently experienced in country areas. This results in multiple forms of loss – to the medical practitioner who is keen to sell the practice for a a fair profit, and to the communities of our nation’s country areas, due to the loss of essential medical services. With continued rising costs to the health system, the supply of doctors in remote regions slowly shrinks.

There are however win-win solutions that could help to turn around this dilemma…

CASE STUDY #2  – Practice succession strategy for a country GP

Dr Richard, a GP in a small country community, implemented a well constructed succession plan to overcome the difficulties he faced in selling a remotely located general practice. Here are the main features of his continuity strategy:

1. Dr Richard sponsored Ian, a talented student from his community, through medical school.
2. Ian, having strong family ties to the local area, was more likely than most to want to return to the region if he could be assured of career prospects there.
3. Dr Richard seized the opportunity to build his succession plan, and secured an agreement with Ian to join his practice as soon as Ian was fully qualified.
4. Both parties benefited from the agreement, with Ian receiving substantial financial support during his studies at medical school, and with Dr Richard gaining the assistance and continuity which he required, via a legal commitment from Ian to work in the practice.

There is nothing to prevent GPs in any location from developing a similar strategy to assure a potential candidate for their practice. Many Medical students will graduate with significant HECS debts, so may be attracted to the possibility of commencing their career with a clean financial slate, by accepting a similar arrangement as offered by Dr Richard to Ian.

Government incentives that may assist your practice succession

The Australian Government has instituted a scholarship program for medical students with the specific purpose of encouraging more GPs to practice in regional areas.

The Bonded Medical Places (BMP) Scheme allows up to 600 students to receive HECS reimbursements, in exchange for a commitment to work in districts where there are shortages of general practitioners. They must do so for a minimum of six years after gaining the general practitioner fellowship.

In addition, the Medical Rural Bonded Scholarship (MRBS) enables up to 100 students who are prepared to commit themselves to working in rural locations for a minimum of six consecutive years, after completing fellowship studies as general practitioners, to receive (from 2010) $24,207 per annum, tax-free, and indexed annually, while they study.

You can read more about the details of these scholarships my latest book, “Your Practice Succession: How to Leave a Legacy and Reap the Rewards of a Lifetime of Service to Your Community”

How prepared are you to exit your practice with maximum cash flow and profits?

Take the FREE quiz and find out!

To Your Profitable Practice Exit,
Leigh Riley

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Overcoming Business Succession Strategy Weaknesses

My previous post consisted of a case study about how to eliminate or reduce tax payable when you exit your business, and in an earlier a post I identified the 8 Exit Strategy Weaknesses that you want to overcome for a more profitable exit outcome.

Being in business requires you to maintain updated knowledge of a vast range of issues, and the economic factors impacting your business are just as important as anything else I’ve covered in this blog series.

Understanding the trends that will develop and change your business as a result of economic factors will be crucial for the longevity and continued viability of your business.

On Friday I was speaking with a dentist who was busy factoring in demographic population shifts and social change to his business decisions.  He was thinking about how these factors that he had identified would affect his Dental Practice earnings over the next 10 years.  Cleverly, he is actively planning his business for the shift in demand, to ensure his Practice continues to remain relevant to the market and profitable well into the future.

Who would have thought that tooth repairs would be affected by changes to the economy?  But dentistry is a business like any other, and this very smart dentist is fully across that fact.

Here’s an economic reality that will affect every business, no matter what your industry or business focus may be.  The Global Financial Crisis (GFC) has had a long lasting effect in ways you may not have imagined.  Even if your business has grown and continued to prosper through this period, it is very likely it will bite you when you go to sell – unless you’ve put in place a healthy exit strategy.

How To Can the GFC Effect Your Business Exit?

If you’re expecting to sell your valuable business asset, start thinking about the price that someone will need to pay to buy.  If you’re like many business owners I’ve met, you may have built an asset that is not easily afforded without the buyer borrowing to purchase.

Now here comes the GFC crunch point: all financial institutions are scrutinizing very carefully the money they lend for business purchases since the GFC.  They will only lend to people who have substantial assets to back the loan, and in the absence of that, financial institutions require a very healthy business proposition with a high level of business asset backing and robust sustainable and proven cash flow.

That reality is certainly applying pressure to business owners who hope to make an easy sale in the immediate or medium term.  The situation isn’t likely to improve for some time, so it wouldn’t be wise to live in hope that it will pass soon.

How can you prepare to sell your business for the price you want?

You want to start preparing now!

• Boost your revenue and continue to show a healthy profit.
• Tidy up your business financial status.
• Identify the trends for your industry and start leading your business into the long term sweet spots of revenue earning.
• Develop a strategy that will position your business earnings for the long term.
• Think outside the square about who will buy your business, and how you can position your buyer to afford your business so you can exit with maximum cash flow and all the profits you deserve for the lifetime of effort you’ve invested in building your business.
• Gather a team of succession experts to assist you in locking in your strategy, and make sure they’re working collaboratively for your benefit, so that you receive the best possible solution that will overcome all the barriers we’ve identified.

If you need a quick summary of the aspects of your business that will get you started on preparing your business succession, you can take the Business Exit Quiz. It’s FREE, and you will receive a customized analysis of your exit readiness with a list of items that you need to work on to maximize your business sale price.  The 10 questions usually take 2-3 minutes to complete.  So what are you waiting for?  Click here now to take the Business Exit Quiz.

You could also read the book ‘Your Business Succession‘ for a comprehensive commentary on how to prepare your business for maximum cash flow and profit at your exit.  Order your copy of “Your Business Succession” online.

To Your Profitable Business Exit!

Leigh Riley

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