On Increasing the Value of Your Practice

Industry with Elegance - 2014

Idaho

First Steps

Like any grand goal, its accomplishment depends on completing tasks that are part of a plan designed to achieve your objective.

When it comes to transitioning from your practice, the first items to address are to prepare yourself personally and professionally. These include the creation of lifestyle and financial plans to determine whether your current assets will support your desired lifestyle. 

Once completed, it is prudent to undertake a thorough, objective review of the current condition of your practice. The purpose is to ensure that it's functioning properly. This is the subject of a previous article.

Next: Optimize the Value of Your Practice

The next  step in preparation is one that will benefit you in the near term as well as at the time of sale. That’s to optimize profitability and thus its value, to you as well as a prospective buyer.

The methodology of this endeavor is the Practice Value Optimization Plan. 

As is common in life, there are things that stand out in importance for what you do. Then, there are things that are best avoided, if possible. 

To Do or Not Do

As you proceed with the assessment of your practice, you’ll probably find that there’s benefit to be found in doing some things and not doing others. Let’s discuss the latter first and cite examples, as I leave it to you to evaluate your own practice.

To not do:

• I know physicians who, for one good reason of another, decrease their volume of professional services as they approach their end of career. This is understandable. However, it’s important to keep in mind when making such a change is optional, that this will likely decrease your profitability and subsequent valuation. When you consider that practices may sell for multiples of their profitability (EBITDA), this can be significant.
• Sometimes practices incur seemingly insignificant expenses that aren’t closely monitored over a period of decades. The cumulative effect of these on your profitability can be significant. Start by reviewing automatic, recurrent expenditures and evaluate current options.

To do:

• Review and identify your sources of revenue. Include your professional services as well as that of others. Is productivity optimized?
• Is the work schedule of each member of the practice optimal? Think beyond past work habits. Consider the impact that changes over the relatively short term of your transition can have on additional profitability and therefore, value.
• Are there sufficient personnel to meet the demand for services?
• To what degree are you depending of current staff to support the preparations for transition? To what degree does doing so affect productivity? Are staff reassignments or additions necessary that will also support a new physician(s)?
• If you have an in-office surgical facility, do you know the cost of each surgical procedure? What about multiple procedures? Is your facility a true profit center or does it operate at a loss?

These are just a few examples among the universe of possibilities. 

Beyond what you personally know, how can you identify other opportunities?

Your Staff as a Resource

Two valuable principles:

• You probably have a knowledgeable, talented and devoted staff. I suggest that it’s really important to engage them in this endeavor and ask their opinions and suggestions. Ask questions like: What, Why, When, How, Where and Who. The answers will be revealing.
• Ask yourself: Do I practice a good balance between my role as a leader and manager? I counsel that great leaders are also great managers who are able to balance these two roles effectively.

I submit that this is a critical time of your career when it’s beneficial to marshal all your resources for your benefit, that of your staff, your patients and those that will follow in your steps. 

Seize the initiative and savor the moments.

My best wishes to you and your family!

PS: Would you like to learn more about how to prepare yourself and your practice for the end of career transition? You may be in solo practice and wish to carry out a succession or outright sale; perhaps you are in group practice or are otherwise employed. I provide consulting/coaching services that are tailored to your specific needs. Click here to request a complimentary introductory conversation.

Madison River - 2004

Yellowstone National Park