5 financial items practice owners should not procrastinate on

March 28, 2022
It's hard to believe Spring is upon us and Expo East is this week. I will be in attendance to meet with practice owners and would love to block out some time for you. My calendar is HERE and the plan is to find somewhere quiet at the Javits Center. Expo East holds a special place in my heart as I went every year growing up to help with booths and attend practice management lectures. I hope you see you there!
This past year has been one of normalization for many practices, and there have been several consistent issues I run into that practice owners can learn from. At the root of all these issues is this: it's important to have good advisors.
Whether it's a tax-planning opportunity or exit planning mistakes, these are the most common issues I see that should be addressed now, not later.
1- Hire a good CPA. The reasons for this are many: not maximizing taxes, not making the right elections, not understanding what your tax bill is expected to look like before the end of the year so you can actually plan for it, under-utilized or badly kept depreciation schedules and not managing balance sheet items correctly (which is an issues with sales) are some examples of a very long list of things that are commonly done incorrectly. It's worth the annual cost to get these items right over the years from an audit, tax savings and exit planning perspective.
2- Get a good book keeper. It's really common to under estimate how important good financial records are. As an advisor, they are the only way I can track what a practice provides to an owner, calculate practice valuations, understand annual spending and forecast the impact of practice changes (such as hiring an associate and dropping a day of patient care). Additionally, when owners go to sell practices buyers typically look back 3-5 years, so the process should start early. Cleaning up last minute is not a good strategy.
3- Structure your practice real estate correctly. For owners of practice buildings, from both a tax and exit planning perspective, don't try to get cute with build out costs, loan terms (for example, don't take your practice as collateral with real estate), rent rates or the lease agreement. Although you may own both the real estate and practice, treat both like each is working with a stranger. This is a best practice in general but absolutely critical as owners get close to exiting. Similarly, practice owners renting space should always push for terms an eventual buyer would find acceptable.
4- Don't "wait until you need" a financial planner. If I had a dollar for every time a client said they wished they had hired me sooner my kid's college funding would be complete. It's tempting for practice owners to want to wait until they are in the right position financially or fore a reason like selling their practice to engage a planner. What doctors don't realize is that it's the small adjustments over many years that have the biggest impact on retirement and exit planning. Selling a practice in particular is something best managed at least 5 years out so that retirement forecasts are validated, operations can be adjusted, financial statements fixed and tax strategies reviewed well before an actual sale takes place.
5- Invest in practice management. Whether it's through a consultant, reading books, study groups or CE sessions, knowing and understanding your practice's business model, niche, marketing, KPIs (key performance indicators), operations and developing correct human resource procedures is critical to growth, income maximization and exit planning. For most practice owners, their practice is very personal, but viewing it through the lenses of a professional can help maximize income, value and generally help running the business easier.
Have a great week, especially everyone headed to Expo East! I hope to see you there, and if you are, let's MEET. (If you don't see a time that works with your CE schedule please let me know so we can try to find an alternative).
P.S.- Hayes Wealth Advisors works exclusively with Optometric Practice owners to help them build wealth outside their practices through customized, industry-specific planning. We have built planning tools to comprehensively answer the questions that face practice owners in today's environment. Our services are available both on a one-off basis or in the context of a full financial plan. Set up a call if you'd like to learn more about how Hayes Wealth Advisors can help you make the best financial decisions for your practice and family.