9 Mistakes Doctors Make when Starting or Buying a Practice
Have you ever considered starting or buying a practice? If so, you’ll want to hear the 9 biggest mistakes we see doctors make when beginning this journey. Rob Borcherding, Vice President and Business Development Manager at Wells Fargo, as well as Brett Larson, JD, Attorney at Messerli & Kramer, join Katherine Vessenes, JD, CFP®, CEO and Founder of MD Financial to discuss the top 3 mistakes they see in each of their perspective fields.
Listen in as a lending officer, lawyer, and our very own senior financial advisor discuss the most common mistakes they’ve seen doctors make when starting or building a practice, so that your transition to owning your own practice is as seamless as possible.
1:10 - Rob Borcherding’s Top 3 Mistakes:
Interviewing and Selecting your Team Inadequately
When entering into practice you need a core group comprised of an attorney, a CPA, and an insurance agent.
Many new doctors don’t consider their construction costs, equipment provider, or having a realtor that specializes in medical offices.
Not Preparing your Personal Financials or Understanding Pre-qualifications
Doctors need to know how practice lending works, as rates are historically low and there are so many ways a practice lender can help you out.
Student debt considerations are sometimes missed, so having a conversation about how quickly you should pay back your loans will really help set you up for success.
Understanding the liquidity factor is essential for doctors hoping to own a practice.
Not Understanding a Business Plan or even having a Rough Draft
Marketing and advertising ideas must be considered when drafting a business plan.
Clinical philosophies and a general vision for your business is essential to starting your own practice.
9:12 - Brett Larson’s Top 3 Mistakes:
Not Making a Smooth Transition from your Past Employer
When leaving your current employer, make sure the transition is as smooth as possible, as to not create a risk of any lawsuits.
Look at your initial employment agreement to fully understand the non-compete/non-solicit obligations.
Based on your location and your specialty, see how enforceable these components are as to not take any clients that could cause you trouble from your past employer.
Not Focusing on Drivers of Consistent Revenue Cycles
Good collection/billing practices is the first step in making sure you are set for success from Day 1 of your practice.
Make sure your highly profitable employees have good non-compete/non-solicit obligations.
This is the flip side of the analysis you went through to leave your employer.
With contracts, make sure they have market terms and you have as much control as possible.
Alignment when Entering a Practice with Multiple Owners
Consider where owners are in their career path. If you join into a practice while early in your career, consider the paths of other owners.
In your Buy/Sell Agreement make sure that there is a clear picture of what will happen if one owner wants to leave.
22:51 - Katherine Vessenes’ Top 3 Mistakes:
Counting the Costs Incorrectly
When financially reviewing doctors’ business plans, we notice a common mistake of miscalculating many of the start-up costs.
Many doctors haven’t considered the lag that happens from starting the practice to getting the first revenue from it.
Getting Subpar Retirement Plans
SEP IRAs usually aren’t enough for doctors saving for retirement. We recommend starting a 401k whenever possible.
A Defined Benefit Plan (DBP) may be a good option.
Overall, MD Financial’s goal is to help doctors save more money in taxes now and have more tax-advantaged funds in retirement.
Doctors are Not Usually Born Entrepreneurs
A lot of doctors haven’t started a business, and many don’t know all the small requirements that go into it.
You might prefer working in a smaller business to learn what some day-to-day issues may be, such as: hiring, billing, negotiating with landlords, and more.
In summary, if you’re a doctor and you have a dream of owning your own business, know that you are a valuable player to practice lenders. Any doctor who wants to take advantage of owning a business can do it. Make sure you are leveraging the information of professionals around you, such as CPAs, attorneys, and financial advisors. When we consider doctors who own their own clinic compared to those who don’t, they usually are the happiest. They like being able to have control and here at MD Financial, we really encourage it! Get the team around you and make your dreams happen.
If you would like to contact Brett or Rob specifically, find their email addresses below:
Rob Borcherding - robertborcherding@wellsfargo.com
Brett Larson - blarson@messerlikramer.com
CONTACT US
1-888-256-6855
Katherine Vessenes, JD, CFP®, is the founder and CEO of MD Financial Advisors who serve 500 doctors from Hawaii to Cape Cod. An award-winning Financial Advisor, Attorney, Certified Financial Planner®, author and speaker, she is devoted to bringing ethical advice to physicians and dentists. She can be reached at Katherine@mdfinancialadvisors.com.