Just under 35% of practice owners intend to exit their practice within the next six to 10 years, according to William Buck’s leading annual 2024 Exit Smart Report. Yet over half of all practice owner respondents lack an exit plan, risking substantial sale proceeds by being unprepared. This highlights a significant need for timely advice and planning among practice owners.
It’s critical for practice owners to understand that there isn’t a one-size-fits-all approach to exiting. Tax is undoubtedly important when considering succession, but perhaps even more important is the wealth planning aspect. With time, you can work with your advisors and develop the solution that best suits you and your needs.
More key results from William Buck’s 2024 Exit Smart Report:
- 51% of respondents from the health industry were unsure if their business structure was tax-effectively structured for a sale
- Nearly two-thirds of respondents from the health industry had not had their practice valued in the last 3 years
- More than half the health industry respondents were concerned about receiving their desired sale price, and
- Just under 30% of health industry respondents were unsure if they had enough money to retire sustainably.
Despite the unpreparedness for exit among practice owners, there are a few steps you can take now which will steer you towards an exit on your terms, at maximum value.
Step 1: Consider how you imagine your retirement to be. What lifestyle do you want? Does it involve travel, hobbies, family and other pursuits? How much income do you think it will take to sustain?
Step 2: Speak to a financial advisor about your goals and aspirations and work with them to develop a wealth accumulation. A key component of this plan will be to determine determining your level of reliance on the sale proceeds from your practice, to fund retirement.
Step 3: Have your business valued now. The valuation has two elements: the value of the business and the ‘why’ the business was valued at that amount. As you plan for succession, the ‘why’ is perhaps more important than the amount. With time to plan for an exit, you also have time to address any potential weaknesses in the business and improve its valuation.
This process is very common in succession planning and is often called a ‘value gap analysis.’ It involves analysing the gap between what you want for the business and what it is actually worth.
Step 4: Review the structure of your business and explore your options for a sale. You don’t have to pursue a trade sale and sell to another business. Consider various alternatives that could not only maximise your sale proceeds but also align with your lifestyle plans. For example, if you would like to de-risk and sell your business but would also like to continue working at least part-time after a sale, there could be options for a sale and buy-back at a lower percentage. This strategy is increasingly common and offers a second bite of the cherry when you ultimately decide to retire.
Knowing when to sell your practice isn’t easy. There may never actually be a ‘perfect’ time to sell. As such, waiting for the ‘right time’ is likely just holding you back from the next phase of your life.
William Buck’s 2024 Exit Smart Report highlights the challenges faced by business owners when succession planning. If you are planning an exit or would simply like more information on options available to you in the future, please contact your local William Buck health specialist.
