While you are selling your medical practice
2006-09-18 15:13:00You’ve been operating your medical or medical-related business, one exemplary of labor and patience that found its beginnings years ago. Suddenly, an occasion presents itself that leaves you contemplating a possible sale of your medical business. Several courses appear attractive, not excluding a total sell-off, partners’ search, or simply looking for an opportunity to participate in another medical business transaction to start a new practice.
Unfortunately, you become sick and cannot work. To keep the value of your business, it should be on the market as a ’running concept’, staying clear of the dubious label of ‘ emergency sale’.
Such a hypothetical encourages the following not-so fictional discussion between a medical professional and a financial specialist:
Scenario 1.
Q: Mr. Doctor, what will happen to your business if you become sick, preventing you from generating revenue
A: I will sell my business.
Q: The selling process is not short. Will you be able to sustain overhead and operational expenses without any revenue? How about 3months; 6 months; 12 months?
A: …It may be very difficult.
Scenario 2.
Q: Ms Doctor, you and your partner have an established medical practice, one that is received as reputable and successful. What will happen if one of you falls ill, limiting his or her ability to participate effectively in the ins-and-outs of business operations?
A: The other partner will work.
Q: For how long? How will the sick partner and his family benefit from the business in this situation; how will stream of income be continued?
A; If it’s not for a short time… the other partner should buy-out… we have had such an agreement.
Q: Do you or your partner have enough money to pay the 50% of the value of business to buy-out…?
A: …Well, it’ll be very difficult.
These are familiar scenarios, prompting difficult questions and very often revealing that pre-planned solutions hardly satisfy current circumstances.
Let us introduce several options to resolve these obstacles, or at the very least, shed more light the complexities that surround these obstacles.
DISABILITY INCOME PROTECTION FOR MEDICAL PROFESSIONALS.
Depends on insurance company, there are some differences in terms, benefits, determinations and conditions of policy. What is most crucial, however, rests in the following:
If a Medical Professional becomes sick and cannot perform the material and substantial duties of his/her occupation, the Insurance Company will pay benefits during the terms of policy. Benefits - is the portion of income stated in a policy. Benefits period (during which the Insurance Company will pay benefits) may be 2, 5, and 10 years or maybe even until the age of 65. These policies are usually automatically (guaranteed) renewable and non-cancelable. Some of them will pay benefits even if an Insured is at work at some other capacity, but not in own occupation.
Example:
A surgeon, or a dentist, aged 45 with an annual income of 200k, purchased the above-mentioned policy a while ago. Unexpectedly he or she becomes ill and cannot work. After 3-6 months our case study is considered disabled and is entitled to an income from Insurance Company at roughly 90K annually. Very often this income is non –taxable and insurance policy will be continued without a premium payment. This amount of money is payable to an insured as a protection against loss of income in the unfortunate case of disability. Also, some policies will allow insured to teach in a college now and receive income as a teacher. These numbers and examples of benefits are subject to the terms of policy and presented here for the purpose of discussion only.
As illustrated, the medical professional may indeed have a stable income during disability. The means to pay overhead expenses during disability to keep up the market value of medical practices, or buy-out part of business are still in question and will be discussed later.
What will it be in the next part of our discussion?
Unfortunately, you become sick and cannot work. To keep the value of your business, it should be on the market as a ’running concept’, staying clear of the dubious label of ‘ emergency sale’.
Such a hypothetical encourages the following not-so fictional discussion between a medical professional and a financial specialist:
Scenario 1.
Q: Mr. Doctor, what will happen to your business if you become sick, preventing you from generating revenue
A: I will sell my business.
Q: The selling process is not short. Will you be able to sustain overhead and operational expenses without any revenue? How about 3months; 6 months; 12 months?
A: …It may be very difficult.
Scenario 2.
Q: Ms Doctor, you and your partner have an established medical practice, one that is received as reputable and successful. What will happen if one of you falls ill, limiting his or her ability to participate effectively in the ins-and-outs of business operations?
A: The other partner will work.
Q: For how long? How will the sick partner and his family benefit from the business in this situation; how will stream of income be continued?
A; If it’s not for a short time… the other partner should buy-out… we have had such an agreement.
Q: Do you or your partner have enough money to pay the 50% of the value of business to buy-out…?
A: …Well, it’ll be very difficult.
These are familiar scenarios, prompting difficult questions and very often revealing that pre-planned solutions hardly satisfy current circumstances.
Let us introduce several options to resolve these obstacles, or at the very least, shed more light the complexities that surround these obstacles.
DISABILITY INCOME PROTECTION FOR MEDICAL PROFESSIONALS.
Depends on insurance company, there are some differences in terms, benefits, determinations and conditions of policy. What is most crucial, however, rests in the following:
If a Medical Professional becomes sick and cannot perform the material and substantial duties of his/her occupation, the Insurance Company will pay benefits during the terms of policy. Benefits - is the portion of income stated in a policy. Benefits period (during which the Insurance Company will pay benefits) may be 2, 5, and 10 years or maybe even until the age of 65. These policies are usually automatically (guaranteed) renewable and non-cancelable. Some of them will pay benefits even if an Insured is at work at some other capacity, but not in own occupation.
Example:
A surgeon, or a dentist, aged 45 with an annual income of 200k, purchased the above-mentioned policy a while ago. Unexpectedly he or she becomes ill and cannot work. After 3-6 months our case study is considered disabled and is entitled to an income from Insurance Company at roughly 90K annually. Very often this income is non –taxable and insurance policy will be continued without a premium payment. This amount of money is payable to an insured as a protection against loss of income in the unfortunate case of disability. Also, some policies will allow insured to teach in a college now and receive income as a teacher. These numbers and examples of benefits are subject to the terms of policy and presented here for the purpose of discussion only.
As illustrated, the medical professional may indeed have a stable income during disability. The means to pay overhead expenses during disability to keep up the market value of medical practices, or buy-out part of business are still in question and will be discussed later.
What will it be in the next part of our discussion?
- How to create A fund to continue the process of a selling medical business (practice) in the case of an owner’s disability?
- How to create a fund to buy-out partner’s interest in the medical business in the case of his/her disability
