Wells Gibson Friday Blog – 16th April 2021
Preparing for the sale of your practice
As a practice owner professional such as a dentist, preparing for the sale of your practice is also known as exit or succession planning. This typically involves orientating your practice into its best possible position to reach the highest purchase price achievable – however, it’s true other factors can be important for practice owners such as ensuring your successor is the right fit for your staff and patients.
Although some highly organised individuals include exiting in their initial business plan, it’s something that the vast majority of owners leave until 3-5 years before their desired retirement date.
However, it’s not as simple as deciding on a future date and doing some tidying up. Before you plan to exit, you must be certain that you can afford to. This will depend largely on what other assets you have, how liquid these assets are and importantly, how much income you can expect to receive in, what we refer to as, your spending years, followed by your later life years.
The question is, do you need to sell your practice to achieve and maintain financial independence? How much is enough? Will you be relying solely on the capital gained from the sale of your practice or, like most practice owners, Wells Gibson has served and advised, do you have accrued benefits c/o the NHS Superannuation Scheme or other assets, such as a second property; cash savings; stocks & share ISAs; and personal pensions?
The first step is to clearly define your financial situation and the cost of your desired lifestyle. Once you know how much you need to live on each year, we can forecast this into the future.
Although the average life expectancy in the UK is just over 81 years old, you might live to 100, so starting with your desired retirement age, take some time to consider the cost of your desired lifestyle in retirement – perhaps consider two categories such as survival (e.g. gas, electric) and lifestyle (e.g. eating out, holidays). Try to consider your life’s transitions – you may wish to downsize (or rightsize!), travel extensively or work part-time during your retirement, for instance.
With the cost of your desired lifestyle in hand, it’s time to get an up-to-date valuation of your practice. We can then compare this valuation to the amount your Wealth Plan forecasts you will need, to live the life that’s important to you.
Exit or succession planning, along with, retirement and estate planning are complex matters which generally revolve around one big question – how much is enough? This is where Wealth Planning key.
So, before you decide when to exit your business, seek professional advice to ensure that you sell at the right time, with the right outcome and for the right reasons.
Do you know how much is enough? Contact Wells Gibson.