Planning to Retire: The Most Important Planning of Your Life

by Alex Zlatin, Maxident

1/3 The Experienced Dentist Pocketbook — A Three Part Series

Dwight D. Eisenhower said, “In preparing for battle I have always found that plans are useless, but planning is indispensable.”, throughout our adult life, retiring seems fairly far away. It might be argued that our adult life is too busy and overwhelming, one does not have time and resources to plan for their retirement. This cannot be farther from the truth! Like Eisenhower mentioned in his above-mentioned quote, as soon as you graduate and find your full-time employment as an associate, you should start planning the rest of your life – and never stop thinking about it, tweaking it and adapting to the evolving environment and your needs.

retirement planning

How to plan-out your whole life, in your twenties (or even thirties)?
It is true that it is extremely difficult to see 30-40 years into the future. However, difficult is not impossible. Coming out of school with a huge debt, eagerness to gain experience and start paying it off, is a definite focus steal. Navigating the unspoken life milestones, like marriage, children, divorce, child support, being a single-parent, etc., can be stressful, exhausting and draining. Having said that, it is imperative to always think about your end-game and keep looking forward. The best way to do so is to reverse-engineer your requirements. If you would like $10K per month when you retire, assuming you will be retired for 25 years (60 y/o to 85 y/o), you’ll need $3M. Working with rough numbers, when you start saving for retirement when you are 30 y/o and following our assumption of retiring at 60 y/o, you’ll have 30 years to accumulate $3M. This is equivalent to $8,334 to save each month after paying off any loans and sustaining your lifestyle needs. Although it is a substantial amount of money, it is attainable with proper planning.

retirement planning

Life Milestones
Looking closer at our life milestones, will give us an interesting viewpoint at financial planning (aka wealth accumulation). Unlike many students, dentists finish their schooling with one of the largest debts. As life progresses, you get married and have kids. This natural enhancement to your family, brings additional expenses. At this stage, earning enough to sustain a family and pay-off your student debt is the best play. Easier said than done. As dentistry becomes more competitive and there are less patients per dentist in urban areas, earning more early on in your career can be quite challenging. As you become a little more comfortable with your earnings, other milestones can throw a wrench in your plan – sickness (either yourself or family), divorce and supporting your kids through some avant-garde endeavors are just some possible occurrences which would require you to pivot in your financial journey and re-plan for the future.

It is important to mention that although sickness and divorce are life events that force you to take some action, supporting your kids in a business venture, through college, etc., is not mandatory. I know enough dentists that prefer their kids to succeed on their own and do not provide financial support. Having said that, I am sure you’d like your children to surpass yourself in their success and if you have the ability to give them a little head start, I feel it is worth doing.

retirement planning

How to Plan The Sale of Your Practice?
When looking at selling your clinic, there are a few parameters to consider:

1. How Profitable is Your Clinic?
Similarly to selling any business, the more profitable it is the more you can ask for it. Although the Canadian market for dental clinics is a “seller’s market”, which means the seller will get more than their clinic is worth because there are more buyers than sellers, a lot of buyers will not be interested in your clinic if it is not profitable enough for their portfolio.

2. Patient Count and Potential
In the vast majority of cases, the number of your active patients will dictate the majority of your practice valuation. You’d like to use the active patient definition of “patients who were billed anything at your clinic within the last X months”, where X will be either 12 or 18 months. Obviously, the more of these patients you have the better. Having said that, buyers look at the potential of your clinic with regards to level of competition in your area, demographics, trends for the neighbourhood, etc., when exploring a potential practice purchase.

3. Your Timeline
Perhaps one of the most important parameters is your wants and needs. Are you looking at selling and retiring right away? Are you looking at selling and working part time? Are you looking to sell and continue practicing full time for about five years? These are just some of the relevant questions that are instrumental in the decision of selling. Selling your greatest asset, which cost you time, money, hardships and sweat, blood and tears, is probably one of the biggest decisions in your lifetime. It deserves a serious thought put into it and ensuring you base your decision on enough and the right information.

There are quite a few more parameters that influence your valuation. However, if we want to look at the top three, the above-mentioned can provide you with enough information to explore the right pathway.

We have not discussed the question of when should you sell your clinic. This is because the answer to this question will fluctuate substantially, depending on the answers you provide to the questions discussed earlier. The reality is that each dental owner is unique and has their own requirements, needs and wants that will dictate when should they put their practice for sale and what path to pursue.

In the next article titled “Preparing to Sell – Decoding Practice Valuation”, we will go into the details of how your office is valuated and provide you with practical advice to increase the value of your practice, as you gear up towards putting it up for sale.

About the Author

Alex Zlatin is the CEO of dental practice management software company Maxim Software Systems (MaxiDent). He helps dental professionals take control and reach the next level of success with responsible leadership strategies. He leverages his experience in “Responsible Dental Ownership – Balancing Ethics and Business Through Purpose”, a detailed guide providing practical tools and a unique, proven approach to running a successful dental practice.;

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