Bill Klaproth (Host): This is AAOMS On the Go. I'm Bill Klaproth. With me is Zach Esplund, founder of Physicians Wealth Solutions. Zach works with healthcare professionals to help design financial plans that support successful practice transitions. And today, we're going to discuss practice strategies to support the long-term success of oral and maxillofacial surgeons. Zach, welcome.

Zach Esplund: Bill, I appreciate you having me here.

Host: Yeah, looking forward to talking with you. So, thank you so much for your time. So, let's start with this, Zach. Why is it important to start transition planning early, even if an OMS is not ready to retire?

Zach Esplund: Well, it's one of those things beginning with the end in mind, and it sets up the foundation for a successful transition. I can't stress enough: Better to over plan than to just jump into it. Starting early, it increases your options, gives you flexibility. The nuances that you can work on can maximize the valuation. And it also helps with a lot of the emotional side of things. If you have an idea of where you're headed and what targets you're after, then it puts your mind at ease. And it takes some of the rash decisions that could be made if we're burnt out or if we're just jumping into something, and really not having it as successful of an outcome as we could have otherwise had. Negotiation wise, it helps with that. If you know your practice's value, if you know what's fair, what's not fair; if you're feeling under pressure, if you're pressured to sell, buyers can feel that, and they'll play that to their advantage versus yours.

The other piece of it, I think, too is a lot of the structuring of it. If you're just jumping into a sale and saying, "Hey, I just want out" without thinking about the tax consequences versus saying, "Hey, I want out, but if I structure it this way, maybe as an installment or over a period of time,” it creates a drastically different outcome for the better for you. So, definitely starting early to think through all the dynamics is very beneficial and also recommended.

Host: Yeah, I like how you say it's better to over plan. That seems like really, really good advice. And you said it helps the emotional side of things. If you know where you're going, it keeps you from making some decisions you might not have made otherwise. And it gives you that peace of mind. So, planning early, that really makes sense, Zach.

So, what are the biggest mistakes that you see surgeons make when approaching a practice sale or a succession?

Zach Esplund: Well, to kind of piggyback off your first question, it's number one, just waiting too long to start the process. Number two, not really understanding the various drivers that drive the value or the various components that drive the value. What levers do I need to turn up or down? Or how can this impact the actual value or attractiveness of my practice?

Another piece I see a lot is if we're busy doing what we are doing as a surgeon and don't want to mess with the books, the financials and all of that stuff, and it's not as clean, or it's messy or inconsistent, it can lead to delays. It can lead to lack of confidence for a buyer. They may look at this and say, "No, this thing is not really in good order," or "I don't really trust what I'm seeing here."

And then, I would say another big mistake is trying to go at it alone. It's like putting your house for sale by owner versus working with a coordinated team, especially when we're talking big dollar amounts where taxes come into play, and just knowing the preparation on the internal side of things, not just on the financials, but with the staffing, with the patient retention and all of those pieces as well.

To answer your question and simplify it, I would say it's waiting too long to get started, not really knowing what is driving the value, not having clean books, and then just trying to go at it alone. You don't know what you don't know. Listen, take advice, hear perspectives, and then make educated decisions around how you want to structure and do whatever makes the most sense for yourself is what I always suggest. Listen to your inner voice and follow that, and then get the professionals that can help you do it the right way.

Host: So then, how can an OMS prepare his or her team and patients for a smooth transition?

Zach Esplund: Getting into the human side of it, which is just as – if not more – important than the financial side. And I would say the best thing you can do to prepare team, prepare patients is be intentional about building internal leadership with the team. Communication, overcommunicate transparently. Let your people know what's going on, why it's going on. Start to introduce if somebody's successing you, introduce those successors to your patients early. So it's not "I'm here today, gone tomorrow." It's "I'm here today. Here's who is going to be taking over, and you're in good hands" to help that retention. And stay consistent.

If you have a clear plan on what you're doing when you're doing it, not only does your staff like that, but your patients do as well versus if it's just a rash decision and you're here today, gone tomorrow. Successor takes over the practice and then half the staff leaves within a year. Patients start to leave because the service is poor. It can be a night and day difference if you have your team onboard and you're smoothing that transition versus a large or significant abrupt change all at once.

Host: Well, it seems like the more you do on the front end of a transition, the smoother the back end will go.

Zach Esplund: It is a common theme we're seeing here. The sooner, the better. And hope for the best, plan for the worst, and just understand the variables that could impact you for better or worse.

Host: I'm just curious, what role then does the surgeon's personal financial plan play in a practice transition? That's got to play into it as well.

Zach Esplund: I think that that speaks to the heart of why and when and how are we transitioning? If you think about the business as a tool or a means to a personal end. You know, it is, "I've dedicated my life to this. Now, I'm moving into the next chapter," whatever that means, whatever's important. How do I make sure that this tool, this baby that I've grown over the last number of however many years is giving me the full value? nd how do I make sure that the value that I'm receiving is going to be able to provide the lifestyle or the ideal future that I have for myself?

So, to better answer your question, how does the personal financial planning play into the transition? Well, they go hand in hand. If I am, let's just use the word retiring. If I'm transitioning out of my practice and retiring, I need to know how I'm then going to spend my time, what my lifestyle looks like, and then all the numbers that come into play to sustain that lifestyle. So now I know, "Yes, I can sell today," or "I need to drive the value at least to this to accommodate my personal goals," or "I need to adjust my personal goals," which nobody wants to do. It's how do we use the business, or how do we turn the levers so that it fits into what you're wanting for your personal life.

Host: That pre-planning, again, knowing what you want to do in retirement and understanding that and how much money you're going to need, really, really important.

Zach Esplund: One more comment on that to expand, the mental and emotional aspect is so critical here because it's an entirely new phase of life, and it's different. The fear of the unknown can be paralyzing and it can cloud your otherwise good judgment versus if you've, again, planned ahead, you have a clear idea of what you're doing and how you're going to do it, you understand that if practice proceeds will net X amount of dollars, these dollars are going to be used here, these dollars are going to be used there, this is accomplishing all of my goals. It really makes that a much more enjoyable transition and process so that you can move into that next chapter feeling good, feeling confident, feeling like you've made the right decision versus feeling otherwise to keep it simple. And not having the feelings of joy, but maybe the feelings of remorse or uncertainty.

Host: And it sounds like if you don't think you're going to have enough to meet the lifestyle that you want, you're going to have to either work longer or grow the practice. Would that be right?

Zach Esplund: There's variables, there's levers. So it’s, do we adjust the personal life that we want? Hopefully not. If not, what can we do on the practice side to get it to where we need it to be?

Coming back to kind of piggyback on these other questions, if you have the right sort of advisory team around you, you may uncover ideas and strategies that not only reduce the tax impact or the cut that comes out of your pocket for taxes significantly, but you can significantly increase the return and/or the income that can be derived from these dollars you're receiving. So, what might simple math look like it doesn't work, with a few professionally guided ideas and strategies, it could completely change that dynamic for the better. So yes, coordinating with your personal goals in mind is, I think, fundamental to any sort of a transition.

Host: And then, having an advisor advise you on this is, you said one of the mistakes you often see is people trying to go at it alone. So, have somebody that's an expert in financial planning that can help in transitions like this that can help you with this really makes a lot of sense. So, for someone who is within five years of retiring maybe, what is your best piece of advice for that person?

Zach Esplund: I always say the five-year window, it's the sweet spot to really getting things right. This is kind of that window of time when a buyer's looking back at the financials to see what has the trend been? And this is really where things can go really well or, again, where lack of planning can just undermine the decades of hard work that you've put into this. It's like we could potentially fumble the ball at the end zone right when it matters the most.

So, best piece of advice for somebody within five years, I would say treat the transition just like you would treat a surgery. Diagnose the scenario, see what the scenario is. Consult with specialists, get your advisory team. And then follow a orchestrated timeline that really reflects the outcome or it helps generate the desired outcome. And don't wait till you're burned out to start doing this stuff. That's one of those mistakes I noted earlier. If you're just done, and you don't have the time or energy that it really takes to do this the right way, it just drastically changes the outcome of what could have been.

So, start early. Make sure that you have the adequate time. If there are levers that need adjusted to improve financials, reduce debt, mentor a successor, for example, transition the patients, make sure the team and your workflows and processes are documented so the next person stepping in can do so easily. Really just intentionally stepping into this as a journey that you're in control of. And five years prior is a good time to do it. Earlier is better, but the longer you prolong it, the less time and flexibility you'll have to move some of these levers into your favor.

Host: So, that's a good marker, Zach. Your best advice is you got to start at least five years out to really start putting this plan together. It's not like, "Okay, I'm going to do this next year." If you start five years out, that pre-planning, it will just make it that much easier.

Zach Esplund: When you look at the upside versus the downside of starting five years sooner or even earlier, it puts you in a position of power to make the decision per your preferences. Worst case scenario, the five-year mark gets here and you changed your mind and you're not ready to sell or you're not ready to transition out, you don't have to. But you've already done the work to just drive the value that much higher and you're now in that spot where you can negotiate from a standpoint of, "I don't really need this. Make me an offer I can't refuse," or "I'm all ready. It's just when I'm ready-ready, I'll pull the trigger on the plan that's already been orchestrated."

Host: Really good advice. And five years seems to me, my opinion, like a minimum. Five years sounds great, but it seems like even a little earlier, if you can, would be a better way to approach this just to really ease that mental side of it and have that peace of mind, which you were talking about earlier.

This has really been interesting, Zach, and really I think important for OMSs to understand and really start to think about these things earlier. And luckily, we have people like you to help guide OMSs through. Before we wrap up, Zach, is there anything else you want to add?

Zach Esplund: So that last question, the five-year sweet spot and all of that, I think your question was what is the best piece of advice for somebody within five years of retiring? Well, if you don't have a plan yet, get some help as soon as you can. If you're getting help, but you still don't feel confident, or you don't have the clarity that this will work out, or you feel like something's missing, listen to that feeling and try to identify where that's coming from. That typically comes from the lack of clarity or advice in one or maybe more than one particular area.

When you're transitioning out, you should know and feel very comfortable and confident with how it's all going to work and what it's going to result in. So if you're within five years and you don't feel that way or you don't feel like you've adequately prepared, don't delay it. As you had mentioned, Bill, you're getting to the end where if you delay too much further, you're going to run out of time to adjust what could potentially still be adjusted for you as well.

Host: Yeah, really good advice. Zach, thank you so much for that. We really appreciate it. And thank you so much for your time today in talking with us about this. We really appreciate it. Thanks again.

Zach Esplund: Yeah, my pleasure. I appreciate you having me. Always happy to help.

Host: Yeah, for sure. Once again, that is Zach Esplund and you can visit AAOMS.org/AAOMSToday and the AAOMS Today Practice Management Notes columns for more practice management resources and tips. So if you're in this position, the things that Zach was talking about today, please visit that page and you will find resources and tips on things exactly like this.

And if you enjoyed this podcast, please share it on your social media and make sure you subscribe so you don't miss an episode. I'm Bill Klaproth. This is AAOMS On The Go. Thanks for listening.