Exiting a Practice AND Investing Requires Education and Experience

Guidance For Your Financial Decisions

Picture of by Dr David Phelps

by Dr David Phelps

Many dentists and doctors reach out to us at different times in their careers.

They are interested in how we help our doctors and their families create a game plan, a Plan B, by investing in alternatives to create cash flow.

Predictable, sustainable, recurring income that replaces your active income is highly desired but seldom planned out in detail.

Dentists and doctors also come to us right before, during, or after a practice exit, when they’ve sold their practice, received a large amount of equity, and want to put it to work.

As long as you had equity in your practice, that is, actively operated your practice, you’ve been able to produce income. You know best how to maximize that equity.

But once you take the chips off the table and you hold that equity in cash what do you do with it? Up to that point, you've been directing that capital with your finger on the pulse of that business or practice.

Now you're out. You are no longer the one in charge. If you’re still getting paid, it’s based on your production, just like an associate doctor. 

From Practice Owner to Investor – Making the Leap

We often seek education on running a business, and we take CE, or join other masterminds, but it never occurs to us that we should do the same for our finances. The mistake most practice professionals make is not seeking education or a group that helps you figure this out.

Many of our own members make the claim, “I only wish we had found you and joined Freedom Founders sooner. We sold our practice and what we learned from you and your group showed us how to do things better.”

That’s often the case. We just don't know what we don't know. We're not involved in these kinds of financial transactions on a regular basis, so why would we know?

DSOs (private equity) do it all the time. They buy and sell many practices every month, while you only sell your practice once. Even with a good advisor, there are things you just don’t know.

CPAs are great at examining taxes, and attorneys are great at examining the structural component. But does anybody understand how the business model works?

The Importance of Recognizing Incentives

At Freedom Founders, we have a great board of advisors. What makes us different is that we provide guidance in exiting your practice and investing in alternatives like real estate without taking commissions.

We don’t have affiliate commissions like brokers do. There is nothing wrong with taking commissions like brokers or people who sell real estate syndications do. If it is disclosed then it’s legal.

But you must understand the incentives behind any one side of any agreement. Who has an incentive to make the deal? Who has the incentive to take your capital and put it to work in a real estate syndication, whether it's appropriate or not?

Someone else has at least as much incentive to get you to do it as you might have to try to figure out where to put your money.

When you don't have an unbiased perspective, you don't get all the information. Information is omitted, whether by intention or by design of the incentive. The fact is, when someone is selling you something, you don’t usually get all the information you need to make a decision from them.

I don't sell any products or other people's services or investments. Freedom Founders is an education and connection program. We help you create your personalized blueprint to reach financial freedom and offer you the guidance and education to make the best investment, business, and practice transition decisions you need to achieve financial freedom.

This is why we’re different from anybody else out there. We can't be bought.

When seeking a product or service, you must consider the incentives. Every day, people are bought. I see it in other groups that bring together investment opportunities or DSO rollups. There’s always an incentive in there somewhere.

That is how the capitalistic marketplace should work. But if you understand the incentives, you are better armed to make the best decisions for yourself and your family.

Every time you go to the marketplace, someone wants to sell you a product or service. The promoter or seller must get paid somehow, and that's okay. That's how it works.

But this means you have to do the work to understand if the potential prescribed benefits are:

  1. Real (truthful)
  2. Viable (can be accomplished and makes sense)
  3. Predictable (has a strong likelihood of occurring)

You must also understand the particular dangers that prevent you from receiving your full money back with a return.

This applies to both real estate and practice exits, particularly when receiving multiple payments over a number of years.

Don’t Wait Until You Sell Your Practice to Build Your Plan

People knock on the door right when they're about to cross the finish line. “David, we talked to you a year ago, and my wife and I are right now signing a letter of intent with xyz DSO. We'd like to jump in right now to Freedom Founders.”

My response is, “You can, but you might not want to go through with your sale just yet.” We've saved many of our members hundreds of thousands of dollars by having them take a pause to learn from our community.

Our members are able to tweak a few things, choose a different buyer, or avoid the wrong real estate investment, which saves them money and allows them to get what they want in the first place. 

Most do not have the background experience or the ability to vet and do the due diligence for either real estate investments or their practice exit. Most don’t know what to ask for, or what to negotiate for.

Instead, most just let someone else drive the bus. They just hop inside for the ride. A good doctor is supposed to take financial advice from somebody else because it’s too complex for them. “Don't worry about it. We'll take care of you. Here's the term sheet. Jump in. It's all good.”

Typically, when the market's running uphill, you’re going to do well. Unless someone has been totally incompetent, deals generally work out during a bull run.

If you sold your practice four or five years ago and you have received a couple of recaps already, you may be close to being out completely. Good for you.

The same applies to real estate investors. If you invested a few years ago and you're exiting now, good for you. You probably hit it just right.

If you're just entering the practice sale or real estate market right now without understanding the market cycle and the dangers, you're doing yourself and your family a huge disservice.

My advice to you is to get educated and find a group that can give you accurate information and is not trying to sway you in one particular direction. 

You need to understand who has your best interest at heart. In most cases, that's only you. I hope this helps guide you through the shark-infested waters out there today.

You can sell your practice and invest successfully today; you just need help and guidance to avoid the danger zones. And I'm here to raise those red flags.

Next month, I am launching a small, private online group specifically for doctors who are considering or in the midst of a practice transition (full or partial sale).

I will be laying out a financial roadmap to successfully navigate your exit and invest for replacement income while protecting your nest egg from market volatility. 

his is your opportunity to receive direct feedback on your specific situation. Space is limited. You can get all the details here.

My advice to you is to get educated and find a group that can give you accurate information and is not trying to sway you in one particular direction.

To your freedom!

– David


P.S. Whenever you’re ready, here are some other ways I can help fast track you to your Freedom goal (you’re closer than you think) :


1. Schedule a Call with My Team:

If you’d like to replace your active practice income with passive investment income within 2-3 years, and you have at least $1M in available capital (can include residential/practice equity or practice sale), then schedule a call with my team. If it looks like there is a mutual fit, you’ll have the opportunity to attend one of our upcoming member events as a guest. www.freedomfounders.com/schedule

2. Become a Full-Cycle Investor:

There are many self-proclaimed genius investors today who think everything they touch turns to gold. But they’re about to learn the hard way what others have gained through “expensive” experience. I’m offering a free report on how to become a full-cycle investor, who knows how to preserve and grow capital in Up and Down markets. Will you be prepared when the inevitable recession hits? Get your free report here.

3. Get Your Free Retirement Scorecard:

Benchmark your retirement and wealth-building against hundreds of other practice professionals, and get personalized feedback on your biggest opportunities and leverage points. Click here to take the 3 minute assessment and get your scorecard.

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