Situation
An early-career physician in his late 30s is contemplating buying the specialty medical practice where he works. The practice is highly profitable and is located in a coveted community. The current practice owner is seeking to retire.
C.H. Dean is familiar with the practice, as it provides outsourced CFO services for the current practice owner. Dean also acts as a wealth manager for the owner, who introduced the young physician to the firm for financial guidance.
The young physician is excited about the potential of owning the practice, yet is personally torn about the financial and lifestyle commitment it will require.
The doctor has two young children and is the primary breadwinner for the family. He is a number of years away from paying off his medical school loans and wants to aggressively save for his family’s future.
The doctor is looking to Dean to help him understand the financial trade-offs of purchasing a practice versus remaining as a staff specialist when it transfers to new ownership.
He has several specific concerns:
- How much debt he can afford to purchase the practice
- How to pay off the debt in a reasonable time period
- How to save and invest for his children’s education as well as fund a comfortable retirement for him and his wife if he purchases the practice
Approach
To help the physician understand the trade-offs of purchasing the practice, Dean took a highly consultative approach that included these steps:
- In-depth conversations with the doctor and his wife to help them crystallize their short- and long-term goals. These conversations helped the couple come to mutual agreements on a set of priorities, in light of their personal value system.
- An evaluation of the physician’s current financial situation, including the family’s operating budget, debts, and investments.
- A projection of savings and investment needs to meet the array of family goals. Dean created scenarios that included purchasing the practice under various levels of debt, as well as remaining as a staff physician. This analysis helped the doctor and his wife understand the financial trade-offs of the choices they have for their future.
During these conversations, Dean provided the family with additional important planning advice:
- Guidance on estate planning
- A plan to pay down the remaining medical school debt
- A plan for education savings
Outcome
Thanks to the comprehensive planning and insights provided by Dean, the doctor decided to pursue the practice purchase with a level of debt he and his wife felt they could manage. Dean helped them through the process of applying for, and securing, loans for the purchase at advantageous terms.
The couple also retained Dean to manage investments that previously were in a self-directed brokerage account and future contributions to newly established educational and retirement savings accounts.
With Dean’s guidance, they updated their estate plan and began paying down the medical school debt in a manner that aligned with the vision they have for their life.