Don’t bring bad habits into 2016. In the New Year, identify the risks and solutions needed to make your practice financially better off.
Happy New Year, I hope the holidays were good for you and look forward to continuing our discussions on asset protection and related issues for physicians. Given our focus on both recurring and evolving risks, and the ways to manage or prevent them as effectively as possible, a simple list of resolutions may help you identify the areas where you need additional help:
Resolve To Have a Business Plan, Even if it’s Only Three Items Long
We’ve previously addressed why every medical practice must have a business plan in detail. I am often surprised at how many successful doctors and practices have no real business plan beyond, “Work as hard as possible and see as many patients as possible and live off what’s left after paying everyone else.” Working with thousands of doctors across the country for over a decade we see a clear pattern: Those who have a specific financial goal and a plan to get there and stay there usually do. A few others get lucky, the rest get disappointed. Ideally you’d have a detailed business plan with revenue goals, budgets, and a marketing plan to get there, but don’t let the perfect be the enemy of the good. Even identifying three specific goals and a time frame and plan to achieve them is a great start and will make the process more manageable and get you three items closer to a complete plan with stress and more security.
Resolve to Stop Short Changing Your Business and Personal Tax Planning
Many physicians, who are often in the top income tax brackets, pay more in taxes than they are legally required to every year. We find that the time pressures many doctors work under leads to significant procrastination in the areas of personal and business tax planning creating one of several negative outcomes including:
- Paying significantly more than is legally required by not implementing available tax reduction strategies with the help of great advisors including maximizing retirement plan funding, investment income tax planning, and business tax planning, among others:
- Getting taken by the high pressure, last minute sale schemes (often without appropriate due diligence by you and your advisors) that target doctors at the end of every year and again just before tax day. These range from financial and legal schemes that may be merely ineffective, inappropriate or overpriced to outright scams and the fraudulent tax schemes that I’ve covered here for many years that may subject you to both civil and criminal liability.
Resolve to Manage Risk and Opportunity, Not Crisis
The best legal and financial strategies, as in medicine, are preventative. Given the burdens all medical professionals are working under, such as compensation changes, increased expenses, liability, taxation and regulation, practice managers and owners need to be sure they are managing risks and opportunities, not crisis, as we move into 2016. Professionals like myself consistently hear, “I’m working too hard to take time to protect myself and the money I work so hard to make”.
Some Commonly Overlooked Business Risks:
Risks created by incomplete or ineffective business legal planning is areas like missing or outdated corporate documents including operating agreements, the layers of specialized liability insurance every practice needs, the lack of a business plan, missing or inadequate key-man insurance, succession and crisis management plans are just a few examples I’ve addressed in detail and will continue to update you on this year.
Some Commonly Overlooked Personal Risks:
Again, any competent asset protection plan for doctors must include both business and family risk management. Many doctors are myopic in their risk assessment and focus only on their professional malpractice exposure as a risk. That’s ineffective from both a business and personal standpoint and doctors must carefully address their own, legal, and financial tax planning with qualified help as start. Basics like estate planning, family wealth segregation and preservation planning, disability insurance and personal liability insurance are key areas where doctors are often underserved and need additional formalities, paying household staff cash under the table and risks created by your children and other family members are just two key examples.
I will expand on all these issues and many more in detail this year and will help you identify both the risks and solutions you need to practice fearlessly and add predictability to your financial future. As always, your comments, questions and suggestions are welcome.