Given how often private practice ownership changes hands, proper succession planning is absolutely critical for a successful transition. Many physicians don’t pay much attention to this aspect of practice management, which can cause many difficulties should ownership quickly change hands, such s in the case of a death or sudden retirement. This lack of planning causes difficulties not only for the incoming owners, but also for the practice’s patients, disrupting the continuity of care.

Many current practice owners are expected to retire in the coming years, which will create a very competitive market as they seek to sell their practices. Private practice owners with a desire to secure the long-term future of their practice will need to start the process of succession planning in order to have a plan in place for when the time comes where they sell their practice.

Here are 4 steps to take for proper succession planning:

1. Select a successor

The first step is deciding who you want to inherit your practice. this can be an individual physician, a group of physicians, another practice, a hospital or a private equity management company. Making this decision early on is key to ensure proper continuity of care for your patients and maintaining existing good relationships with referring physicians. These are both important for ensuring your existing patients and referrals keep coming to the practice post-transition. The wrong choice can drive these patients elsewhere.

2. A buy-sell agreement

Once a successor has been chosen, it is time to handle the legal aspects of the transition. While there are a few different options available for legal arrangements, the most common by far is a buy-sell agreement. This agreement allows you to make certain provisions that lay out what will happen when you leave the practice. You can state who your successor will be, what price shares will be sold at and how the shares are to be allocated if there will be multiple owners. These provisions can also govern what happens in the case of unforeseen circumstances such as bankruptcy or severe illness that require you to leave the practice before your set retirement date, ensuring your successor is able to legally step in and take over once you leave.

3. Prepare your successor for success

The next step is to begin training your successor to be able to successfully run a medical practice. This is an area that many practice owners overlook once all of the legal documents have been signed and the lawyers have left. It is not enough for your successor to just be passionate about medicine and running their own practice. to ensure their success, have a training program in place for your successor that exposes them to all aspects of running a practice, so that they know what they are getting into once they take over, and can begin to develop the critical management skills that are required to successfully run a practice. doing so gives them the opportunity to learn and grow while you are still present to give them advice, handing over more and more responsibility as you prepare to step back and make your exit. Doing so can be difficult for owners that are very passionate about their practice, but it is a necessary step to take.

4. Communicate your plan

Once all of the planning has been done, it is time for you to communicate your plans to your staff, rather than waiting for rumors about your departure to begin spreading and impacting the efficiency of the practice. These rumors can turn into misunderstandings unless you make it clear who will be in charge of the practice when the transition happens, leading to patients seeking out other providers and a loss of referrals if there are concerns about the long-term stability of the practice. Patients need the reassurance that they will continue to receive the same standard of care once you leave. You also need to communicate your plan to your chosen successor, to prevent them from seeking out employment elsewhere.