“LIFE is a balance between time, money and health. At some point, something has to give.”
Not the most inspiring piece of rhetoric you may ever have heard, perhaps, but certainly one of the most true. Life to the young seems to stretch on endlessly into the distance; life for those of us who are perhaps older (if not wiser) seems less sure.
Ask anyone over the age of, say, 45 what they would like to do when they retire and you’ll get an enthusiastic response, usually something along the lines of: “I want to fulfil a lifetime ambition and learn to cook/paint/play the guitar/walk to Everest Base Camp/sail round the world/trek across the Australian outback” or something similar.
Most of us have some sort of pipedream that we love to lapse into, especially if it’s been a bad day at work or if we’ve been on the same farm for six hours and that TB test just seems to be going on for ever.
Setting aside George Bernard Shaw’s assertion that “there’s only one thing worse than not achieving your ambition, and that’s achieving your ambition”, future ideas, daydreams and plans keep us going in readiness for the day when we can indeed chuck the diary out of the window and say, “Right, today I’m going to do what I want to do!”
But even those with more prosaic ideals (“Oh, I just want to spend all my time in the garden/walking the dogs on the beach/playing with my grandchildren”) are, of course, at risk of not achieving their ambitions if they haven’t planned ahead for it.
It’s a sad but all too common truism that, just as in veterinary practice where poor planning can mean an under-performing business, poor planning when we’re working can mean real limitations on what we do once we retire.
Aiming to tackle this problem, Anval has been running its popular seminars on how to plan for the next stage of your life for some years now. The title of “Retirement Planning” has been replaced in favour of “Succession Planning”, partly because the word retirement can have negative, one-foot-in-the-grave connotations, and partly because leaving practice can involve so much more than just hanging up the stethoscope for the last time.
Considerations
What’s to be considered when you decide that you’re not going to go into work any more on Monday mornings? You may feel that, however good things are, it’s time to get out of a partnership that has been running along nicely for the last quarter century and which has been giving a very comfortable income.
You may be a single-handed vet who needs to realise his or her assets to make up a large part of a retirement fund, or you may be in the situation where there are several vets who are at different stages of career and lifestyle, and each has different ideas on how the next five years should be spent.
But whatever the dreams and ideas, everyone who does retire needs the wherewithal to allow them to survive somehow. It’s all very well planning to hike the Inca Trail or cycle around Ireland, but there still needs to be money to buy food, pay the gas bill and put petrol in the car, and we’ll all still need to have some sort of house to come back to, even if it’s just to wash the dirty laundry – and let’s not forget that our children still seem to have the attitude that, if money really doesn’t grow on trees, the next best thing is to source it at zero interest from the bank of Mum and Dad … so where do we begin to get the strategy for a successful succession for all concerned?
Own agendas
Delegates at these seminars always have their own agendas – the profession is renowned for having no common plan on how to run itself and we shouldn’t expect that any two vets will have the same ideas about retirement.
The questions asked during these events range from, “My partner and I are the same age; he wants to leave work next year but I want to go this year, how can we work it so we’re both content?” through “I’d like to go part time, working only three mornings a week, but we can’t agree a pay ratio” to (from a practice manager) “I’ve got five vets, all late 40s to late 50s, who barely speak to each other, so how I broker a deal that allows them to retire with a fair share of the profits over the next 10 years is almost impossible.”
Perhaps the one obvious thing is that one size doesn’t fit all, and that one man’s (or woman’s) exit strategy is another person’s nightmare, so forward planning is absolutely essential: not just saying, “I want to retire next year”, but saying, “I want to retire in 10 years, how do I look for a long-term plan which makes for an easy exit and ensures that my retirement fund is going to give me enough on which to live – and a bit left over so I can enjoy myself?”
Complexities
Peter Gripper spoke on the complexities that need to be gone through when a vet wishes to sell up. The first bit is good news: there are plenty of eager buyers out there.
However, the second bit is that this isn’t something that can be achieved within the space of a few weeks.
Preparation is a major factor, so get ready to welcome potential buyers; get that asbestos survey done; ensure that planning permission is indeed in place; and then look to market the practice, ensuring it looks smart and tidy, both physically and financially.
There are only a very small number of specialist companies, Anval included, which can advise on how, when the time comes, to sell a practice, and what options are open to the vendor – be that outright sale, taking in a partner, selling out but staying to work part time, or even selling out to a supermarket giant which wants the surgery site, if not the veterinary business.
One of Anval’s specialities is that it is able to advise vendors on how that alltoo-intangible asset of goodwill can be valued, and it also keeps a confidential list of companies and individuals who are on the lookout for practices to buy, and will advise on how and when to market the practice to them.
Whatever type of sale is chosen, allow a minimum of six months for all parties – vendor, purchaser, banks, accountants, solicitors and valuers – to get things sorted out properly. There are pitfalls and traps aplenty along the way, and even if everything seems to be going smoothly, you can bet that the bank has lost a vital document, the solicitor has gone on holiday, or the accountant has had his laptop stolen, which is going to push everything back another month or so.
Preparing for change
Having seen Peter deal with the practicalities of how one prepares a practice for sale, Geoff Little spoke on how to prepare the business set-up for a change in circumstances, whether that be partners leaving or new ones arriving.
The phrase “partnership agreement” was iterated and reiterated throughout the day.
Hands up all those who are partners reading this and either don’t have such a document, haven’t signed it, haven’t seen it lately, or haven’t reviewed it in the last five years? Too many hands nervously raised, I fear.
A good agreement will set out what every partner in a business needs to know. Things like:
■ What happens if someone has to be expelled from the partnership?
■ What does it say about retirement, either due to age or infirmity, and what’s the situation if more than one partner gives notice to retire at the same time?
■ Does it provide for asset valuation, property sales and how and when payments are made to the person retiring?
Oh, and before you sniff and say “We don’t need that, we’re a limited company”, it’s a really good idea to have a shareholders’ agreement to cover these sort of questions that will inevitably arise in this situation too.
Who to tell?
Then there’s the question of who else needs to know when a business changes partners.
It may seem obvious to tell the bank, but don’t forget the landlords and tenants if there is leasehold property involved, lease companies if equipment or cars are financed, and indeed anything else that has your name on it!
And what do you tell those who are so essential to a successful business that needs to continue trading – the clients, nurses, and veterinary assistants? The list can seem to go on and on – but if nothing else it does demonstrate that retirement is never going to be a quick answer for anyone.
Great in principle…
Peter Orpin picked up on some of these points in his talk. Many people nowadays opt for reducing their workload rather than leaving practice altogether, which is great in principle but can, unfortunately, open the door to disagreements and disputes.
There are a lot of benefits on part-time working, for both the individual and the practice, but it can lead to problems if lots of part-timers want to do the easy nine-to-one shift and there are no volunteers for the Friday evening surgery or the Saturday afternoon farm on-call.
Peter took us through the complexities of profit division for part-time partners – how to make allowances when calculating profit division for both clinical work and managerial work as well as the capital invested in the business.
A points system may be the best method of working out a clinical salary, whereby every vet in the practice signs up to an agreement which sets out how many points equate to each portion of the working week, whether that be a Monday morning surgery, an afternoon worked or a Friday on call.
Work out how many points a FTE vet “earns” and attribute the salary accordingly, so if a partner drops all his or her night work, which may have been accorded 25% of the total number of points, the clinical salary drops by 25% too.
The pension pot
So far, so good, but what about that allimportant pension pot for the individual who is stepping out of the surgery door for the last time?
Traditional pension schemes have been performing in a rather dismal way recently, and have been given such a hammering in the media over the last few years that many will have decided that there must be other ways of keeping the cash flowing into the twilight years, whether that’s by property speculation, share portfolios or investing in the futures market.
Anval had teamed up with a veterinary accountancy specialist, the Moore Scarrott Partnership, and investment funds expert, Rowan plc, for the day, and their specialists took everyone through the potential minefield that is SIPPs (self-invested personal pensions) and followed it with an excellent overview on the vagaries of the stock market, the credit crunch and advice on how to cope with bull and bear markets.
This was a comprehensive afternoon that delivered almost everything except that one essential we all dream about, namely the supernatural ability to presciently foretell which investments we should rush out and buy to net us a hugely profitable portfolio overnight. If only; we can but dream.
So there were many take-home messages from the day, but the most important one must be, whatever the future holds, planning for life after vetting should start in our third and fourth decade, not leaving it until we’re in our fifties or sixties.
