PRACTICE MANAGEMENT
available to buy the practice when the time comes.
HOW TO FINANCE THE PURCHASE OF THE PRACTICE
There are many good investment options available
and this is where advanced planning will really pay
off. Even if the investment will not cover 100% of the
money required to purchase the business, it will certainly be the minimum required for the seller to provide, before a financier would even consider funding
the shortfall.
In the event of death, a life insurance policy is actually the cheapest way to finance the arrangement –
for example where you know without a shadow of
a doubt who will be taking over your practice in the
inevitable event of your death. Let’s compare taking
out a loan to finance the acquisition versus using a life
insurance policy (Estate Duty, CGT and CPI ignored
for example purposes):
Assumed price of buying a practice:
R1 800 000
Assumed premium of life cover: R3 000 per month
or R36 000 per annum
Cost of capital: = 2.00% per annum
Compare that to a prime interest rate of 9.50% per annum, where the interest only is equal to R171 000 per
annum. The life cover will pay out to the policy owner
as a cash lump sum without any other or further cost
incurred. To pay the loan over a period of 10 years
at an interest rate of 9,50% will cost R23 291,56 per
month (monthly in arrear) or R279 498,72 per annum.
The best option is obvious.
And should things not work out for any reason, you
will still end up with a lump sum through a “forced
savings” plan.
THE “QUICK FIX”
Because there are so many things that can go wrong
when executing an exit plan from your business,
whether by planned or forced sale, you should have a
contingency plan in place. In the words of the iconic
US president Benjamin Franklin “one ounce of prevention is worth a pound of cure”
Any good vet will make sure that he insures his livelihood in case of a sudden calamity. Ironically, this
same contingency plan often becomes Plan “A” while
the vet is preparing his business for sale. Clearly the
starting point for all of this is knowing what your business is worth.
Additional information on this topic available through
the Vet360 App and website. www.vetlink.co.za
ABOUT THE AUTHOR: Deon is a Certified Financial Planner®, Professional Member of the
Financial Planning Institute (FPI), and General Tax
Practitioner (SA)TM. He obtained a Post Graduate
Diploma and Advanced Post Graduate Diploma
in Financial Planning (Estate and Investment Planning),
both at the University of the Free State and is registered
as a Senior Estate Planner with the Fiduciary Institute of
Southern Africa (FISA). Deon has spent the last 28 years
practicing as a Financial Planner. Deon has extensive experience in financial, estate, investment and tax planning,
and specialises in estate and wealth structuring. (Reincor
Investments CC, FSB nr 13835)
[email protected] 082 656 6660
Please contact me for a no-obligation chat so that I can
explain these issues to you in more detail and we can design an appropriate plan to ensure that liquidity issues are
not a thing that should keep you awake at night. Register
for a more detailed webinar on www.vetlink.co.za and fill
in the Value Builder Questionnaire for a preliminary valuation of your practice.
Webinars
Vet360 Webinars series features an outstanding selection of practical and informative webinars, brought to you by our business
authors and other experts. UPCOMING - October: THE BEST SYSTEM TO GET MORE OF YOUR IDEAL CLIENTS INTO YOUR
PRACTICE ANY TIME YOU WANT! by James Molfetas. Author of book "Infinite Sales Funnels" http://infinitesalesfunnels.com/
BER
EM
SEPT
29
SEPTEMBER WEBINAR TITLE: You will have to sell your
practice at some point - make sure it is on your own terms
and that you get what it is worth.
00 SPEAKER: Deon Nel
/20h
@12
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