Meet Mike. Mike is 47, he is a Dentist and has two practices, one NHS and one private. His passion is mountaineering and skiing and believes Dentistry is a lousy job but a great hobby. In other words he enjoys treating his patients given the time and resources to do so but in the NHS with the pressures of UDA’s (Units of Dental Activity) and ever reducing budgets he feels this is not possible.
Mike came to us with a wish list. He wanted to know when and if he could afford to sell the NHS practice and work part time in the private practice from age 50 and buy a property in the French Alps. In addition to this he wanted to know if he could sell the business without compromising his long term retirement income.
Having costed these objectives and considered his existing assets, income, expenditure and both businesses a Financial Plan was created.
Mike was introduced to a specialised Dental Accountant who was able to value the NHS Dental business accurately.
Forecasts were then created with the following assumptions:
- What income he could expect to draw as profit from his private Dental business having employed an Associate to cover half of his time at work from age 50
- A lump sum of capital from the sale of his NHS Dental business was assumed to be available from age 50
- It was assumed that he purchased a property in the Alps at age 50
- His expenditure was analysed to establish what he needed to maintain his lifestyle pre and post retirement.
- His Personal Pensions and ISA’s were consolidated and invested in a low cost portfolio at an agreed level of risk
- His NHS pension benefits were ascertained and projections made with respect to what he could expect to receive at 60
- An assumption was made that his private Dental business was sold at 60 at a value commensurate with today’s values and indexed.
The outcome of the process showed that Mike could not achieve his wishes given the current level of his assets and the value of his businesses. However, the financial plan created set out what action he would need to take in order to get there and what his compromises might be. His options were:
- Continue as he is and work to 54 instead of 50, then sell the business and buy the place in France.
- Meet all his objectives by increasing the profit in his dental business by 17% to achieve a higher sale value and save some of the additional profits.
- Sell the business at 50 and enjoy the next 10 years in France but spend less than anticipated in retirement beyond 60.
- Sell the business as planned and take significantly more risk with his investments to hopefully achieve a higher return (an option but not recommended!)
In the end Mike worked with his Accountant to reduce overheads in both his businesses while employing a marketing consultant to increase his number of patients. This increased the profitability of both ventures and together with increased pension savings from these profits Mike is expected to buy his place in the Alps at age 51.
Only by having a strategic plan and a knowledge of the numbers he needed to hit was Mike able to achieve his goal of early semi-retirement. With a dovetailing of his personal plans with his business plans his key questions were answered and the necessary action taken.
If you would like to get answers to your key questions please get in touch for an initial conversation.
Financial Planner & Director