Our thoughts . . . 03-08-10
'TILL THE STORM PASSES BY - Part I
"Till the storm passes over,
'till the thunder sounds no more,
'Till the clouds roll forever from the skies;
Hold me fast, let me stand in the hollow of thy hand,
Keep me safe
'till the storm passes by."
This old gospel song brings to mind two questions especially important to those pondering their career exit strategy: Has the economic storm of the last 18 months passed? And if not, how do I stay safe? I'm going to bet that most readers of this column are not and will not be in any danger of losing their homes to the mortgage/foreclosure meltdown. Likewise, most have avoided the unemployment line and have been able to maintain access to quality healthcare. No, the "crisis" comes down to the loss of value in personal retirement accounts and in preserving the value of a dental practice. There is no shortage of conflicting information about where we are heading as a country and as an economy. Regardless of your conclusion about this issue, now is certainly a time for action.
Mid-2008 found most of us in a pretty good place. Practice revenues were continuing to grow, interest rates were low, and the stock market was hovering near its all-time high. Sure, some of us scratched our heads a bit over the stories we heard about creative home mortgage programs, but most of us had no plans to move or buy. Doctors in established practices were booked 4-6 weeks out, and the focus of many continuing education programs was on learning and marketing high end procedures. Then, the storm rolled in. By the first quarter of 2009, it was easy to get an appointment with the doctor within a week if not the next day. Credit markets froze and even those patients who had spendable cash were reluctant to use any of it for anything but their most urgent needs. We heard many stories of practice revenues being off 25% or more. Although an increasing number of patients were losing their jobs, the crisis seemed to soften by mid-2009, and there seemed to be a slow climb back to normalcy in many practices. We received reports that final 2009 revenues were not too far off of the historical highs of 2007 and 2008 and the stock market climb had begun to relieve the "sky is falling!" mentality. Has the storm passed us by?
Your answer to that question depends a lot on your personal circumstances and who you listen to about the future. Unemployment is still a monstrous problem. I still hear more stories about people losing their jobs then about them finding new, quality opportunities. Interest rates remain low, and while that keeps the cost of credit low, it also means that there is little or no secure earnings on capital. Those with limited resources find themselves continuing to erode the principle value of their savings and estates, and that never inspires consumer confidence. The Talking Heads continue to warn that an upcoming crisis in the commercial real estate market is going to make the residential market issues seem like Disneyland. Just to top it all off, sooner or later Congress will have to begin to make adjustments to the tax code in order to continue to float the boat. A November 20, 2009 article in the Wall Street Journal highlighted six "looming tax changes that would particularly affect wealthy tax payers." Somebody's got to pay, and it's probably going to be you.
So how do you answer the question? Do you think the storm has passed and it's time to move forward with your plans to retire from practice, or will you continue to seek shelter and safety? The action plans for these two scenarios will be the subject of our next article, so stay tuned.
Steve Wolff, DDS
UMKC Class of 1977