With second wave of COVID-19 gripping the nation, healthcare practice owners are understandably anxious. However, there were some key lessons learned after going through the first wave that can help position these business owners to better weather the current disruption. After taking a look at what was done well and what could have been done better in the first, we're in better shape now to proactively manage our new normal. Our teams across the country examined the most important areas for healthcare practitioners like dentists, doctors, optometrists, and others to consider so their professional practices are resilient in the days to come. The following are the most memorable lessons learned.
Conserve cash
Monitoring expenses is good practice under any circumstance. As the saying goes, cash is king—and we want to keep it that way. Historically, cash flow generation and cash conservation weren't issues encountered by health practitioners, as these businesses are typically recession proof.
Among the ways to keep cash on hand, tax planning strategies are a great starting point. From dividend planning to potentially decreasing corporate and personal tax installments—there are a number of ways to control how much cash stays in the business, and protect accumulated assets. Reviewing expenses to ensure they're offering a return to the practice is an option. Adjusting compensations until cash flow is more stable may be an option as well, along with exploring COVID-19-related government relief programs such as the Canada Emergency Business Account (CEBA), Canada Emergency Wage Subsidy (CEWS), and Canada Emergency Rent Subsidy (CERS) program.
From a wealth management standpoint, now is the time to consider the composition of investments and where funds are available. Liquidating investments to generate cash, or accessing existing funds to make cash available can add some much-needed padding to the business in times of uncertainty.
Review debt agreements
Managing debt has been another important lesson. When it comes to reviewing debt agreements, maintaining strong relationships with financial institutions is key. The lenders providing financing are the ones who can help extend or defer payments on loans. Practice owners who took on substantial debt after the first wave and were ill-equipped to pay it were scrambling to make minimum payments. Getting behind on debt payments could lead to banks cancelling loans altogether, which puts another immediate road block in front of already-stressed clinic owners.
If new equipment purchases or leasehold improvements are being considered, several options should be reviewed: whether it should be leased or purchased; building the cost of tenant improvements into lease rates; and a deferral of payments until economic conditions stabilize.
In building these crucial and ongoing relationships with financial institutions, this is an opportunity to consider converting to a term loan and freeing up lines of credit. Having this available credit capacity in the event of a second wave could better position practice owners to handle a potential disruption in the future—COVID-19—related or otherwise.
Our teams are here to assist in discussions with banks, as these should be ongoing conversations that ensure proper plans are in place at any given time.
Prioritize human resources
No matter which industry or subsector business owners operate in, losing key staff is a huge disruption. In environments as intimate as clinics, that disruption is even more noticeable. Communicating with staff—whether it's about evolving processes like infection control or managing anxieties—is more important than ever. With the pivot to remote and more flexible arrangements, this communication is vital in keeping staff aligned and motivated.
Further, it's important to understand wage subsidies and other government relief programs (like EI or CERB claims, for example) to help manage changes in staffing, or work-sharing programs. During the first wave, some of the biggest lessons learned were how to handle labour-law-related questions around temporary or permanent staff layoffs, and reduced working hours.
Managing mental health concerns, patient frustrations, and staff anxieties were among the issues that arose during the first wave. Indeed, the root of many challenges stems from people. Our HR teams helped clinic owners find solutions to help manage staff during the first wave, and they're ready to assist as we work through the second wave.
Proactively strategize and plan ahead
Being prepared for the unexpected was another important lesson learned. Adjusting business forecasts for changing behaviour, anticipating and responding to patient's new needs and consumer preferences should be top of mind.
Managing supply chains and personal protective equipment (PPE) protocols, along with monitoring suppliers for the most cost-effective products are integral parts of future planning. Another consideration is to review tenancy agreements along with new requirements for air filtration systems. Portable HVAC units have been a short-term solution that clinic owners used to deal with this issue amid the first wave.
How else can healthcare practitioners get future plans in order? First, by identifying the highest-risk areas that may become problematic through the second wave. Further, by developing a communication strategy for staff and patients in anticipation of further disruptions, so it's not a last-minute consideration that leaves everyone stressed out. This can also help map out cutbacks or changes moving forward, in the event of deeper closures.
Ultimately, taking time to perform a debrief tends to prove helpful: ask what went wrong, and what could have been done better.
Start transition planning now
This pause in usual business activity has affected transition plans across the country. Nobody knows what normalized earnings look like in the current environment, nor how that impacts value, or when things might stabilize again. While people are cautiously optimistic in less-affected areas, mergers and acquisitions are booming in others. Despite geographic differences in supply and demand, there's been a surge in those trying to sell right now. And larger organizations are still offering great prices—not discounting because of the COVID-19 disruption. This is good news for those considering a sale.
The COVID-19 disruption has prompted transition delays, while also being a catalyst pushing clinic owners to take action sooner and retire early. Some practices have decided not to expand because of the risk profile; some are thinking now is the time to sell the business and be an associate for the last few years of practice; some are worried about how much cash could potentially be realized on a sale.
When planning for retirement income, our wealth advisory team can help with projections now rather than later, if income is anticipated to be down for a certain amount of time. On the other hand, there is a great buying opportunity here with a chance to expand the business.
From a tax standpoint, it's advisable to be prepared, so the business is well-positioned now—no matter which route is taken later. Keeping companies purified ensures they're ready for a sale when the time comes. Purification was a tax issue long before the pandemic—COVID-19 just increased the urgency as transition plans have accelerated, separating investments from operations becoming a greater priority.
Moreover, clinic owners might want to realize capital gains where possible. If that means doing so as part of a compensation plan, capital gains can be taxed cheaper, and might also help realize the existing value of the practice.
Looking farther into the future than normally, things may need to shift to accommodate unexpected changes. Having transition plans in place was always crucial—but especially now after valuable lessons were learned.
Is your practice ready for what's next?
Despite these tough times, it's an optimal opportunity to make changes, minimize taxes, rethink existing strategies, and most importantly; learn from the lessons of the first wave. Our teams across the country work collaboratively to offer solutions, wherever challenges may be. Our approach to advisory is all-encompassing, so answers to questions can be found one way or another. We were there to help clients with the challenges of the first wave, and we're on standby to help with what may come in the near or distant future.