The three-legged stool, Part 1

July 1, 2007
In this day and age, it is critical that you protect your assets as you strive for financial independence and financial security in retirement.

by John M. Cahill

In this day and age, it is critical that you protect your assetsas you strive for financial independence and financial security in retirement. I have found during my 36 years of working with dental professionals that often their most important asset, their dental practice, has not been adequately protected when the unexpected happens, such as death or severe disability.

Without question, this asset needs attention above all others because it is your income-producing asset - it is “the goose that lays the golden egg.” In order to protect your practice, think of it as a “three-legged stool.” If any of the legs are missing, the stool will topple over and not be able to function as well as with all three legs in place.

What are the three legs of the stool that will truly protect your practice?

Leg 1: Life and disability insurance
Leg 2: A formal death and disability survival group (mutual aid group)
Leg 3: Preparing your practice for sale now

This month, let’s examine Legs 1 and 2 and discuss the importance they have to the whole stool.

Leg 1

To properly prepare for death or disability, the first line of defense is life insurance and disability insurance, both personal disability and business interruption insurances. Every dentist needs to discuss with his or her insurance agent how much insurance he or she should carry based on each person’s personal situation. A dentist with young children will clearly need more insurance than a dentist nearing retirement with little or no liabilities. It is smart to shift some or all of the risk to a third party as assets are built. The first leg of the stool needs to be in place.

It’s not enough to have life or disability insurance if you truly want to protect your practice. If you were to die, the life insurance would benefit your family, as would your disability policy in the case of disability. However, your practice would be exposed if you were not available to practice dentistry and “your ship was without a captain.”

Leg 2

What do you do to ensure your practice will continue if you die or become disabled? The best and least expensive “insurance” you can have is a survival group/mutual aid group. Many professionals are part of such groups and all of them, without exception, understand the practical benefits in this form of insurance.

A survival group is typically a group of six to 12 peers or friends who agree to come into the deceased or disabled dentist’s office to operate the practice for three to six months at no cost to the dentist or his or her family. This group can be formal or informal. However, having helped dentists establish these groups for the past three decades, a formal group consistently survives longer than an informal group. Let me assure you that once the group is established, keeping it formal requires minimal effort. Formal groups meet once a year and include spouses. It is essential to have spouses attend these meetings because it is he or she who will deal with the members of the group in the case of death or severe disability. If the spouse knows the other members, it will mitigate significant stress for him or her during a very stressful time.

In the case of death, normally there is no activity for two to three weeks as the family grieves. You can imagine how important it is to have a survival/mutual aid group step in and fill the gap as the family goes through this initial grieving process. This can only happen if you properly plan for the unexpected and either develop or join a survival group.

Without the third leg of the stool you teeter, but you are still far ahead of those who have not planned or taken steps. Next month we will discuss the third leg of the stool: preparing your practice for sale now.

John M. Cahill, MBA, of Western Practice Sales/John M. Cahill Associates, has more than 30 years of experience in the dental industry, including all aspects of appraisal, sales, purchases, and buy-ins in connection with dental transitions. Cahill is an emeritus member of American Dental Sales Inc., and can be reached at (800) 641-4179 or by e-mail at [email protected]. Visit his Web site at See the classified ads for names and addresses of ADS members in your area.

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