One consideration often overlooked by new physician consultants is whether they should immediately start thinking about building a consulting company.
Acting as a solo physician consultant has advantages, including:
- Retaining all the income
- No management responsibilities
- Being able to devote all of your time to clients
The disadvantages of acting as a solo physician consultant, however, are significant, including:
- Difficulty taking time off
- Having no redundancy
- Not being able to leverage your knowledge and expertise, and perhaps most importantly
- Not being able to sell your practice when you would like to retire or move on to other business interests.
A solo physician consultant practices successfully for 10 years and averages $150,000 net. After 10 years, he has earned $1.5 million and then he retires.
Example: Consulting Company
The same physician consultant over the course of 10 years brings on 5 additional physician consultants. She is able to generate $1 million net per year for the company while earning the same $150,000 net for herself. The physician then sells her consulting company for three times net earnings ($3 million). She has earned $1.5 million plus $3 million for a total of $4.5 million.
It is never too early for a physician consultant to consider what their exit strategy is. Will you just close up shop or can you build a successful company with residual value?
Many highly successful physician consultants build a consulting company so they can leverage their knowledge, expertise, and rainmaking abilities. When they are ready to move on they sell their consulting company for a premium value.