Support our online development, and advance our onground research initiatives in free market economics, as we seek to showcase the brightest Next-Gen minds.
THE ME-P DISCLAIMER: Posts, comments and opinions do not necessarily represent iMBA, Inc., but become our property after submission. Copyright © 2006 to-date. iMBA, Inc allows colleges, universities, medical and financial professionals and related clinics, hospitals and non-profit healthcare organizations to distribute our proprietary essays, photos, videos, audios and other documents; etc. However, please review copyright and usage information for each individual asset before submission to us, and/or placement on your publication or web site. Attestation references, citations and/or back-links are required. All other assets are property of the individual copyright holder.
By Dr. David Edward Marcinko; MBA MEd
***
***
SPONSOR: http://www.MarcinkoAssociates.com
When a medical practice grows into 80% of your net worth, you’re no longer just running a medical business—you’re carrying a level of concentration risk that can shape every financial, professional and personal decision you make. The core issue is simple: when most of your wealth is tied to a single, illiquid, operationally demanding asset, the downside scenarios multiply while your flexibility shrinks. Understanding what actually happens in this situation—financially, psychologically and strategically—helps clarify why many practice owners eventually seek ways to rebalance their financial life.
What concentration risk means in a medical practice
Concentration risk may occur in solo and small group practices when too much of your wealth depends on this one income stream. In a medical practice, this usually means:
- Your practice equity makes up the majority of your net worth.
- Your income is tied to the same asset that represents your wealth.
- Your retirement plan depends on the future sale of that practice.
This creates a single point of failure. If anything disrupts the practice—reimbursement changes, health issues, staffing shortages, local competition or regulatory shifts—your income and your wealth decline at the same time.
How this level of concentration affects your financial life
1. Your net worth becomes illiquid
A medical practice isn’t like a stock portfolio. You can’t sell 5% of it to raise cash. Most of your wealth is locked in:
- patient relationships
- professional referring relationships
- intangible goodwill
- equipment
- electronic medical records
- leasehold improvements
- real estate holdings
- staff and systems
This means you may feel “wealthy on paper” but still experience cash‑flow pressure, especially during slow months [January, February and March] or unexpected expenses.
2. Your retirement timeline becomes fragile
When 80% of your net worth is the practice, your retirement depends on:
- your health
- finding a qualified buyer
- receiving a fair valuation
- getting paid over time (often 5-7-10 years)
- the buyer successfully running the practice
If the buyer struggles, or dies, your retirement income may be at risk. Many owners underestimate how much of their retirement plan depends on someone else’s future health and performance.
3. Your income and wealth move together
If the practice has a bad year, you don’t just earn less—you’re also worth less. That double exposure amplifies volatility. A, insurance or insurer reimbursement cut, local industry or job slow down or key staff departure can simultaneously hit:
- your salary
- your distributions
- the practice’s valuation
- your retirement saving plans
This is similar to a single stock risk problem and the opposite of diversification where an investor spreads investments across various assets to reduce risk and optimize positive returns so that an asset decline is offset by another’s advance.
***
***
1. You may feel professionally trapped in the practice
When most of your wealth is tied to the practice, stepping back becomes difficult. Owners often feel pressure to:
- work longer hours
- delay retirement
- avoid taking vacations or extended time off
- personally handle tasks that could be delegated
The practice becomes not just a job, but the anchor of your financial identity.
2. Decision‑making becomes overly cautious
High concentration risk can make you hesitant to:
- invest in new technology
- expand or relocate the practice
- hire additional providers
- take on debt
- experiment with new service lines
When the stakes feel enormous, even smart risks can feel unsafe.
3. Burnout risk increases
The emotional weight of knowing that your family’s financial security depends on your daily performance can compound stress. Many podiatrists report that the practice begins to feel like a burden rather than an asset.
4. Your financial resilience weakens
Unexpected life events—illness, disability, divorce, or family needs—can force decisions at the worst possible time. With most wealth tied up in the practice, options are limited.
5. Your lifestyle becomes tied to practice performance
If the practice has a downturn, your personal spending may need to adjust quickly. This creates a sense of anxiety and instability even when the business is fundamentally healthy.
6. Your long‑term goals become uncertain
Major goals—college funding, second homes, early retirement—become dependent on the practice’s future value, which is influenced by factors you can’t fully control.
Now, once podiatrists realize how concentrated their wealth is, they often pursue one or more strategies:
- Gradual de‑risking through retirement plan contributions, brokerage investing, or real estate.
- Bringing in associates or partners to share operational load and diversify income.
- Joining a larger medical group practice
- Partial sale or recapitalization to convert practice equity into liquid assets.
- Building ancillary income streams such as real estate ownership, consulting, or ancillary services
- Private equity association.
The goal isn’t to abandon the practice—it’s to prevent it from being the only pillar holding up your financial life.
ASSESSMENT
When 80% of your net worth is tied to your medical practice, you’re not just exposed to financial volatility—you’re exposed to identity volatility as your wealth, your work and your sense of overall self and security becomes intertwined.
CONCLUSION
And so, reducing practice net worth concentration risk isn’t just an economic strategy; it’s a way to reclaim flexibility, reduce stress and create a more stable foundation for your career. More importantly, how well do you actually execute office net worth risk reduction in your own medical practice?
SPEAKING: Dr. Marcinko will be speaking and lecturing, signing and opining, teaching and preaching, storming and performing at many locations throughout the USA this year! His tour of witty and serious pontifications may be scheduled on a planned or ad-hoc basis; for public or private meetings and gatherings; formally, informally, or over lunch or dinner. All medical societies, financial advisory firms or Broker-Dealers are encouraged to submit an RFP for speaking engagements: CONTACT: Ann Miller RN MHA at MarcinkoAdvisors1738@outlook.com -OR- http://www.MarcinkoAssociates.com
Like, Refer and Subscribe
SEND IN YOUR TOPIC IDEAS, TODAY!
HOSPITALS: http://www.crcpress.com/product/isbn/9781466558731
CLINICS: http://www.crcpress.com/product/isbn/9781439879900
ADVISORS: www.CertifiedMedicalPlanner.org
FINANCE: Financial Planning for Physicians and Advisors
INSURANCE: Risk Management and Insurance Strategies for Physicians and Advisors
Dictionary of Health Economics and Finance
Dictionary of Health Information Technology and Security
Dictionary of Health Insurance and Managed Care
***
Share this:
Filed under: iMBA, Inc. | Leave a comment »
