MtoM #57 - Orthopedic Surgeon Sells Practice Early in Career

This is the White Coat Investor Podcast. Milestones to celebrating stories of success along the journey to financial freedom. Here is your host, Dr. Jim Dali.

This is Milestones to Millionaire podcast number 57, orthopedic surgeon sells practice early in career.

If you're like most doctors, nobody taught you anything about personal finance or investing during your undergrad, professional school, or residency. Even though your family and perhaps even your business rely on you to be the chief financial officer, you have never been given the tools to succeed. Enroll in WCI Financial Bootcamp, a free educational email series, and learn to convert your high income to wealth. You will learn the basics of investing, saving, insurance, and more. Your high income alone will not lead to financial success, but as always, we want to help you on your financial journey. Go to whitecoatinvestor.com financialbootcamp to sign up today. You can do this and the White Coat Investor can help.

Thanks for listening to the podcast. We love hearing from you, what you like, what you don't like. We really appreciated all the information you gave in our survey a few weeks ago, and we're trying to incorporate it into the show today. We've got a really great guest who's had a pretty unique path to multimillionairehood early in career. Let's get David on the line and learn a little bit more about him and his pathway to becoming wealthy. All right, our guest today on the Milestones to Millionaire podcast is David. Welcome to the podcast.

Thank you. Nice to have or. Thanks for having me.

What's your specialty and how far are you out of training?

I am a orthopedic surgeon. I specialize in foot and ankle surgery. And right now I'm six years. Just over. Six years out.

Six years out. Impressive. And you are in what part of the country? In Southeast or Northwest or where you at?

I'm in the Southeast. I'm in a suburb of Atlanta.

Okay, and let's get into the numbers. What's your approximate net worth?

Approximate net worth is around 6 million right now.

$6 million. Six years out of training. $6 million. It's very impressive. Congratulations on that. Now, how would you divide that up? How much of that's home equity? How much of that is, you know, investments, retirement accounts, real estate, et cetera.

So right now mine is about 400,000 in home equity. It is about 3.6 million in cash, currently about two and a half in equity in a company. And then it's about 300, 400,000 in retirement and 529,000.

Okay, so a big chunk of that In a company it sounds like. So we'll hear that story in a minute. And a lot sitting in cash. Any particular reason you're carrying so much cash?

Pretty much because the as we get into it'll develop. But as the big chunk of my net worth right now is from sale of a practice and so that's gone through. It just went through a little bit ago. I don't want to rush into investing at all. So right now I just have it in cash. Kind of see where the market goes with the current world climate before I really get that into equities. Cool.

There's some interesting stories here. I can read between the lines that we're going to be hearing about. But before we get into those, what's, what's your range of income been throughout your career?

When I first came out I was on a guaranteed salary of 400 plus call pay. So it's probably first year around 500,000. It's gone up each year. Last year's was the highest I'd earned which was about 1.1 million.

And how long do you think it took you to become a millionaire?

It took me all of six years.

It's interesting. So that change from 1 million to 6 million has happened very quickly. So tell us the story. Somewhere in here you owned a business, you owned a practice, sold one of them. What's going on?

To be honest, I was a late adapter as compared to some of your audience to the white coat investor. I didn't discover the white coat investor until my fifth year of residency and had made all the cardinal mistakes. I deferred all my loans, wasn't making any payments. My wife did the same. And so we allowed our debt to accumulate after discovering it and getting through fellowship. Once I started working we really attacked that and we're on our path to just becoming independently financially successful. And had taken half a million in student loans down to about 70,000 and had between savings and home equity had probably hit millionaire status earlier this year. But I joined a medium sized practice 10 orthopedists down around Atlanta. And you know, especially in the Atlanta market there's a big pressure for selling with orthopedics and an equity into private equity. And our practice went through that process. We ended up selecting a different partner. We selected a strategic partner. But recently after going through about a year long process, we were able to sell our practice and start an MSO in essence which gave us some equity, some security, a lot of power on our negotiating and personally was successful for me.

Now how long have you been a.

Partner in that practice for four years?

For four years now. What kind of fear did you have coming into that pre partnership track that maybe they would sell? Before you became a partner, were you worried about that at all?

Oh, for sure. So my fellowship year, I agreed to join that practice. My fifth year of residency in my fellowship year, they called me and said, hey, we're looking to sell. So that was six or seven years ago. They went through that whole process and discovered that the practice didn't have the value they thought. And so despite that, I joined and took on the risk that, hey, it may sell, I may not be successful. There were easier groups to join and we really went down a path once I got here of beefing up ancillary services and things like that. Didn't think about selling for probably four or five years. And then our practice just continued to grow till we got to the point where it made a lot of sense to do that.

Are you worried at all about not being the owner like you were before, about having less control now for the rest of your career?

A little bit. So the things that we worried about when we went down, this was control clinically. And then the other thing is a lot of these deals are structured where you give up a large portion of income in the long term for money up front. I'm 39 years old. I don't want to give up long term income for upfront money at the scale. So, you know, that model makes a lot of sense, I think, for end career doctors, but doesn't make a lot of sense for someone like me. So when and I have three younger, three younger physicians with us and it had to make sense for them long term. So that's why we went with a strategic partner, because we retain a large portion of ownership in all of our various business avenues. So within our practice, number one, I have control of my schedule and my work life still, because our partner really is more, how can we get better on contracting, how can we get better on collecting and the business side of things? And you guys run a successful practice, keep doing that. So as long as we're able to keep doing that, I think our autonomy on a daily basis will be the same. But then from a long term perspective, a large portion of our ancillary revenue will continue to be ours and then any growth, we get to share in the growth aspect of that. So I think that the two biggest worries for everybody as you enter into kind of this type of relationship is what's your clinical autonomy like and then how's your income affected in the long term. And I think there's equity models where you get some pretty good or pretty heavy income impact. I think the strategic partnership model, they want us to be successful, so they'll be successful. And I think it's a little bit different model.

So how do you feel knowing that more than a third of your net worth is tied up in one business?

You know, it's just to me right now, it's a number. It hasn't really sunk in as far as what that net worth means. And it is in one business. But right now I'm still in control of that business. And so I think at a certain extent, going to the size practice I went to was a large bet on myself and the people that I'm with to make it successful. And so while we're still integral parts of this business, I think that I have some control over how successful that is. And then hopefully we continue to grow it so that whenever I exit from the business, whether that's sign a term for right now it's five years, but it could be 20 years and I take that equity out, it's worth more than what it's worth now.

So do you consider yourself financially independent now?

I don't. I'm sure if I ran the numbers, I probably would be. But I have a financial advisor that I found through your website and he asked me when this was all happening. Hey, what are you going to do the day after this closes? And I said, well, I'm going to go to work because that's what I've trained for and that's what I do. And I think it's going to take me some time to realize that I have more flexibility than I used to. But I love practicing and I love operating and that's what we do. And I think, you know, to be successful in medicine, you have to love it. I don't think a lot of people can be successful because it does take so much time and effort and energy and attention.

Well, you've been extraordinarily successful. As I mentioned, before we started recording, we just did a survey of our audience and of those that answered the survey anyway, about 10, 10% are worth 6 million or more. So not terribly rare among our audience, but still impressive, especially so early in your career.

What advice do you have for those.

That are, you know, maybe they're, they're late in their orthopedics residency and wondering if they can be financially successful like you. What recommendations do you have for them?

Number one is not to be afraid of a reasonable amount of risk going to smaller practices, going to smaller areas does carry some risk, but it also, I think, has a lot of benefits. Normally joining larger practices have a longer ramp or a bigger buy in. For example, my practice, I didn't have any monetary buy in. It was all equity, sweat equity. So when you became productive and could support a share of the overhead, you got to be a partner, which was. It benefited me greatly. I also think that, you know, just doing, figuring out what's going to make you happy, because at the end of the day, that's what you need to be. And then not being afraid of betting on yourself. I think some people go to where long term it's going to be most secure. And sometimes the biggest reward comes for saying that, you know what, I can do this and I can be successful. And if we surround ourselves with the right people and the right plan and take good care of people, then our practice is going to grow. And so it's finding that right blend.

Awesome. Well, David, you've been very successful. Thanks so much for sharing your story with our Milestones to Millionaire audience and coming on the podcast here. And we wish you many years of wonderful practice and financial freedom going forward.

Thank you.

I really enjoyed that conversation. It illustrates a different path to wealth, I think, than we've had on a lot of our podcast so far. You know, I run into a lot of docs who are very worried about selling to private equity, especially in the first half of their career. And I think they did a pretty cool thing, the way they structured this, that David got both cash and retains some ownership. And so it kind of splits the difference, hedges that risk a little bit. And the truth is, you got enough cash out of the deal that if he just lets that ride for the next 10 or 20 years, that by itself would be enough money for him to have very comfortable retirement off of. So I think it was a pretty slick deal. It's interesting afterward he mentioned that he'd been thinking about going into academics just a few years before and realizing that that decision could have cost him basically $5 million. And so betting on yourself, taking some risk, not being afraid to be an owner, I think those are the lessons that we can all take forward from David's experience to becoming a multimillionaire pretty darn early in his career.

If you're like most doctors, nobody taught you anything about personal finance or investing during your undergrad, professional school, or residency. Even though your family and perhaps even your business rely on you to be the Chief Financial Officer, you have never been given the tools to succeed. Enroll in WCI Financial Bootcamp, a free educational email series, and learn to convert your high income to wealth. You will learn the basics of investing, saving, insurance and more. Your high income alone will not lead to financial success, but as always, we want to help you on your financial journey. Go to whitecoatinvestor.com financialbootcamp to sign up today. You can do this and the White Coat Investor can help. If you'd like to come on the.

Podcast, you can sign up to be a guest@whitecoatinvestor.com Milestones. We'd love to have you on to celebrate your milestone and to use it to inspire others to reach the same milestone. Till then, keep your head up, shoulders back. We'll see you next time on the Milestones to Millionaire podcast.

My dad your host, Dr. Daly, is a practicing emergency physician, blogger, author and podcaster. He is not a licensed accountant, attorney or financial advisor. So this podcast is for your entertainment and information only and should not be considered official personalized financial advice.