Five Tips Before Signing Your First Contract
A few minutes of uncomfortable conversation can make an almost $400,000 difference
You’ve been through a decade’s worth of training and you’re excited to get to work as an attending or private practice physician. And you should be. After years of comparing your annual salary to your weekly hours and realizing you make something around minimum wage, you’re finally going to be earning that income you heard about growing up.
All of our medically inclined clients got into their field of expertise with the goal of helping people. This should not take away from the fact that they should be compensated in a way that reflects their talents and training. We hope this post (and the others) will help you make sound financial decisions so that your finances are never something you need to worry about.
So, if I told you, in this new role you’re about to enter, you would get paid $10,000 for an extra 5 minutes of work, you’d say that’s ridiculous, right? Well, that’s exactly what happens in your contract negotiation.
The five minutes that make up that short, uncomfortable conversation are likely worth $10,000 or more. $50,000 over the next 5 years. Millions of dollars if you take into account investments and compound interest.
$10,000 Contributed into one of your investment accounts for five years would “only” be $50,000. When you add in the benefit of compounding returns and the time that you have on your side, you can expect to have over $400,000 after 30 years.1
Let’s walk through some tips to make sure you’re maximizing the potential of your first contract. It starts with seven simple words:
1. “Is this the best you can do?”
After years in residency, the rotations on contract law and negotiating are often hard to remember. Clients often tell us that they didn’t receive ANY practice in either of these topics and are now at the point where they are about to sign a multi-six-figure contract. Might not come as a surprise that this is not where they feel the most comfortable. If anything, they are glad to finally being paid anything that resembles a physician’s income. Before you panic sign, consider asking the above question, especially if the alternative is not negating at all.
It’s hard to translate the context correctly when it’s put in bold letters in the middle of the page like that so let’s provide some more realistic context:
[Hospital Administrator] *Hands you a stack of papers that do not resemble a chart that you’ve been staring at for the last three years.” *
[You] Still in residency, want to finally be able to vacation with your non-physician friends who have been making twice as much money the last three years. You respond politely and professionally,
“Thank you for the offer, if you don’t mind, I’m going to have an attorney review this with me to make sure I fully understand it. Is there anything you can point out to me in here that I should make sure I review with them? I see on page X, it talks about my bonus/salary, before I make my final decisions, is this the best and final offer?”
Now a couple of assumptions were made here and please use this as a framework, not a script:
You have other offers - the best way to feel comfortable negotiating? Have a few offers.
You have done your research and know what your specialty pays in your area - want to feel more confident asking for more money? Know what others in your position are being paid.
You are comfortable hearing them say “yes” - Sometimes they are going to say yes and they will not negotiate, this is okay too.
2. Understand your full burden to the company
Benefits are more than salary and signing bonus. It’s easy to focus on things like signing bonuses, relocation stipends, salary, but there will be a lot more things that become important to you once you start. Some of these may be categorized as non-financial benefits but they are still going to impact how much you enjoy working here. Things like:
Insurance Coverage (Health, Dental, Vision, Malpractice, and Disability)
Professional and Continuing Education
Vacation and Sick Leave Policies
Retirement and Student Loan Plans
3. No need to Rush, Nothing is Permanent
It always seems so tempting to jump into the first post-residency position that is offered. After all, you’ve just spent decades learning and training to practice medicine and finally be compensated appropriately for it.
Studies show that half of new physicians will leave the first job within 1-3 years. This is to say that your first job may not be the right fit forever (make sure that the non-compete clause doesn’t hit you on the way out).
4. It’s a contract - Seek Legal Advice.
Having an attorney review this can be invaluable. Contracts are not written in stone, and your value has already been recognized in the offer you’ve been extended. Here are just a few things we’ve seen in the past:
Access to bank accounts to deduct cost-sharing provisions
One-Sided Termination Clauses
No maternity/paternity leave clause
Outside business activities
5. Don’t Change your finances too quickly
The popular saying of “live like a resident” has made its rounds across the internet and been proven to be one of the most influential factors in long-term financial success. With time being the single biggest contributor to long-term financial success, the first few years of post-residency work can be the most impactful. Having the discipline to avoid an over-reaction to a significant spike in income is not for the faint of heart. Lifestyle creep is real and once someone gets used to a certain level of spending it is nearly impossible to go back.
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We’ll be sharing tidbits of wisdom like this with any subscriber every two weeks, along with deeper dives for our clients every month or so.
What questions do you have that we can answer in future posts? Reply directly to this email and let me know.
Talk soon,
Chris
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Fortress Physicians by the Numbers
🏡 42 Physician Households as Clients
💰 $680,000 Avg Household Income
👩 Average Age 44
💸 $3.25 Million Net Worth
📈 29% Average Savings Rate
Securities and Investment Advisory Services offered through Fortress Private Ledger, LLC. Member FINRA/SIPC
Earnings calculated based on 8% compounding interest for 30 years. The total would be $401,773.