Guest guest Posted February 18, 2010 Report Share Posted February 18, 2010 I've heard one quick and dirty method is to set the asking price at one year of gross (maybe net??) receipts. However, in this economy, that might be a tough sell, and depends on what assets you are selling as well. If I was the buyer, I would negotiate something that takes into account patient retention. If everyone came to the practitioner because he was Mick Jagger and then I came in, they would flee in droves and I would be stuck with the check. Geoff , " richblit " <richblit wrote: > > Does anyone know of an easy formula for figuring the value of a practice for sale? > Rich Blitstein > Quote Link to comment Share on other sites More sharing options...
Guest guest Posted February 18, 2010 Report Share Posted February 18, 2010 Rich - I have attached a document that goes over in detail some of the ins and outs of buying and/or selling a practice. I picked it up off of a website a few years ago. Hope it helps. Ray Rubio On Feb 18, 2010, at 3:59 PM, yingsuke2002 wrote: > I've heard one quick and dirty method is to set the asking price at > one year of gross (maybe net??) receipts. However, in this economy, > that might be a tough sell, and depends on what assets you are > selling as well. If I was the buyer, I would negotiate something > that takes into account patient retention. If everyone came to the > practitioner because he was Mick Jagger and then I came in, they > would flee in droves and I would be stuck with the check. > > Geoff > > , " richblit " <richblit > wrote: > > > > Does anyone know of an easy formula for figuring the value of a > practice for sale? > > Rich Blitstein > > > > > Quote Link to comment Share on other sites More sharing options...
Guest guest Posted February 18, 2010 Report Share Posted February 18, 2010 Attachments can't be made on posts to cha. On Feb 18, 2010, at 7:16 PM, Ray Rubio wrote: > Rich - > > I have attached a document that goes over in detail some of the ins > and outs of buying and/or selling a practice. I picked it up off of a > website a few years ago. Hope it helps. > > > > > Ray Rubio > > > On Feb 18, 2010, at 3:59 PM, yingsuke2002 wrote: > >> I've heard one quick and dirty method is to set the asking price at >> one year of gross (maybe net??) receipts. However, in this economy, >> that might be a tough sell, and depends on what assets you are >> selling as well. If I was the buyer, I would negotiate something >> that takes into account patient retention. If everyone came to the >> practitioner because he was Mick Jagger and then I came in, they >> would flee in droves and I would be stuck with the check. >> >> Geoff >> >> , " richblit " <richblit >> wrote: >>> >>> Does anyone know of an easy formula for figuring the value of a >> practice for sale? >>> Rich Blitstein >>> >> >> >> > > > > > Quote Link to comment Share on other sites More sharing options...
Guest guest Posted February 18, 2010 Report Share Posted February 18, 2010 Dohhhhh! Thanks for the heads-up. Ok. Let's try it this way: Buying a practice There are many things to consider when purchasing someone’s practice. The most important considerations are as follows: 1. What would be the difference in cost between starting and successfully growing your own practice as opposed to buying the practice that is for sale? Be as honest as possible with yourself about start-up and growth costs for a practice. 2. What are you really buying? Are there hard assets such as equipment, furniture, or real estate involved in this transaction? If not, are you buying the accounts receivable or the bank account balances? 3. If there are no cash or hard assets, you are then buying what is called “goodwill.” In that case, a medical or chiropractic practice is considered to be worth no more than 30% of the annual gross receipts of the clinic. If there are any hard assets, those are added on to the value of the “goodwill.” Practice assessment for a potential buyer 1. There are a few ways to determine or prove the value of gross receipts. Most sources suggest that you require access to two years of tax returns and financial records. If a practitioner selling a clinic cannot provide these records, it is questionable whether they will have kept their patient records in any more organized a fashion! At that point I say buyer beware. If they refuse to give you access to this information, then you certainly don’t want to do business with them. 2. Intangible assets may include: a. the clinic market position (monthly patient visits, positive cash flow, take home pay of the practitioner, number of total patient records, income and expense projections, base overhead expenses per month). b. regulatory history (are there any suits or legal problems) c. operational systems in place and quality of patient record keeping d. quality of the facilities and capacity for growth staying in those facilities e. soundness of the balance sheet and up-to-date financial record keeping f. size and current-status of the mailing list g. reputation of the clinic in the community h. staffing situation (will the current staff stick with you) i. visibility of the location 3. Other considerations you need to research: a. How flexible is the financing and payment structure for this purchase? b. How many months or years is the current practitioner willing to stay in the clinic and work with you? The longer this transition process, the better to introduce you to the client base, and the more valuable the practice is to you. c. What does an analysis of the local demographics reveal? Is the area gaining or losing population? What is the average age of the population and what was the average age a decade ago? Are there many 3rd party payers serving this community that require you to be paneled in order to serve the largest segment of the population and what do those panels pay? d. What does an analysis of the clinical appointment book for the last year reveal? Are there many repeat patients? What is the average number of appointments per patient? What type of hours and workload is the practitioner maintaining and does that work for you? e. Will the seller send out a letter informing the entire patient base of their upcoming departure and supporting you as their practitioner of choice for referral? Will they pay for that mailing? f. If you only keep 40-50% of the patients who have come to this clinic, would that be enough to support you while you build back the patient base and would the price still be worth it? g. What is the status of the current lease? Are there opportunities for expansion? Are there any legal or zoning problems with the building that could affect you? h. What is the seller’s definition of an active patient? Is it the same as yours? i. Who is assuming responsibility for the inactive records and what will it cost you if you must store them? j. Who owns the clinic name and logo if it is not the person’s name? For example, John Smith Acupuncture Clinic is not a name you want to buy as part of the purchase, but you might want to keep the name Whole Woman Health Clinic if it is well established in the community. If all this seems like too much and you are really serious about wanting to do this purchase, you might consider hiring an independent valuation expert. This is usually a shared expense between buyer and seller whether you end up buying the practice or not. Finally, buyers, don’t ever think that buying a practice absolves you of marketing efforts in the community. Remember that most people who become your patients are buying “YOU” and you will still need to embed yourself in the community in a positive way. Ray On Feb 18, 2010, at 4:19 PM, A. Brameier wrote: > Attachments can't be made on posts to cha. > > On Feb 18, 2010, at 7:16 PM, Ray Rubio wrote: > > > Rich - > > > > I have attached a document that goes over in detail some of the ins > > and outs of buying and/or selling a practice. I picked it up off > of a > > website a few years ago. Hope it helps. > > > > > > > > > > Ray Rubio > > > > > > On Feb 18, 2010, at 3:59 PM, yingsuke2002 wrote: > > > >> I've heard one quick and dirty method is to set the asking price at > >> one year of gross (maybe net??) receipts. However, in this economy, > >> that might be a tough sell, and depends on what assets you are > >> selling as well. If I was the buyer, I would negotiate something > >> that takes into account patient retention. If everyone came to the > >> practitioner because he was Mick Jagger and then I came in, they > >> would flee in droves and I would be stuck with the check. > >> > >> Geoff > >> > >> , " richblit " > <richblit > >> wrote: > >>> > >>> Does anyone know of an easy formula for figuring the value of a > >> practice for sale? > >>> Rich Blitstein > >>> > >> > >> > >> > > > > > > > > > > Quote Link to comment Share on other sites More sharing options...
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