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I have the opportunity to buy out a single location from the owner. He currently owns 3 offices, and is offering to sell one. My knowledge of such a transaction is minimal, so I need to get some experts involved, I'm just not sure what those experts are. Are there lawyers that specialize in this sort of thing? I know the appraised value from 2 years ago which will at least get some talks with banks started. Does anyone have suggestions on reading material to learn about estimating operating budgets and just how to run a business? I do have a partner going into this who is more knowledgeable than I am about day to day operations and we have a few consultants lined up to help make sure we are moving in the right direction. Has anyone here ever gone through a buyout like this?
Thanks in advance.
How will you know you'll be able to keep the patients?
This office is in a different city than the others. The owner feels too stretched to try and manage the office due to the distance. Also the local referral sources refer because of our relationship. I don't see losing the referrals due to a company name change, they are still referring to the same people.
Some of my readings so far detail the transaction as buying the assets, and not the company. This way any existing billings remain the responsibility of the owner. We would essentially be purchasing the charts, equipment, etc. I also think we would need an agreement that we would not start an office in the city of the current owner and he would not start a new office in our city.
I'd be interested how you do it.
I am a CPA in Canada and bought a small CPA firm. I did it on my own and just had a lawyer draw up the final agreement. I bought the clients and based the purchase price on 1 year of gross billings. That amount is paid over 3 years and is adjusted based on the retention of clients. So, we identify the clients, I pay 1/3rd of the billings up front and in year 2, pay another 1/3 less any of his clients that left (unless they left because of something I did).
I then took over the lease of the office and paid for any office equipment that he sold at fair value. I bought the server, some computers and furniture etc. The sale of assets was separate from the client list.
There is no value for "Goodwill" which is essentially the name of the firm I buy. We pay for actual billings, not the reputation.
For buying a medical practice, your best bet is to talk to someone who bought or sold a similar practice. Lots of people will help and charge you a fortune. I find it best to talk to the seller, get the broad strokes settled on and then let the lawyers finalize things.
The typical medical/dentist/chiropractic/ model was usually 50% of gross plus the market value of the equipment. However, I've sold/bought several chiro practices over the years and never received or paid that much for them. There are lots of factors to consider such as over head, etc. Do you have an option to purchase the building?
The building/space is currently just leased. The lease is month to month, so we have the option to just maintain the lease or move. We expect to maintain the lease for the near term and look to move to a new space once everything smooths out from the transfer.
where are you? what state or country?
usually the seller is likely going to vastly overrate everything. you need to have your own person do thru everything for a fair price.
there's lots of companies that do this for dental practice purchases.
do you have a restrictive covenant currently?
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