Group practice roadmap: Acquisition outliers

We wrap up our acquisition discussion by hitting on some frequently asked questions  about some situations in practice purchases that do not fall neatly within the examples we’ve discussed in the previous musings on this topic.

Of course, every situation is unique and it would be impossible to cover everything here, but here are some outliers that we’ve seen frequently enough that you will probably stumble across a couple of them if you are serious about practice acquisitions.  

Read more…

Group practice roadmap: how much should I pay for a practice?

Among the top 3 questions that always come up when you purchase a practice, one of them is “how much?”  Clearly, the price of a practice is often a major, if not the, determining factor in whether or not to ink the purchase contract.

A lot of variables go into the determination of a purchase price, but here, we’ll boil it down to its simple essence.  We’ll also give you some rules of thumb for making a good practice purchase so that when you close, the practice is producing income for you right away – unless you’ve bought a fixer upper.

Before getting into any part of the purchase process, please understand this: the starting point for you in negotiating a purchase price is NOT the seller’s asking price.  Rather, your starting point is your own independent evaluation and computation of price.  If the asking price for a practice is $500,000, and your independent assessment is that the practice is worth $300,000, you should have no problem passing and looking for other opportunities.  On the other hand, if the asking price is $500,000 and you value it at $750,000, we have a winner.

Let’s break down the process of determining the value for a practice:

Read more...

Group practice roadmap: Acquisition pitfalls

Buying a practice is not unlike dating.  You see someone that looks good to you, evaluate the situation, and think only of all the great possibilities.  Then, you enter a final “transaction” and once you are committed to that transaction, BAM!, you discover some horrible skeleton in the closet.  Unfortunately for you, now you are in and extricating yourself from the situation is difficult.  

Without extending that painful analogy further, let’s take a look at some things that have gone wrong in acquisitions.  We’ll also discuss how you can prevent yourself from becoming a victim.  And here, we’re not talking about the normal due diligence issues that arise: unpaid tax bills, bad credit ratings on purchased corporations, looming lawsuits, etc.  We’re digging a bit deeper here to find a few of the messier situations that you might run into.

Read more...

Group practice roadmap: the purchase option

As we’ve wound our way through this group practice roadmap, we regularly get asked a simple question: throughout the discussion, you’ve talked about building a new location as the means to add new locations to your group practice.  What about acquiring an existing practice?  And certainly this is an effective, useful way to grow your practice.  In fact, most of the top group practices grew through a combination of new office development and acquisitions.  And we were definitely going to get around to discussing it.  Now, would be a good time to have that discussion.

Like a lot of other folks out there, we’ve done our standard hundreds of acquisition deals – from having no money and begging for owner-financed deals to having public market money and overpaying in cash to beat out competitors.  And while every deal has its own characteristics and unique issues, things can generally be boiled down under the umbrella of some major overriding points.

In our first review of acquisitions in this post, we’ll talk about things you need to know and should consider.  We’ll follow that up with a discussion of some problem areas, do a breakdown of how the economics of a deal might look and then give you some places to look for a practice to buy.

If you are going to buy a practice, make sure to consider these handful of items before signing that final deal.

Read more...