Once you have decided not to work for someone else when you graduate, the next question is whether to buy an existing practice or start one of your own. It sounds easier to buy, but is it?
Buying a practice can be less trouble, but it is still a lot of work and it may not be the best option for you. Here are three reasons why buying a practice can be easier:
“¢ You don’t have to start without patients. The established patient files give you a base income each month that will help pay the bills.
“¢ You don’t have to buy all your equipment and supplies. The office might not be set up exactly as you want, but everything is there, and you don’t need to go looking for the many items needed to set up a practice.
“¢ You don’t have to set up the practice systems. Billing, collections, patient flow, and other procedures are already in place, so you can step in and begin working the system immediately.
Of course, you have to pay for an established practice. But how do you know the practice is worth the asking price? If you do find a practice you think you may want to buy, get answers to the following questions before you get too involved in the purchase decision:
Is the practice set up to support the way you want to work? If you want to run a family practice, and most of the clientele are work-related injury or PI (personal injury) patients, you will have to start from scratch to attract families to your practice. If your technique is notably different from the previous doctor’s, you will have a difficult time transitioning the patients.
Is the practice located in the right place? If the practice is in a town you want to move to and live in for a long time, you can proceed knowing that you will be buying a business you can stay with for years. If the practice is not exactly where you want to be located, you will probably be better off finding a town you like and starting your own practice.
Is a practice broker involved? Most practice brokers are reputable, and they can help
smooth the way toward a sale. But remember that the broker works for the seller – not the buyer – and the broker’s objective is to get top dollar, as this determines the size of the sales commission. Hire your own CPA and attorney and verify everything the broker says.
Is the price reasonable? Many doctors will inflate the prices of their practices for two reasons: 1. They want to get paid for their years of work, and 2. They have been counting on using the proceeds of the practice sale to fund their retirement.
A practice in which the doctor has only been working a few days a week might seem like a steal, but if the selling doctor won’t come down in price, you could end up paying too much for the practice.
Can you get a non-compete from the doctor? The last thing you want is to buy a practice and have the selling doctor open up down the street and take back all of his or her former patients. Some states (like California) do not uphold non-compete agreements, and you will have to pay a reasonable amount of money for a non-compete as part of the purchase price.
If you don’t think you can get a good non-compete, or you don’t think it will be upheld in court, the practice may not be for you. Make sure that you know the actual reason the doctor is selling. If your instincts tell you that you’re not getting the whole story, be cautious.
How long will it take you to make a living from the practice? If the price is too high, if there is no strong patient base, or if you are going to have to start effectively from scratch, you might be better off going down the street and opening your own practice.
Finally, trust your instincts. If the offer sounds too good to be true, it probably is. If everything looks great and you have a good feeling about the practice and the location, it could be a wonderful lifelong investment for you.