What To Consider When Buying A Medical Practice

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If you're a medical professional who has been considering going into business for yourself instead of working through a larger practice, you're not alone. The advent of "concierge care" and the rise in popularity of alternative treatments (like acupuncture, chiropractic, and massage) have combined to create a business environment in which small medical practices can thrive. For many, starting from scratch can be an expensive prospect; purchasing a practice that's already in operation may be cheaper, more efficient, and more effective. But valuing a medical practice can be tricky, especially when much of the practice's current value may hinge on the physician's patient list, a factor that isn't necessarily transferable to a new owner. Read on for some of the issues you'll want to consider when appraising a medical practice in preparation for a purchase. 

Equipment Appraisals Give a Good Starting Point

One of the most objective factors you'll be able to use to negotiate a purchase price involves the "hardware" associated with the business; that is, the medical equipment you'll be purchasing. But even if you've worked with this equipment throughout your career (or purchased some on your own), it's a good idea to seek out a firm that specializes in medical office equipment appraisals. Some pieces of equipment can last for decades with minimal maintenance, and therefore hold their value well; others, especially those that involve rapidly-developing technology, may become outdated, obsolete, or no longer serviceable in just a few years. By factoring in these depreciation costs, an appraisal can give you a good idea of what you'd pay to replace this equipment if you weren't purchasing it with the business. Depending on how much of this equipment you need to run the business, you may wish to negotiate its purchase or only take on the pieces of equipment you'll actually use.

Don't Forget About Goodwill

Some businesses are valuable simply because of the high resale value of their hard assets. But many businesses derive much or most of their value from the intangible "goodwill": name recognition, a loyal customer base, and other hard-to-value factors that are unique to one specific owner. 

Although goodwill has a definite financial value, the challenge lies in determining how much of this value will be transferred through the sale. For example, a donut shop that has had a single owner for 50 years may still be able to capitalize on the former owner's name and likeness after the business changes hands (so long as the donut recipe itself doesn't change); however, a doctor who has been seeing the same book of patients since many of them were children won't be able to transition this goodwill so easily. 

It's important to account for this so that you avoid paying a seller for goodwill that you won't be able to use yourself. One alternative is to enter a partnership for a year or two while the seller "winds down" his or her practice; this allows you to become acclimated to your new clients and helps ensure a more seamless transition of business-related goodwill. 

For more information, contact a company like Compass Medical Appraisal Services today.