I’ve been working at this practice for 2½ years; since it first opened. My boss built it with plans for someone else to work in it, but that fell through, so I’ve been the sole dentist there. I am talking to him about buying it but can’t decide if it is worth it. He wants all the money out of it that he put in, but based on production numbers, I don’t see how this can work out for me.
Here’s a little background…
We are the only office in a small town. I have built a good reputation in the town and it would be very nice to take over this practice and keep the patient base and the goodwill that I have earned there. I could probably build my own practice there (based on contractual issues that I won’t get into here) but I really don’t want to screw over my boss since we are friends. The balance on the practice loan is 489k and he says he put in 50k of his own and that he can’t sell it for less than that.
Here are some (very basic) collection figures:
2007: 195k, based on 7 ½ months, mostly part time
2009: should end up around 600k
I know that I haven’t given much information, but that’s all I have on hand right now. I just don’t know where to go at this point. I’d rather not have to start another new practice from scratch since I’ve basically done that with this one. Any suggestions for what I should be doing next?
Thanks in advance for any help. I’m at my wits end.
The practice may or may not be worth what he’s asking; there’s not enough information to make that judgment.
If it’s a 3-4 operation practice which should have only taken approximately $300k-$400k to open, I wonder where the other debt came from? Was it from supporting you and the practice for 2 ½ years maybe? If so, he’s gotten some pretty nice tax breaks for his increased debt and I agree, that’s not your problem and it may be overpriced.
One can’t assess a practice like this on revenue alone though; that’s very dangerous for both buyer and seller. If this were a 20-year-old practice with older equipment and older technology then I would agree, the price seems out of line. This is a 2 ½-year-old practice, maybe with new technology with revenue of $600k and growing, the price may be reasonable.
On the other hand, if it took over $600k in debt to open this 6 op practice with all the bells and whistles and it has the potential to be a $1 million practice within a year his price may be a bargain.
If this practice is only capable of doing about $600k, you don’t want to buy it for that price for sure.