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Buying a business?

Discussion in 'Practice Management' started by kwokigwe, Nov 8, 2013.

  1. kwokigwe

    kwokigwe Welcome New Poster


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    Hello - need some advice/guidance if possible.

    I have just qualified this summer as a 'mature' student.

    I am in the process of purchasing an existing business. There are no premises involved as such as the vendor operates out of 2 sites one day week and just rents them for the day. Vendor is retiring. Have talked to 'landlords' of the rooms and they are fine with me taking over.

    So in effect I would be purchasing the client/patient list and some bits of equipment (trolley/light) rather than bricks/mortar. Turnover in the region of £23,000. Asking price £20,000.

    My (potential) accountant has advised that I should demand the vendor put a clause in the sale contract that if a certain % of clients leave in say first 6 months then he has to pay me 'x' amount and same over 9 & 12 months.
    Alternatively he advised that I propose payment by instalments, e.g. £5000 for first 6 months, £5000 after 9 months etc - again to ensure patient numbers remain constant and he not sold me a sinking ship!

    As this is all new territory for me and with podiatry being a unique business field I was wondering if this is the norm (having such clauses included in sale contract) or have most people in who have been through this just taken the plunge!!??

    Any advice or comments would be very much appreciated.

    Thanks
    Kwok
     
  2. Podess

    Podess Active Member

    Kwok,
    It sounds to me like your acccount is giving you good advice, so take heed. It doesn't really matter what others do, it is what you are happy with.
    It seems your accountant is doing his best to ensure you have a favourable deal and aren't buying a "pig in a poke".

    Good luck !

    Podess

    This is just for interest,

    http://en.wikipedia.org/wiki/Pig_in_a_poke
     
  3. fishpod

    fishpod Well-Known Member

    Twenty grand is far to much you could lose 50 percent of the patients the sliding clawback is a standard thing even pool cleaners do this. i would offer him 10 grand upfront take it or leave it as i dont see he has a queue of buyers. be tough its a buyers market. the most he could hope to get would be his net earnings for the year this will be much lower than turnover. good luck with the negotiations dont panick.
     
  4. Anne Stephens

    Anne Stephens Member

    You WILL lose some patients! The figure often quoted is 20% but it may be more or less depending on where the practice is, how much competition is in the area and how the takeover is managed. If you haven't already done so, it may be worthwhile negotiating a handover period with the current owner, providing you with an introduction to the patients and easing you into the practice. I didn't do that when I bought my practice and I wish that I had!
    I also probably paid more than I should have for my practice, but it was in a location where I wanted to live and as, almost 10 years on, I can look back and see how I have grown the practice - it was money well spent. Who knows whether saving a few grand at the outset would have made any difference? I can't be sure, but I do look on it as having been a very good investment.

    I wish you luck in your negotiations and hope that you end up with a thriving and successful practice

    Anne Stephens
     
  5. Lab Guy

    Lab Guy Well-Known Member

    It is far better to keep the contract as simple as possible to avoid drama moving forward. I agree with Fishpod, offer 10 grand up front and end of story. Find out if the vendor has a good reputation as it will be far easier to build the practice.

    If your unable to meet the patients then personally call every one of them to tell them you bought the practice and you look forward to serving them. You should also send
    letters to them as well to introduce yourself to mitigate losing patients.

    If he wants more money then consider going out on your own. If your ambitious and self motivated, you can build up your own practice. Good luck.

    Steven
     
  6. W J Liggins

    W J Liggins Well-Known Member

    I agree with Lab Guy here. The price is far too high. Why not investigate the possibility of a room in local medical practice(s)? A good simple chair/couch can be purchased second hand quite cheaply and will appeal to medical practitioners who might want to do a deal on using 'your' room from time to time. You'll have a ready made footfall of appropriate patients, direct GP referral and all sorts of other benefits (ready access to drugs, as well as a stimulating environment, facilities in place, cleaners arranged etc.). With a suitable marketing plan, you will have to expend much under £20,000 and still be able to purchase web sites and all the 'advertising' you could possibly need.

    I know a colleague who has done this and I wish that I did it when I qualified.

    All the best

    Bill
     
  7. Mike Plank

    Mike Plank Active Member

    Again I agree that this price seems too high. Many practices I see for sale use the turnover as a guide to the price of the practice but what is more realistic is buying a practice for the equivalent of one years profit or thereabouts. There does not seem to be any rules to pricing goodwill. I would carefully check all the previous accounts and check if the business is faltering or expanding and what is the competition? Is there scope for expansion in patient numbers or days available at the clinics?
    I probably like Anne Stephens paid too much for my practice in hindsight. However over 17 years and working on building the practice I don't regret it.
    There is some good advice posted here so I wish you well in whatever you choose to do.
     
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