From "Ask the Expert"...

Negotiations can be a stressful, daunting process.  Especially when purchasing a practice.

Put yourself in the sellers shoes for a moment.  The doctor has bled for the practice through the years and is now ready to pass it on to a new doctor.  Of course they have opinions about the practice's worth.

However, their opinion does not necessarily correlate with the actual value of the practice.

Consider the following factors:

• There needs to be an appraisal done by a qualified appraiser.  The seller customarily has this done and pays for it.
• Have an accountant review the appraisal and tax returns from the past three years.
• Have your own representation throughout the transaction by your own attorney.
• Assess the reputation of the practice within the community.
• Consider the payor profile....where do the revenues from this practice come from?  Insurance, cash, work comp, personal injury, etc.?
• The practice stats regarding new patients, office visits, collections vs. services rendered, from the past three years.
• Practice growth (or shrinkage) and potential for growth based on demographic data from the area.

This is one of the biggest decisions and transactions you will face.  There are many advantages of buying a practice vs. starting up your own, but it is not without pitfalls.  Do your homework and enlist the help of your attorney and accountant.