I’ve been contemplating starting a brand-new practice from scratch or buying an existing practice. Here is a summary of the practice that is for sale:
What was your budget for a start-up?
-selling doctor is female and selling because she will be working for the state
why did she decide to become an employee?
-office is currently open 24 hours/wk (Mon-Wed) and has been for the past 5 years.
Sounds like it’s been hobby, has it been? Is she married? Does her significant other work?
She only has 2 full hygiene days per week.
So that’s approximately 400 “active” patients going through hygiene (16 x 25 weeks = 400) assuming the majority are seen twice each year. Is that the case? Is there any hygiene on the docs schedule?
-patient count is approximately 2000 patients (1500 were seen in 2007)
Is this a tourist location where patients are seen once for emergencies? Of the 1,500 patients supposedly seen in 2007, how was that determined? Are these 1,500 DIFFERENT patients or simply 1,500 “visits”?
-roughly 8-10 new patients/month (mainly internal marketing)
Again, sounds like a hobby, no interest in working more than 3 days per week, no desire to market and grow the practice?
-selling doctor refers all ortho and endo, and some dentures and some pedo
Do you perform any of these procedures? Any other procedures you do that she doesn’t and vice versa?
-practice is 60% FFS and 40% PPO (only 2 PPO plan accepted – metlife and delta dental)
-2008 gross through Oct (10 months) is $245,000 and net is $85,000
-2007 gross was $323,000 and net was $110,000
-2006 gross was $335,000 and net was $120,000
What’s the breakdown between hygiene and dentistry? Hygiene should be around $80k based upon the 16 hours per week which puts her production at $240k for a total of $320k, is that about right?
The asking price is $285,000 and is negotiable. There seems to be a lot of potential to grow this office:
What’s the population to dentist ratio? Is the lease renewable? Have you had the lease looked at yet?
-accept more PPO plans-implement more external marketing (direct mailers, etc.)
-open more days and hours
-keep a lot of procedures that were referred out in house
Ok, you answered one question…
In addition to the potential, some red flags about the office I see are:
-why are there only 2 full hygiene days/ wk when the office has been established for 6 years with 2000 patients? Probably has poor recall and STM program.
This isn’t necessarily a red flag, again, if the income wasn’t “needed” by the doc who only wanted to work 24 hours per week, why would you want more patients you can handle?
-only 2 equipped OPS after 6 years!!!! WHY!!!
See above….hobby….heck, doctor only worked 1 chair 2 days per week…tells me a lot about her motivation, which is not intended to be negative, I’m just guessing her motivation for this specific practice wasn’t the same as someone else’s.
What do you think???
See if you can answer the questions and tell me more.
How much do you think this office is worth?
Depends upon the buyer. If the byer was looking to start from scratch and looking to spend $250k for a 1,500 square ft space with 2 equipped ops and I compared this to spending $250k for the same space WITH an immediate patient base of $300k…..well, I’d be working TOMORROW instead of waiting 90-150 days for my space to be ready!
What price would you negotiate?
That’s for the buyer to decide.
Any suggestions??? Do you need any additional information???
Yep, dig a little more. I agree with you, sounds like it has potential though you need to find out more about the demographics and look into some of the issues I raised.
Don’t get hooked into the price versus revenue ratio in this case, it’s irrelevant in this case. Think about what I said above:
1. how much would it cost you to build out 1,500 sqr ft ? $100k-$125k with landlord allowances?
2. how much would you spend to equip 2 rooms & have everything else they list? $100k ?That’s $200k to $225k right there. So lets discount it because it’s 6 years old, $150k ? $125k?
Now the kicker:
3. how much would you be willing to pay for an immediate patient base of $300k ? $150k? $100k?
$285k doesn’t look to bad to me compared to opening from scratch in 90-150 days for about the same cost and with NO patient guarantees!
This post first appeared on DentalTown.