Highly lucrative private practice for sale, 500K net income, charleston SC

[rich10900]

Busy outpatient private practice for sale. Current owner works 41hrs per week, has three therapists in the office and three upfront office staff/office manager. Practice gross for 2016 is 740,000 with 510,000 in net profit after expenses. All W2's, expenses and income will be verified with the past six years of tax returns (open book for the right buyer). Owner owns the building and all contents. Located in beautiful Charleston SC. Practice accepts all major insurers, no Medicaid. Recent $45,000 upfit to the office with an expanded waiting room to accommodate 15 patients and two new exam rooms . This is a turnkey practice with all rights to website., .com names. It will gross 61,000 per month. Asking 300,000 for the building and 200,000 for the practice. May consider owner financing at zero interest. The bank will mortgage at 4.5% interest with 10% down. It currently has over 3,000 patients most of which see the three therapists so it will retain a high percentage of clients. Practice has a second psychiatrist who works part time and is a wonderful practitioner. Only reason for sale is family emergency and I have to move my family. Purchase the practice, put your name on the door, owner will teach all the business aspects of private practice and make over a half million per year at 41hrs per week.

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[rich10900]

Busy outpatient private practice for sale. Current owner works 41hrs per week, has three therapists in the office and three upfront office staff/office manager. Practice gross for 2016 is 740,000 with 510,000 in net profit after expenses. All W2's, expenses and income will be verified with the past six years of tax returns (open book for the right buyer). Owner owns the building and all contents. Located in beautiful Charleston SC. Recent $45,000 upfit to the office with a warranty on two brand new HVAC systems. This is a turnkey practice with all rights to website., .com names. It will gross 61,000 per month. Asking 300,000 for the building and 200,000 for the practice. May provide a lease to own and owner financing at zero interest. It currently has over 3,000 patients most of which see the three therapists so it will retain a high percentage of clients. Practice has a second psychiatrist who works part time and is a wonderful practitioner. Only reason for sale is family emergency and I have to move my family. Purchase the practice, put your name on the door, owner will teach all the business aspects of private practice and make over a half million per year at 41hrs per week.

2016 tax returns have been filed and will reflect 720,000 gross and over 500K in net profit after expenses for last year

 

[PistolPete]

2016 tax returns have been filed and will reflect 720,000 gross and over 500K in net profit after expenses for last year

I have no interest in moving to SC or buying this practice, but it's nice to see some real-world private practice details. How much do you bill, and what percent of that do you collect, when not including the therapists? What's the no-show rate? All the best to you!

 

[nexus73]

Do people buy psychiatry practices?

 

[hamstergang]

Misread, nvm.

 

[finalpsychyear]

I guess if one wanted to do private practice and wanted something up and running. Your basically coming out of the first year making 500k-200k so 300k net if you dont' count the building purchase.

Good for someone who doesn't want to spend maybe the first year building up a practice.

 

[dl2dp2]

The pricing is very fair (and if all the numbers you are reporting work out, somewhat below what I would expect) except don't know how the building real estate would be properly valued in SC. If I were in SC I'd totally consider it.

What if you get a new partner to gradually transition out (i.e. the locum guy)? That might be a bit easier than straight selling.

For other forum readers, I suspect this, while much better than average, is not unusual in the community. Basically if you count the salary for this job to be 250-350k, you are taking in another 40-50% overhead. It's high, but not that high. And if you worked for a facility this all goes to the equity partners or hospital administrator. Great job running the biz!

 

[FlowRate]

I'm surprised you haven't gotten more traction. Last I heard, Charleston was a pretty saturated market and you've cornered your own nice share of it.

 

[Seroquelled]

I would jump on this if I could (assuming it is real) but I'm still a resident.

 

[michaelrack]

one important detail is if insurance companies will allow the new owner/psychiatrist to be added as a provider to the practice's insurance contracts. Most probably will, but the new doc will still need to go through credentialing with the insurance companies.

 

[nexus73]

What if you buy a practice and half the patients are on 6mg of Ativan a day with Adderall for their adult Adhd?

 

[st2205]

What if you buy a practice and half the patients are on 6mg of Ativan a day with Adderall for their adult Adhd?

I'm pretty sure there has to be a benzo and stimulant dosage/salary equivalency chart floating around somewhere out there.

 

[Jules A]

I'm pretty sure there has to be a benzo and stimulant dosage/salary equivalency chart floating around somewhere out there.

Right? The gross is far too low for any self respecting benzo/stimulant focused practice. But Nexus73 makes a good point because I worked at a new practice that took on a large number of referral patients from a local psychiatrist who retired and it was a challenge. All geri and most had been on not one but 2 benzos for years. I thought we were going to have to cover the waiting room floor with mattresses to avoid fall injuries during the first 3-4 months.

 

[Shikima]

Right? The gross is far too low for any self respecting benzo/stimulant focused practice. But Nexus73 makes a good point because I worked at a new practice that took on a large number of referral patients from a local psychiatrist who retired and it was a challenge. All geri and most had been on not one but 2 benzos for years. I thought we were going to have to cover the waiting room floor with mattresses to avoid fall injuries during the first 3-4 months.

How it was for me. Fortunately, they were the severe PDs and left to go elsewhere. New ones showed up looking for multiple benzo's, I said no and they got angry. Haven't seen those return either.

 

[Mapplicant]

Responding to several above who says this is agreat deal....definitely sounds so from the very rosy numbers perspective and the sale price.

Now this probably is my incredible business naivete....but why would someone sell a business grossing 700k with 500k in profts for just 200k and the bldg for 300k?

Of course it could be the owner is retiring and looking to cash out and made his/her money...but if you were the owner would you give it up for 500k? As others also alluded to....it could be pts full of benzos and stimulants or maybe even more nefarious reason that the practice has to change provider's hands.

 

[Shikima]

Responding to several above who says this is agreat deal....definitely sounds so from the very rosy numbers perspective and the sale price.

Now this probably is my incredible business naivete....but why would someone sell a business grossing 700k with 500k in profts for just 200k and the bldg for 300k?

Of course it could be the owner is retiring and looking to cash out and made his/her money...but if you were the owner would you give it up for 500k? As others also alluded to....it could be pts full of benzos and stimulants or maybe even more nefarious reason that the practice has to change provider's hands.

Owner needs to rapidly move on this due to family situation IIRC.

 

[Mapplicant]

Owner needs to rapidly move on this due to family situation IIRC.

Ah, makes sense. My used car salesmen radar gets alerted when something seems too good to be true...but of course there are always legitimate reasons for a great deal at times.

 

[Ahamis]

2016 tax returns have been filed and will reflect 720,000 gross and over 500K in net profit after expenses for last year

Why are you selling your PP?

 

[notdeadyet]

Why are you selling your PP?

Read the original post. It's in there.

 

[michaelrack]

.

Now this probably is my incredible business naivete....but why would someone sell a business grossing 700k with 500k in profts for just 200k and the bldg for 300k?

although 500k is technically the profit in accounting/IRS terms, when valuing the business you would subtract out the amount that it would take you to hire a psychiatrist to do the work (or how much you value your own labor, how much you would earn if you took another job instead of being the worker in this business). So if one asssumes it would take 300k to hire a psychiatrist to do the work, that would leave 500-300k = 200k of economic profit.

 

[Trismegistus4]

What would the owner's own personal income be in this scenario? The OP says "make over a half million per year" but presumably that's based on the "510,000 in net profit after expenses." He says practice gross is 740k--does that mean he's paying the salary and benefits of 3 therapists and 3 office staffers for a total of $230k?

 

[HockeyPsyGuy]

Intern with no outpt experience, but is there any guarentee majority of patients will stick around once the guard changes?

I would assume patients are loyal to their individual provider, not his/her brand or legacy

 

[PistolPete]

Intern with no outpt experience, but is there any guarentee majority of patients will stick around once the guard changes?

I would assume patients are loyal to their individual provider, not his/her brand or legacy

Good point, no guarantee that the patients would stick around.

 

[rich10900]

Please folks, stop bashing my practice when you don't know anything about me (saying its a pill mill or benzo/Adderall factory) . Its legit, its real. My wife has to move her job because the hospital is beating her up, she is a cancer doctor and working 13-14hr days. So I am making the sacrifice to move for my wife/children where she found a better job and we will be closer to my in laws. I am a very conservative prescriber and most in the area send patients to me to clean up the medications. Most of my patients are hard working teachers, lawyers, all the way to multi multi millionaires. I do therapy with about 3-4 patients every week for 50 minutes that I hand selected. The retention rate will be high as 75% of the people have seen and known my therapists for 4-6 years. Charleston is a beautiful and rapidly growing historic area. I own the building as well. You always want to own the building because for anyone who leases the landlord can easily kick you out after term. Anyone who wants a rock solid, really great practice should IM me. I will prove all the numbers with my W2's because yes I can lie and say I make ten million a year, but I cant lie to the IRS. I will also show all the 1099's coming back from the insurance carriers and credit card companies this year and for a serious buyer show you all the business aspect of things for 3-6 months. Dont think of first year numbers, think of a lifetime of making this kind of money, at 41hrs per week. I would NEVER be doing this if it were not for my wife, but she is working from 6am-8pm and we have two small children under the age of four. I am literally giving the practice away and I know that. especially at a 61,000/month gross. I will rebuild when I move. anyone interested lets talk???

 

[Superpsych]

Please folks, stop bashing my practice when you don't know anything about me (saying its a pill mill or benzo/Adderall factory) . Its legit, its real. My wife has to move her job because the hospital is beating her up, she is a cancer doctor and working 13-14hr days. So I am making the sacrifice to move for my wife/children where she found a better job and we will be closer to my in laws. I am a very conservative prescriber and most in the area send patients to me to clean up the medications. Most of my patients are hard working teachers, lawyers, all the way to multi multi millionaires. I do therapy with about 3-4 patients every week for 50 minutes that I hand selected. The retention rate will be high as 75% of the people have seen and known my therapists for 4-6 years. Charleston is a beautiful and rapidly growing historic area. I own the building as well. You always want to own the building because for anyone who leases the landlord can easily kick you out after term. Anyone who wants a rock solid, really great practice should IM me. I will prove all the numbers with my W2's because yes I can lie and say I make ten million a year, but I cant lie to the IRS. I will also show all the 1099's coming back from the insurance carriers and credit card companies this year and for a serious buyer show you all the business aspect of things for 3-6 months. Dont think of first year numbers, think of a lifetime of making this kind of money, at 41hrs per week. I would NEVER be doing this if it were not for my wife, but she is working from 6am-8pm and we have two small children under the age of four. I am literally giving the practice away and I know that. especially at a 61,000/month gross. I will rebuild when I move. anyone interested lets talk???

Someone please just buy him out already. Seems legit.

 

[dl2dp2]

If nobody wants to buy you out you can also try to connect with firms that specialize in selling small businesses to private equity companies. It's not that much money.

The other possibility is just hire someone to fill your spot. Run the practice as the medical director remotely when you move. Actually if I were you that's probably what I would do. Recruiting expenses can be deducted.

I suspect if you want to straight out fire-sell it you might not get a fair pricing. (Just 200k is low IMHO. Using a standard DCF calculator to do a back of the envelop calculation, net profit of 200k a year would put the business at 2 million in valuation, even discounting "good will" by 50-70% you should still be able to sell it for 500k+). I'm not sure if you have talked to business minded people but I wouldn't rely on contacts you make here. I would identify a legit commercial agency in Charleston, which as a city has its share of multimillionaires who'd be interested in this sort of thing.

 

[michaelrack]

If nobody wants to buy you out you can also try to connect with firms that specialize in selling small businesses to private equity companies. It's not that much money.

The other possibility is just hire someone to fill your spot. Run the practice as the medical director remotely when you move. Actually if I were you that's probably what I would do. Recruiting expenses can be deducted.

I suspect if you want to straight out fire-sell it you might not get a fair pricing. (Just 200k is low IMHO. Using a standard DCF calculator to do a back of the envelop calculation, net profit of 200k a year would put the business at 2 million in valuation, even discounting "good will" by 50-70% you should still be able to sell it for 500k+). I'm not sure if you have talked to business minded people but I wouldn't rely on contacts you make here. I would identify a legit commercial agency in Charleston, which as a city has its share of multimillionaires who'd be interested in this sort of thing.

It would be hard to sell for a good price in it's current form, or even with a single psychiatrist hired to fill the spot, EXCEPT possibly to a local hospital. Right now it is too dependent on a single person (the single psychiatrist or owner). Expand it to a couple of psychiatrists and it would be much easier to sell for a price of 1+ million (for the practice and building).
The price the OP is seeking seems reasonable for the practice's current situation.

 

[Candidate2017]

If there's already high demand there, wouldn't it make more sense to buy the building (or rent an adjacent one) and set up shop with staff you hand select? You can hire a bunch of marketing, accounting, billing and law firms for much less than the $200,000 asking price if necessary.

 

[dl2dp2]

It would be hard to sell for a good price in it's current form, or even with a single psychiatrist hired to fill the spot, EXCEPT possibly to a local hospital. Right now it is too dependent on a single person (the single psychiatrist or owner). Expand it to a couple of psychiatrists and it would be much easier to sell for a price of 1+ million (for the practice and building).
The price the OP is seeking seems reasonable for the practice's current situation.

This is exactly what I was suggesting. He has one locum now. If he hires one or more part time (maybe full time) and upgrade the locum to part time, then he has two+ staff psychiatrists. He then acts as the practice owner and medical director, but has no clinical responsibility. Some patients will drop but not all. He can do a RVU based system to encourage profit sharing. All the profit left over from one year of operation would be a pretty good estimate of the value of the business. This then can easily be sold to a hospital/private equity entity. Right now his job is sort of not quite done...the business needs to be further packaged before finding a buyer.

 

[rich10900]

With all due respect to everyone I am not and NEVER will ask a million dollars for my practice. I did not intend to set it up that way, but rather a small private practice with two good psychiatrists taking care of great people with some really awesome therapists and front end medical staff, like family. That is the way I treat everyone that works with me including my patients. I now have to move and sell it for my wife. Its a little quote "happy wife happy life" so yes I am literally giving away, on a silver platter, a gold mine of a practice. For years to come a good psychiatrist will make a lot of money, three times the local academic salary and live in a beautiful area. And the patients are bread and butter 90% depression and anxiety, most rock stable on a small dose SSRI/SNRI that have seen me for years. Maybe propranolol for anxiety as well. So if anyone is a good psychiatrist I have three banks and institutions ready to lend 100% financing with zero down at 4.5% interest on the practice. No money down (after I showed them the income statements they are very interested). I can even keep the building and lease back for a few years until one becomes familiar with the area and certainly show the business aspect of the practice which I love. Most importantly to me, all these people I have had the pleasure to employ and my patients I have helped.....keep on getting the care they deserve. That's why its pennies on the dollar. So please IM me if interested.

 

[TexasPhysician]

I suspect if you want to straight out fire-sell it you might not get a fair pricing. (Just 200k is low IMHO. Using a standard DCF calculator to do a back of the envelop calculation, net profit of 200k a year would put the business at 2 million in valuation, even discounting "good will" by 50-70% you should still be able to sell it for 500k+). I'm not sure if you have talked to business minded people but I wouldn't rely on contacts you make here. I would identify a legit commercial agency in Charleston, which as a city has its share of multimillionaires who'd be interested in this sort of thing.

Medical practices do not carry valuations like a typical business. A lot can change when a medical practice changes hands. The therapists could leave. The other psychiatrist could leave. The better staff may leave. Patients may look elsewhere. What would the cost be to move nearby and poach patients?

There are many variables, especially when the owner of a medical service company leaves.

I would start with the appraised value of the office building. Then someone should meet all of the staff, review books, etc. and look for potential flaws of the practice. Remaining value of an insurance practice is debatable as commercial insurance patients are not hard to obtain.

Above appraised value of the property, remaining value is probably between 20-400k depending on many factors. I base that on actual numbers that I have seen.

Non-monetary value is the potential quality of business education the OP could provide.

Anyone interested should certainly perform a thorough due diligence before being 500k in debt. While this may be a great deal, no one can determine that except a well informed buyer.

 

[dl2dp2]

With all due respect to everyone I am not and NEVER will ask a million dollars for my practice. I did not intend to set it up that way, but rather a small private practice with two good psychiatrists taking care of great people with some really awesome therapists and front end medical staff, like family. That is the way I treat everyone that works with me including my patients. I now have to move and sell it for my wife. Its a little quote "happy wife happy life" so yes I am literally giving away, on a silver platter, a gold mine of a practice. For years to come a good psychiatrist will make a lot of money, three times the local academic salary and live in a beautiful area. And the patients are bread and butter 90% depression and anxiety, most rock stable on a small dose SSRI/SNRI that have seen me for years. Maybe propranolol for anxiety as well. So if anyone is a good psychiatrist I have three banks and institutions ready to lend 100% financing with zero down at 4.5% interest on the practice. No money down (after I showed them the income statements they are very interested). I can even keep the building and lease back for a few years until one becomes familiar with the area and certainly show the business aspect of the practice which I love. Most importantly to me, all these people I have had the pleasure to employ and my patients I have helped.....keep on getting the care they deserve. That's why its pennies on the dollar. So please IM me if interested.

Medical practices do not carry valuations like a typical business. A lot can change when a medical practice changes hands. The therapists could leave. The other psychiatrist could leave. The better staff may leave. Patients may look elsewhere. What would the cost be to move nearby and poach patients?

There are many variables, especially when the owner of a medical service company leaves.

I would start with the appraised value of the office building. Then someone should meet all of the staff, review books, etc. and look for potential flaws of the practice. Remaining value of an insurance practice is debatable as commercial insurance patients are not hard to obtain.

Above appraised value of the property, remaining value is probably between 20-400k depending on many factors. I base that on actual numbers that I have seen.

Non-monetary value is the potential quality of business education the OP could provide.

Anyone interested should certainly perform a thorough due diligence before being 500k in debt. While this may be a great deal, no one can determine that except a well informed buyer.

I agree with both above. DCF is not a very good valuation tool if your parameters are all wrong--but I already discounted 50-80% of valuation. I think what likely is a better valuation is a comparables analysis. But this is sort of beyond the scope of this post.

OP sounds like a nice, decent, conscientious clinicians who has built a high quality practice with which he/she has a lot of emotional connections. I think the ideal solution is like what I said: recruit another quality clinician, pay him/her a reasonable salary/equity. Convert the practice to a partnership. Then become the medical director/managing partner. This should not be more than a 15% FTE job that will pay well, which you CAN do remotely. A very high quality Cisco teleconference system now only costs between 2k and 5k. You can have weekly team meetings remotely. This is 2017. We have technology now. You should really very seriously consider KEEPING YOUR PRACTICE and making it work, if not for your financial bottomline, perhaps for your patient's. It's unlikely that you'll lose patients, actually, but what's more likely to happen is that a lot of these patients from bad insurance plans will be kicked out by the new owners and will have problem finding another practice that takes their insurance.

If I were OP, I may even consider FRANCHISING. Now I know this sounds kinda crazy, but 1) high quality insurance based mental health is in high high demand around the country. 2) you can easily build a brand if you have two locations and you already have a winning formula in one. So instead of selling the business, how about expanding to your new location and now actually have a brand? Instead of selling to a buyer, how about getting an investor to *grow*? lol