Question about valuation of a practice.

[toyotasupra]

So I’ve been working for a clinic that sees 95% state insurance pts. Working here for about 5 years. Boss basically pays me 40% production which is crazy high. Gross income was around $600k last year. This year boss is retiring - he’s planning to move to a 2nd world country where he will live like a king, wants to sell me the practice… but I’m having a hard time deciding as state pts are unpredictable, 50-50 show rate, poor tx compliance, etc.

That said, is there practice valuation differences between a clinic that see state pts vs cash vs private?

---

Members don't see this ad.

 

[DrJeff]

So I’ve been working for a clinic that sees 95% state insurance pts. Working here for about 5 years. Boss basically pays me 40% production which is crazy high. Gross income was around $600k last year. This year boss is retiring - he’s planning to move to a 2nd world country where he will live like a king, wants to sell me the practice… but I’m having a hard time deciding as state pts are unpredictable, 50-50 show rate, poor tx compliance, etc.

That said, is there practice valuation differences between a clinic that see state pts vs cash vs private?

When a practice is valued, often what the key items are, the most recent 2 or 3 years of collections/productions, any outstanding debt the practice may have, and if there's real estate involved with the potential sale. The source of the income the practice generates (state patients vs private insurance/cash patients) isn't as much of a factor as the simple amount of cash they are generating for the practice per year.

The percentage of the income streams and how that affects valuation is an area where some debate between the parties happens

 

[toyotasupra]

When a practice is valued, often what the key items are, the most recent 2 or 3 years of collections/productions, any outstanding debt the practice may have, and if there's real estate involved with the potential sale. The source of the income the practice generates (state patients vs private insurance/cash patients) isn't as much of a factor as the simple amount of cash they are generating for the practice per year.

The percentage of the income streams and how that affects valuation is an area where some debate between the parties happens

Ok I see. So you’re telling me I should produce less this year and I’ll get a better deal when he sells? Haha.