Sticker Price: Starting Solo Practice vs Buying Someone Out

[deleted690619]

PGY-1 here. I’ve searched high and low only to find that there’s very little info regarding DPMs starting a practice right out of residency. I’m very interested in this route. Please assume that I have the cash/credit needed to fully make this happen. What else is needed? How much total costs am I looking at the start my own practice? Please don’t respond “well that’s hard to answer”, as I can use deductive reasoning to figure that out. Basically I’m open to hypotheticals and anecdotes. Also feel free to comment on the buying someone out aspect also. My local is SE btw if that help any. Really appreciate any responses!

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[air bud]

anecdote - my residency director had his own private practice, very smart, well known nationally, been doing this along time. one day he sat down and went through stuff....rent, electric, computers, sterilization equipment, instruments blah blah blah 200k.

 

[G0dFather]

If your starting from scratch with one room and other equipment etc itll be about 30-50 K depending on the quality of equipment your buying .. you will also need cash to float you each month for overhead until you get busy enough to break even ( that will vary obviously but have enough for at least year to stay solvent, (RENT, EMPLOYEE COSTS, MALPRACTICE, UTILITIES, SUPPLIES, ADVERTISING, OFFICE INS) those are the main items, your biggest issue is the CASHFLOW .... but if you sit there and evaluate all that ( like it did a couple years ago) your better off buying someone out ( if all pans out to your advantage as much as possible) due to the cashflow youll have coming in and the base you can build on/enhance

 

[CutsWithFury]

If your starting from scratch with one room and other equipment etc itll be about 30-50 K depending on the quality of equipment your buying .. you will also need cash to float you each month for overhead until you get busy enough to break even ( that will vary obviously but have enough for at least year to stay solvent, (RENT, EMPLOYEE COSTS, MALPRACTICE, UTILITIES, SUPPLIES, ADVERTISING, OFFICE INS) those are the main items, your biggest issue is the CASHFLOW .... but if you sit there and evaluate all that ( like it did a couple years ago) your better off buying someone out ( if all pans out to your advantage as much as possible) due to the cashflow youll have coming in and the base you can build on/enhance

Are there any DPMs out there that actually sell their practice at a “real” market value? All I have heard is unrealistic evaluations

 

[dtrack22]

Colleagues who have opened up practices (in buildings meant to allow for growth, not one room clinics as has been mentioned) seem to have taken out $200k-300k in business loans/lines of credit to get started. Location will play a pretty big role as commercial office space can vary by $10-20/sqft/yr (ie tens of thousands of $ per year). But it is probably fair to say $250k between loans and lines of credit. I know an individual who took out more and others who have gotten away with less.

Are you supporting your own family (ie how much are you going to have to pay yourself each month)? Are you opening up in a hometown where you could live with parents/family for awhile and save on personal expenses? Is there a local hospital that can help fund your startup in exchange for providing some call/coverage at their facility? Do you have any money from savings, previous investments, inheritance, etc. that would lessen your loan requirement?

I think you would have to get a good deal from a retiring podiatrist to make it worth it to buy an existing practice. Yes, there is revenue coming in from day one, assuming patients stick around to see you and referral sources continue to refer to the clinic. But you may be stuck with equipment, an EMR, staff, policies and procedures that you don't like. Those things can be costly and/or frustrating and/or time intensive to change. Starting your own clinic means you put everything into place as you would want it. I have yet to find a situation where the purchase price for an existing practice isn't at least 2x what it would cost to open up on your own. A solo practice with gross collections of $600k, asking for 80% of gross collections is gonna cost you $480,000. It can also get confusing and the owner can get creative (to his/her benefit) using a multiple of EBITDA. Ultimately you'd have to decide if a larger revenue stream up front is worth the added cost and potential time/labor/headache as you inevitably change things about the practice to suit your needs.

 

[G0dFather]

Colleagues who have opened up practices (in buildings meant to allow for growth, not one room clinics as has been mentioned) seem to have taken out $200k-300k in business loans/lines of credit to get started. Location will play a pretty big role as commercial office space can vary by $10-20/sqft/yr (ie tens of thousands of $ per year). But it is probably fair to say $250k between loans and lines of credit. I know an individual who took out more and others who have gotten away with less.

A solo practice with gross collections of $600k, asking for 80% of gross collections is gonna cost you $480,000. It can also get confusing and the owner can get creative (to his/her benefit) using a multiple of EBITDA. Ultimately you'd have to decide if a larger revenue stream up front is worth the added cost and potential time/labor/headache as you inevitably change things about the practice to suit your needs.

200k-300k is correct ...what i meant was furnishing one room for 30-50k at the start ( although to run a busy office with a solid 20 pts per day 4-5 days a week all you need is 2 treatment rooms, keep your overhead low... what matters is the bottom line doing it that way you can squeeze 70-60 % profit margins if your going to get reckless with overhead youll see 40-30% margins, which by most business standards still isn't bad ) ..... because why would you put more money establishing other rooms when you wont need them seeing 5 pts a day if that at the beginning ??? the rest of the money will be required to fund operations ... I will say though that with right outreach, consistency of hours at your office and internet game you can get busy within a year so you will have to weigh out the costs vs buying in you area and make a decision that way ( kind of like is it better to rent or buy and that equation differs based on where you want to live)


480k ?!.... 80% gross?! what is this medical mavin ?! LOL.... NO.... just NO... NEVER pay for anything like that or even enter into serious talks like that unless you are a sucker ...... if you feel that you can run an office that is up for sale ( and the majority of patients are willing to stay with you, very important point that dtrack makes! and there is a healthy stream of new ones) and comfortable with all that it has ( everything can be tweeked to your liking, dont like certain staff fire them get new ones there is literally a line waiting outside your office on the internet etc..) then 50% of NET (WITH A CERTAIN PERCENTAGE OF PATIENT ATTRITION FACTORED IN!!) is what you need to pay thats it, its fair for the risk you take, you make that offer if they dont like it then walk away, there WILL be more out there plenty of people trying to **** you but its a buyers market now, if they counter with something reasonable within the ball park then it can work out if you feel that extra cash will be a wash in the long run ... of the 3 offices that i have 2 were bought this way, it took me going through 30 other places to get them. But remember that these days its a BUYERS market, many sellers struggle to find buyers ... just look at the amount of debt that potential " buyers" that enter the "market" already have in a market like that sellers get desperate if they want to unload, use that to your advantage

 

[deleted690619]

How likely would I be able to start a practice with $150K?

 

[wounddoc]

As stated before it really depends on the practice, i.e. location, rent, and facilities available. Moreover if you're willing to do the contracting with insurances, be your MA, and learn how to bill on your own you can easily cut overhead and staffing needed.

Looking into lightly used treatment chairs, autoclave, etc can save a significant amount in upfront costs as well.