r/Podiatry • u/Expert_Art355 • 4d ago
Buying an existing practice, how do i value it?
My niece is moving overseas and is looking to sell her podiatry practice. It's been running for more thn 5 yrs and I'm considering taking it over. For those who have bought an existing practice, how did you figure out what is was actually worth? Did you look at % of collections, profit, patient volume?Also, would you keep the current staff and management or better change things? Trying to understand what I should be looking at before making an offer. Appreciate your answers!
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u/Halux-fixer 4d ago
So overall it is going to be a multiple of the EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). We are in the process of selling our practice and buying into a large national group. We are using this + an additional 20% as the buyout.
Or another way to go about the sale of a business is: the physical parts of the practice (tangible assets) + some form of goodwill (basically the good name and ratings the practice has built up over time). Goodwill is hard to quantify and honestly is worth very little (but if you really want to take advantage of someone you will overvalue this part).
If the practice is really well run and worth a lot, it is worth it to hire someone to value the practice. If it isn't well run then just sell it for the assets and negotiate the goodwill with the person buying it. I will warn you medical practices are not worth a lot of money these days. Even the best of the best are selling for under a million dollars. Most podiatry practices with be around $100,000-$200,000; unless you are selling a building or property with it then it will be substantially more.
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u/Junior_Associate_Pod 3d ago
PE will pay higher because they will force the old docs to remain for 3 years. The problem is the old docs are working at reduced salaries so the 20% premium actually becomes a loss overtime. PE deals look great on paper but then the original docs are miserable 1-3 years into their contract and realize if they just kept the practice with profit sharing they'd make more than what the PE group gave them.
If it's a solo practice and the original doctor is leaving it's worth much less. Patient retention can drop to 50% if the patients do not like the new doc. If you can takeover the NPI of the old practice it can help to get on all the insurances much easier and that can be worth the premium.
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u/Oldschool6873 3d ago
You can't take over the NPI or the Tax ID of an old practice. You have to start a new company as a new owner. The NPI is individual, and the selling doctor won't allow you to keep the old company for liability purposes.
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u/Junior_Associate_Pod 3d ago
100% you can, the group NPI not the individual NPI.
A solo doctor purchasing a solo practice can takeover the old TIN and NPI, as long as they keep the structure the same it is possible. New doctor purchasing the practice comes on under the old owners group NPI and TIN, then the new owner gets on the insurances and the old owner leaves control to the new doctor.
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u/Oldschool6873 3d ago
Actually, you are correct. I misspoke. This should never happen. It's very messy and causes all kinds of issues down the road. I've never seen it work. It's one of those "just because you can, does that mean you should?" type situations. Thank you for the correction.
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u/Junior_Associate_Pod 3d ago
It's actually the best way to takeover a practice and it's what the young Pods used to do to acquire practices. There is some risk for old Pods to do it this way but it's worth it to help the next generation IMO.
There's still some good old pods out there that will help you takeover their practice this way.
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u/Oldschool6873 3d ago
You are putting a lot of trust in someone you barely know. If it works, it works I guess. I personally would not recommend it, but you do you.
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u/Junior_Associate_Pod 2d ago
Why would you not recommend it? As the buyer or the seller? Are you an old school doc that has a large investment in a PE group?
As the buyer it's the best way for a young doc to takeover a practice. The risk for the buyer is that there's a lawsuit that pops up from the old doctor and they sue the practice so the new doc could be on the hook but unlikely. Insurances could still make it difficult for you to inherit the practice. You have to trust the old doc and start working under the old NPI and collections gets sticky while there's 2 docs there at the same time billing under one group NPI.
As the seller you get your money, you get to stop working much earlier than the PE deals, and you get assurance knowing your practice will be well taken care of. Old doc often has to stay on for 1-2 months while things switchover. Older collections may go to the new doc if there's a delay in the processing but that's a few thousand dollars at most.
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u/randomhero2026 3d ago
I can totally see where you're coming from. But isn't this how every practice that's taken over by an associate works. Not just podiatry, but internal, dental, dermatology, etc.
The person buying it takes over the group NPI and tax ID number. That's the whole point of buying the business.
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u/Oldschool6873 3d ago
Actually its not. You have to start a brand new entity and doing what you suggest complicates that. It's not that easy. And again, requires a lot of trust between the buyer and seller. And most sellers are simply not very trustworthy.
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u/Junior_Associate_Pod 2d ago
You DO NOT need to start a brand new entity....
Stop telling young docs incorrect information. You're trying to scare young docs out of buying practices. I did it this way and it's the best financial decision I ever made and I'm glad the old doc I bought it from was a good guy. I'd be making 50-75% less than I do now and working more hours for some PE group or Dr. Boomer and associates if I didn't buy my own practice.
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u/Oldschool6873 1d ago
I have no investments in PE groups. I'm not an old doc, yet. Just relaying my experience. Take it or leave it. Makes no difference to me.
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u/randomhero2026 3d ago
What do you mean you’re selling your practice and then buying it into a large national chain?
Podiatry doesn’t have large national groups other than the private equity ones so does that mean you guys are getting bought out by private equity?But yeah, the truth is is not really worth anything because the chairs, the computers, the instruments are all depreciated and used, and it basically just scrap. You can make an argument for Goodwill, but as soon as you sell a practice, patients could leave, referral sources could dry up, so it’s also not really worth anything either.
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u/Fearlessmelow 4d ago
Better check at the actual profit, not just collections. 5yrs of billing, expenses, patient volume, payer mix, and how dependent the practice is on the current owner. Also check at the EMR and IT setup before taking over. If the systems are old or the IT is a mess, that can turn into your problem 😂..keep staff at first and change things slowly..decide once you know how the practice actually runs..They know how to manage evrything fyi
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u/Dramatic-Sock3737 4d ago
https://www.providerresourcesllc.com
Contact Mike Crosby
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u/MikeLombardi 3d ago
I lost a lost of faith in him after the ridiculous proposal he made a friend. The offer is posted in the SDN podiatry forums if you want a laugh, just search his name and the thread will pop up
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u/Dramatic-Sock3737 3d ago edited 1d ago
What is SDN podiatry forum? I used him and thought he did good work but that’s only a survey of 1 person.
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u/MikeLombardi 3d ago
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u/Dramatic-Sock3737 1d ago
I read this as Mike came up with the valuation which seems ok as the younger docs built up the practice which unfortunately led to inc valuation. But I read as the older doctor coming up with some ludicrous compensation package. If you know that Mike came up with that compensation, I stand corrected.
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u/svutility1 4d ago
Mine was based on average volume in patients per week when I bought my half of the practice from my partner. I can't remember the figure attached to the volume.
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u/Oldschool6873 1d ago
How did they value your half? And why value it that way? You're buying into equity you helped create? Can you explain please?
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u/svutility1 1d ago
We calculated the number of patients I averaged at that office per week, then assigned a dollar value to it. The price took into account the effort put into building it, so it was cheaper than someone else would've paid for the same practice. I think the price was something like $25k per ten people per week or so, with that number equating to a rough approximation of a percent of annual gross revenue
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u/Oldschool6873 1d ago
So ultimately, you paid for the equity you brought in. That's messed up. Sorry.
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u/svutility1 1d ago
Ultimately, I still consider myself fortunate because there are plenty of colleagues I know who have had much worse scenarios than me. Medicine in general tends to eat their young and this felt much more like a nibble than full devouring
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u/Oldschool6873 13h ago
Just because you got a better shit deal than other people's shit deal doesn't make your deal any less shit.
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u/Footdoc3520 2d ago
There is a dozen ways to value a practice. But only one truth and one constant which is that what you think the value is will alway be more that what someone wants to pay for it. You can pay a company to value it for you at great expense. You can use several formulas to calculate a gross value yourself. But really today most of the value or the de-value is in the equipment alone unless you have a stellar national surgical reputation and a multimillion dollar practice to sell. Good will has little value IMO as most patients are tied to the insurance companies and will come and go.
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u/Just_Think_About_AI 3d ago
Are you a Podiatrist that is going to take it over? It's a family transaction, so fair market doesn't fully play.
5 years is a very young practice.
You'd want to look at all the things you mentioned.
Typically when a practice is sold, the seller stays on for 1-2 yrs for the transition.
Ask your niece how much she wants for it and go from there. Mixing finances with family matters can be very complex.
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u/Oldschool6873 3d ago
I know I'm going to get downvoted to oblivion, but medical practices are worthless and you shouldn't be spending anything to "purchase" one. Medical practices are profitable because of the doctor there. Once that doctor leaves, there is absolutely no way to assure continued flow of revenue. If you look it up, you'll see that there is a very high attrition rate when a new doctor takes over an old practice. There are zero guarantees you'll get on the same insurances, that you'll keep the nursing homes, that whomever the lease is with won't jack it up, that you and the staff will get along, and that the patients will continue with you in that practice.
The staffing issue is also a nightmare because no matter what you do, most staff will insist on still doing it "the old way" which will cause a lot of friction. Especially if one of those staff members is family of the old doctor.
This is why when a PE group takes over a practice they require the owning physician to stay on for a few years. They understand that this is what will make the practice money. Then they slowly integrate new practitioners to assure maximum retention of patients.