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02/02/2018    Brian Kashan, DPM

Formula for Value of a Practice (Name Withheld)

I just read the posting by Name Withheld, about
how he would choose to open an office next to an
older practice instead of purchasing an existing
practice. Although the circumstances. He
describes, with the sudden passing of a doctor
is different than the more common scenario of a
retirement, there are several similarities. If
the practice has been a successful practice and
is valued correctly, it should be an attractive
opportunity for someone to acquire.

There are several factors that I feel are being
overlooked in the mindset of Name Withheld. Firstly,
it is much easier to get a bank loan when
purchasing an existing practice for a fair
price. The practice has a track record with
trackable income over many years. Banks want to
see security and opening a new practice is the
least secure method for them to base a loan
upon. A steadyor increasing practice revenue is
a much better risk for the bank.

In addition, purchasing an existing practice
provides immediate income. Mutually beneficial
terms can be agreed upon to allow the purchaser
time to acquire revenue and begin payments. In
addition, patients are scheduled from day one.
It is one of the most difficult tasks imaginable
to open an office cold and rely upon advertising
to sustain the practice. While marketing is
essential in today's times, experienced and
successful practitioners will tell you that
their best source of new patients comes from
existing patient referrals.

I have been in practice for many years and have
tried almost every form of marketing and
advertising imaginable. Many were successful.
Some were not. Regardless, marketing and
advertising never came close to the amount of
new patients I get from patient referrals. In my
opinion, the old records of an existing practice
are the best source of new patient revenue. As a
bonus, a new practitioner can charge new
patient visits on every patient that they see
for the first time. In addition, the new
technology and skills of the purchasing
physician will add another source of revenue for
the existing practice.

Lastly, don't forget the established patient
referral patterns of the existing practice.
Doctors who have been referring to the practice
will continue to refer to the practice, if the
transition is handled correctly. It is extremely
difficult to get a referring physician to break
his referring patterns and just start referring
to someone new.

In conclusion, I could not disagree more with
Name Withheld aboutthe best way to start a
practice.

Brian Kashan, DPM, Baltimore, MD

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