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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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