Article Date: 12/1/2004

fix this practice
Avoiding Practice Purchase Blunders
Good (and not-so-good) ideas to remember when buying or selling a practice.
By Richard S. Kattouf, O.D.

Q I'm the senior 50% partner in a practice grossing (monies collected) $1,950,000. My partner has agreed to sell me her half for $325,000. An employee optometrist is aware of these figures and wants to purchase 50% of the practice from me for the same amount. What are your thoughts?

Dr. D.L. Lozzi, Via e-mail

A: For the sake of readers, know what not to do in such transactions. Here are some tips:

Practice purchasing triangle

Dr. Marshall (not his real name) called my consulting company with a situation similar to Dr. Lozzi's. I instructed Dr. Marshall to proceed in purchasing the 50% from the junior partner at their agreed value. I counseled him that we would base his buy-in value on the appraised value of the practice and that it had nothing to do with what the junior partner sold to the senior partner. I explained to the associate doctor that the owner had taken financial risks and put more than 20 years of work into building the practice.

I also explained to Dr. Marshall that the practice builds equity (value) as long as location, records, mode of practice, specialization, medical services and seller's willingness to stay with the practice are in tact. I assured Dr. Marshall that he too would benefit from the sale of his portion of the practice in the future.

Making arrangements

My practice appraisal exhibited a fair market value of $1,250,000, in which case the associate's 50% would be $625,000. Following are some of the highlights of preparing Dr. Marshall's buy-sell agreement:

Recognizing the lessons

Following are some pointers you can take from Dr. Marshall's situation that may help you in the future:

Dr. Kattouf is president and founder of two management and consulting companies.  For information, call (800) 745-EYES or e-mail him at advancedeycare@hotmail.com. The information in this column is based on actual consulting files.

 



Optometric Management, Issue: December 2004