Chapter 6
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ADA Cookbook Chapter 6, How To Buy or Sell Your Practice Practical Considerations and Headaches
Original Author: Tom Zachman, PhD,CCC-A
1. Introduction. A few caveats prior to beginning. Caveat Helein Emptor and the relationship to what I term, the "human nature theory."
2. Prior to the purchase or sale of a practice you must have a good attorney, CPA, banker or perhaps a business broker. We will discuss the selection procedure of the aforementioned professionals as well as pitfalls in dealing with them.
3. There are any number of procedures one might employ in the valuation of a practice. Perhaps the most common is the gross receipt averaging approach. Some people continue to sell "good will" [blue sky theory].We will discuss this along with other approaches such as the gross receipt doubling technique and an average of the net revenue approach.
4. Accounts receivable can be a problem. We will examine the percent collectable, uncollectible as well as those debts related to the overall practice.
5. Prior to the purchase of a practice you must identify your competition.
6. Referral sources must be identified. Do not assume they will continue to refer to you. Personal contact is vital if you intend to maintain you referral base.
7. Do not assume you will automatically be a provider for insurance carriers. Again, personal contact information about yourself is vital.
8. A careful review of the seller’s files is important. A random review of three to five files under each alphabetical listing should be appropriate.We will discuss the things you should look for, e.g., appropriate forms, signatures, physicians’ clearance forms, hearing instrument information, etc.
9. The age, maintenance, calibration of the audiometric equipment should be scrutinized carefully. Prices for the equipment should not be set by the seller but by the manufacturers representative.
10. List every piece of office equipment, furniture, wall hangings etc. so there are no problems when you take over the office. Make a note of everything the seller is taking and everything the buyer does not want. No detail is too small!
11. A detailed evaluation of the office space is necessary. Most people lease space but some are owners of a condominium, or own the building they are in. Make all lease agreements with the lessor prior to taking over. Any changes that need to be made, e.g., new carpet, paint, etc. must be built into the new lease that you sign.
12. You will probably use hearing instrument manufacturers that you are most comfortable with, however, do not discount those the seller has been using before first evaluating their performance. I saw no need to use a dozen providers when three or four or sufficient.
13. A careful review of the support staff is critical. Your support personnel can make or break your practice. You may not want to keep the seller’s staff because of issue’s of loyalty. It is also critical to immediately institute a series of checks and balances where financial information is concerned. You must be an integral part of the system.
14. It is important to be comfortable with the electronic equipment supplier. If this individual is new to you be sure to call to introduce yourself and arrange an appointment with this person. Needless to say, when your equipment is down, so are you.
15. Non-compete documents do stand up in court and it is essential that you have one.
16. We will discuss the reasons for incorporating, when you might consider doing so and some of the corporation schemes that might be considered like professional corporations [PC], sub chapter "S" corporations and some of the newer arrangements that are available in many states.
17. Partnerships can be expensive and do not always work out. Initially they can be a beautiful love affair but could end in divorce.
18. The day you open the door to your new practice you must have a retirement program in place. If, for the first few years, you only contribute five dollars a month, a program is essential.
19. Marketing and advertising prior to opening you office is essential. Usually about two to three months prior to opening is a good idea.
20. A neat, well constructed practice brochure is vital prior to beginning. I will share the location of a publisher who can construct a beautiful brochure at a minimal cost.
21. I see no reason for the person selling the practice to remain. All contacts with referral sources, insurance carriers, etc. should be completed prior to the opening of the practice. As clean a break as possible is preferable.
22. Conclusion. Anything anyone cares to add.
