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I am in the process of trying to purchase my first podiatry practice and I need some help please.
I am trying to find some sort of financial formula to work out how much the business is worth and what I should offer for the practice. Or what the seller is asking is a fair price
Any help would be appreciated
You have to ask yourself what you are really buying. Figure out how much it would cost you to set up your ideal practice from scratch i.e. fixtures/fittings, brand new equipment costs etc, then compare that to the asking price. At the end of the day, when you buy someone else’s practice, all you are really buying are "patients". Goodwill can be challenging to evaluate. Remember, there are know guarantees either, for what ever reason, some pts may decide to go somewhere else after you have bought the practice. You should also check the businesses profit and loss statements for the last 3-5 yrs - is the business growing? Does it have potential to grow further? If these aspects are unclear, then you should start questioning. Try to find out the real reason why he/she is selling as well – the seller might be desperate to sell, which could wk to your advantage.
The Following User Says Thank You to DSP For This Useful Post:
I have no idea of the particular problems of purchasing a practice in Canada. Having burnt my fingers in the U.K. though, I would strongly recommend obtaining professional assistance. An Accountant who works inthe area of small businesses would be a good first stop. Put your cards on the table and ensure that the books for the previous 5 years are gone through with a toothcomb. A genuine seller won't mind. If the seller objects, then steer clear.
All the best
The Following User Says Thank You to W J Liggins For This Useful Post:
All to often things can look really good on the surface. As Bill suggested, I cannot emphasize how important it is to have the right professional advice i.e. a good accountant/lawyer. This is probably even more important for you because you are purchasing in another country. It may cost you an arm and a leg in the beginning, but it's well worth it.
Just remember most of your custom will be from Word of Mouth and Patients may not necessarily stay with you. The price of Good Will is a bit of a grey area.
Especially since it is you you're selling not goods. So what ever formulae you use the Goodwill will always be the X factor.
Study the Town / area for its Demographics and determine if itwill provide enough custom. I worked on 1 Pod for every 10000 People to make a good income however that was NZ.
I would plan to have a quiet period of about 1 to 2 years before the old Pods' regulars find you as comfortable to be with, or your could have a period where the Old Pod is willing to Ween them onto you.
Check that all the Equipment supplied is in Calibration and up to government standards (e.g Electrical Earthing compliance, Autoclave Sterilisation standards Etc...) and future proof.
Have you got an answer Why the Pod is Selling up?
It may be easier to start your own Business up when you get there....?
I just moved to Australia after selling my practice (10 years old) in Canada, Grimsby Ontario to be precise. I can give you an idea of what the practice may be worth by sending me some details of where in Canada you are going. I sold it for less than it was worth as the market is not a hot market for selling. The profession is in slight demand in Canada and if the seller is desperate they either take what thry can or a practitioner can wait till that person just closes up and opens up near by and takes over the patinet load. email me for more deatl and I will let you know about Podiatry in Canada etc. I t is different for each Province.
A practice is worth what someone will pay for it.....if there are no takers except you it is not worth much. From an investment perspective it is only worth anything at all if there is some net profit after you have paid yourself a good wage and met all your other costs.....the good wage you can get for working for someone else with out having to "buy yourself" a job....because if that's all you are doing then it is not worth more than the residual value of fixtures and fittings.
The issue i find in buying a already established practise is determining what it is your actually buying,
i have been told by those who have brought and lost money on podiatry Business
if it got a nursing home run as well as some clinic days being best
Pts have no real loyalty other than their booked into your new clinic, in truth they are the pts of the old Podiatrist and have no obligation to you.
City practises goodwill is worthless , every single pt has only to drive a few kilometers and go to somebody else ,Because your bleed of the orginal pt load is a factor that happens as a consequnce of you taking over the loss of pt load can get UP to 30-40% as people deal with those who they know and the other Pods in town are more well known than you, giving other Pods in town a wind fall of your pts
a business in a small town can be better and buy it only if the old owner leaves town
The Following User Says Thank You to gbc For This Useful Post:
The simplest way to assess is to first calculate the "super profit" figure. That is the net profit adjusted for owner benefits and non-operational expenses. This can be tricky so please get an accountant with expereince to do this. Then you need to work out what is a reasonable amount of money to pay for that income after salary every year taking into account what the money will cost you to buy it, repayments, risk etc. There are other ways. A mutiple of the proift is commonly used. I prefer to account for assets separately. The value can vary a lot. There are intangibles to consider such as lease, fit out, past history, staff if any. Either have the former owner around or send him on his way entirely. Either way you need endorsement and a marketing plan to ensure good will transference. Many things to consider, particulalry if you are not familiar with the market. Careful "due dilligence" in assessing accounts and practice records is vital and always remeber if you do nothing you will be no worse off. Assume its a dog and make it prove itself to you. If you have not done this before I strongly recommend you get a local expert to assist. It will be worth the investment.
All the best
The Following User Says Thank You to Ideology For This Useful Post: