Don’t worry about buying old equipment within the practice.
The reason you are buying a practice is for the location and cash flow, you are not buying it for the equipment. If the practice is profitable, you will soon be making enough money to buy all the new equipment that you could want, and you will be able to afford it.
Don’t worry if you think the seller’s procedures are not quality medicine.
If you are more thorough than the previous doctor and practice more quality medicine, that in itself will create more production income for you when you take over the practice. And yes, most locations, with very few exceptions, will pay for quality medicine for the patient. A lot of veterinarians are guilty of x-raying owners’ pockets and not offering quality medicine. The best practice “deals” are those where the current owner has been running a maintenance practice and not doing all the latest procedures.
Don’t be short-sighted.
Purchasing a practice is not a $100,000 or $500,000 decision. If a practice is grossing $400,000 and you expect to practice approximately 30 years without adjusting for growth and inflation it’s a $12,000,000 decision. Don’t lose millions by getting hung up on nickels and dimes.
A good deal is one that is fair to both parties.
Beware of a deal that seems weighed heavily in favor of either side. Practice value based on reliable numbers and documentation along with a detailed appraisal is what should determine value. At TPSG all deals are geared for buyer and seller financial success.
Thoroughly check out the practice before you sign the dotted line.
Caveat Emptor, let the buyer beware, is the controlling principal in a contract involving a practice sale. Any type of lawsuit seeking to rescind a sale, collect damages for alleged fraud or misrepresentation in a practice sale will be difficult. It is presumed by the court that both parties are educated, informed individuals and adequate time and energy was spent investigating the facts before purchase. Also, both parties had opportunity to seek professional help to seek out the facts. Thus, good representation with attorneys, accountants, and a professional practice broker more than pays for the peace of mind when buying a practice.
To compete or not compete, that can be the question. Are covenants not to compete valid? And will they withstand the legal challenge? In general, a covenant not to compete is designed to assign a value to the “good will” of a practice. The covenant, or promise, usually consists of an agreement by a doctor not to practice within a certain number of miles and for a certain length of time.
This covenant must be exchanged for money. Thus, in the case of an associate signing a covenant and receiving no money as compensation, enforcement of such an agreement in a court of law would be almost impossible to enforce. However, when associated with a sales contract in the sale of a practice, the court attaches the sale as money paid for the non-complete agreement or covenant, and it will be upheld as part of the sale. Thus, a covenant not to compete when signed by an associate employee vs. a covenant attached to a sales contract are at opposite ends of the legal spectrum.
All sales contracts should include a covenant not to compete from the seller. Do not rely on a “gentleman’s agreement” because you think it’s “no big deal”. If it’s “no big deal” and you completely trust the selling doctor, then putting it in writing will be no big deal either.
When you change your life, change your estate plans.
Remember, after you have purchased that practice, change your estate planning. You have just purchased a practice for hundreds of thousands of dollars or more and have secured payment with a life insurance policy. Thus, your estate has just accelerated in value. Don’t forget to implement new financial planning and fine tune your financial future. As a practice owner, you now have changed your net worth going forward in life. Make provisions for these changes with the use of either a new will, trust, more life insurance, or other financial tools. Your true intentions need to be in writing, and financial planning needs to be done with knowledgeable professionals.
Remember, when changes in your life occur, they need to be addressed in your estate plan.