Q: Thank you for forwarding the enthusiastic letters every week. I enjoy reading them and save them for second readings often. Keep them coming. You are doing a great service. I hope it is appreciated by others as well. I am going to ask you a favor. I am in the beginning stages of purchasing a practice form a D.C. I have been working with for over a year . I need guidance. Any suggestions would be appreciated. Looking forward to advice. A: Thanks for the e-mail and kind words. I hope you are also telling others about these e- mails and if you have a chiropractic e-mail address list .. you forward it to me so I can send them a welcome e-mail .. this is how my list grows. As for your question .. you left me with too many questions for you: How much do they want for the practice and what does it include .. how old is the practice .. what are the local demographics (who will you market to) .. why is the other DC leaving .. is the leave in good standing or are they running away from something .. will you acquire debt and bad faith or is the DC generating goodwill .. how does he/she acquire new patients now .. is it heavy on advertising that will drain your budget and limit your new patients .. how long has his/her staff been there .. will you inherit them .. are they paid too much or are there too many .. present stats of the office for the last 3 months .. at least .. overhead costs .. will you purchase the building as well .. if not how long is the lease .. is the location okay or will it be a problem .. can you renew it with no penalty .. are you purchasing equipment .. what price .. would it better to buy new stuff .. will there be an easy transition for his/her patients to accept you .. if the DC is presently in any HMO or PPO programs will you be able (for sure) to be included after they leave .. is there any financing program so you can pay for the practice over time .. etc. Lots of questions .. get to work answering them and we'll e-mail solutions. Dr. M Reply to above: A huge thank you for the quick reply. I am truly grateful. Now for a little info and answers to your questions. The practice is located in Chicago. I am a native Chicagoan. I have been an employee/associate with the owner for 1 year and 4 months. We have a good relationship and he has been good to me. The practice has been in the same location for 38 years. He boasts as having the largest practice in Chicago in the 70's. He has had two associates prior for 12 years each, both which have moved and opened their own practice in other towns. The reason for the owner selling is retirement. He has acquired the help of a real estate agency to sell the building and the practice together or separately. Here are the estimates the realtor gave me: Building: $200,000 - $210,000. This is supposedly based on comparable properties sold - most comparable in the area. The building is 1500 square feet, which includes a reception area, front desk, 5 adjusting rooms, 2 bathrooms, 4 storage rooms, one work area, an x-ray room, a large processing room with more storage, a two car garage and room for 3 more cars on the driveway. The building has been kept well, however the interior was last remodeled in 1965. Age of practice: 38 years. Local Demographics: The practice is located northwestern part of Chicago. The populations differ greatly in all directions, which includes white, Hispanic, and black. Some areas do well and others are not as fortunate. The Chicago towns are bordered so that you can walk across the street and experience a completely different life style compared to the street you just left. There is marketability to all these areas, however a staff which speaks polish, and Hispanic is almost a must. One can get by without it though. The highest age population in all the areas is 24 - 60 years old. Why is the other D.C. leaving? Retirement. However he wishes to stay on board as an employee and help retain his patients who will have a difficult time with a new D.C. Most of his patients are Medicare. Is the D.C. in good standing, or is he running away from something? He is in good standing. Will I acquire bad debt and bad faith, or is the D.C. generating goodwill? HE is generating goodwill. He has also put a price on it. How does the D.C. acquire new patients now? 95% referrals. IS it heavy on advertising that will drain your budget and limit your new patients? There is no advertising. None. Nada. In fact, according to a 1997 statement of expenses, $334.00 was spent on advertising. How long has his staff been there? I have been there 1 year and 4 months. the CA has been there 8 months. Unfortunately, she does not have the skills. Stats: The practice has been enjoying a good first 5 months as compared to last year. Services through may are at $98,895.27 compared to $52,609.45 last year. Collections are at $80,894.08 compares to $44,583.67 last year. Collections (total revenue) for 1997 are charted at $134,001.96. Total expenses are charted at $118,834.10, leaving a net profit of $15,167.86. I understand that a profit is good, however all salaries were charted at $58,494.11. The D.C. also pays himself rent at $1600 per month. If I were to get a loan for $170,000 at 9% for 10 years and have a year identical to 1997, I would end up $40,000 in the hole (A net loss). The only good I can see from all these numbers I have been staring at for the past two months is that 1997 was better than 1996, and 1998 better yet thus far. I am presenting the broker with a list of requests necessary for the proper evaluation of the practice in order for purchase, ie; tax returns for the last 3 years, operating statements, patient info, etc. When I presented the list to the D.C., he was not receptive at all. Building Location: The building is located on a very busy street lined with other businesses. There is metered parking on the street. Equipment Purchasing: This is a bit nerve-wracking. The D.C. has developed a list of everything in the building as an equipment list. This list includes everything from therapy units and adjusting tables to shoe horns and egg timers. The business equipment has been listed at $40,000 - $50,000. Practical equipment includes: 4 Zenith Hi Lo adjusting tables. 2 traction tables (Spinalators) 2 interferrential units, one of which is bad. 4 very old (I mean OLD) ultrasound units. These will have to be replaced. 1 out dated computer with software which needs to be updated. 1 HCFA printer 1 reciept printer 1 diathermy unit 1 hydroculator w/4 heat pads 1 x-ray unit in good condition 1 processor in good condition 1 portable table with drop pieces 13 different size x-ray cassettes I can go on & on, however these are the items with any value. All the other 200 items have little or no value to me. Will there be an easy transition of patients: Probably will retain 75%. Will I be included in any HMO and PPOs after he leaves? I dont know. I am in some now. How would others transfer over to include me? There is some of the info. What do you think so far? Again, I appreciate your help. If I can be of any help to you, please do not hesitate to ask. Dr. T My reply: Thanks for the leg work .. Before we begin .. ask yourself why the others left to start their own practice rather than hang around and stay with this DC who obviously has been wishing to step down for awhile .. even if he never mentioned it to you. You may wish to contact these two associates and see how they are doing .. would they have rather bought this DC's practice or was the experience starting fresh a better idea. Always look for the obvious first. Second. You never told me how much he is selling the practice for .. possibly you did in the last e-mail .. if you purchase the bldg. for $200,000 or so and then his practice it'll be too huge a debt to sustain with Medicare only patients .. the economy is always fragile and being too heavy in debt can be a major burden. You will have to market your practice wherever you are .. either across the street or in the same bldg. If you do not own it .. you can always be evicted after a lease is up .. there is never a feeling of permanency. Possibly the doctor can rent to you with a lease purchase clause during the next few years. Third. Give some thought about looking to start on your own. If you have the ability to loan money .. it may be wiser to create awareness in a new place .. new equipment .. and a new fresh you. This is scary because you have to generate a practice from nothing .. but his practice can always drop in revenue leaving you hanging with a large debt .. therefore .. to avoid this you'll always have to market. You'll need skills to generate patients .. not so much with money but people skills and a little leg work. Advertising is not a sin .. marketing should be on going .. everytime you open your mouth you are marketing .. channeling it in the right direction is the trick. Let me know what you think Dr. M Reply: Dr. above replied and wrote that the doctor wishing to sell his practice now wants to adjust his own patients and give this young dr. a % of the receipts. Very confusing .. my reply Hate to tell you this .. as you are there and I am here .. but he is as confused as you. Take a good look around the area .. is there a place you can open and start on your own .. if there is .. feel that is your option and then lay it on the line for this doctor .. if he is charging you on receivables .. who owns the equipment .. who buys the supplies .. who pays the utilities and CA .. who runs the office? If it is you .. then everything must be under your name .. you need an attorney and an accountant to safeguard you from the IRS and any malpractice suits that may be in the past lingering or in the future. As far as he keeping his patient sand filing under his ID .. fine .. he becomes an Independent Contractor .. again you need legal assistance to make this right. If you feel there is a way out across the street .. tell him what you want .. your price .. and let him know to take it or leave it .. in the meantime .. if you followed my advice last e-mail .. you have an idea who will follow you to another office. Now it's time to determine where you'll purchase or lease equipment etc. .. this is also costly .. so weigh it together and see what feels right .. if you stay there .. you need it done professionally .. have your own corporate attorney .. this isn't done with a handshake Dr. M