Q:

Dr. Margolis,

Here is an interesting one for you that I am seeking advice on. I am  currently working as 
an independent/associate(not sure what to classify as). Let me explain. My current situation 
is this. I am working with another chiro in his office and paying him 50% of my monthly 
billings. Some of the patients that I see are my patients meaning I brought them into the 
office or have built on referral. I also see some of his patients when he is not in the office, 
and other patients will see whoever is available as we are both in the office most of the 
time. I am also responsible for taking all the X-rays and doing all the reports and 
paperwork with which I get 50% as well. If I am away or not in the office, and he sees one 
of my patients I get nothing. The Doctor wants me now to buy into the practice and be 
partners. last year the practice billed out $330,000, of which I did exactly 1/3rd. Of 
this 1/3rd I would estimate that 70% of it is what I have brought in and the other 30% is 
what he has given me. In his wisdom he thinks the practice is worth $300,000 and that I 
should pay him $100,000 to buy the 1/3rd that I did. This is the end of my second year and 
I have now increased my billings to over $130,000. If I buy in then I would be only 
responsible for 1/3rd of the expenses which would decrease considerably what I pay him a 
month. I don't think the practice is worth $300,000 and should I pay for the 1/3rd 
that I did. This Doctor has a history of poor finances (bankruptcy)yet a busy practice with 
95% collections (practice is in Canada so mostly third party collections, ie. government). 
As it stands now I believe he is making about $65,000/yr towards his approximate $90,000 
in expenses a year off me. If I left, it would be hard to find space in the area. My questions 
are:

Should I buy in at a fair price?
What am I buying? his 2/3rds,my 1/3rd, or the ability to pay 1/3rd of the expenses.
Can you see any possibility of an equitable deal?
Or should I leave and take my chances?

A:

You have a dilemma. Personally .. I would not become a partner to no one .. especially 
someone with a history of poor finances and bankruptcy .. the risk of complications in the 
near future is real. There must be safeguards in place .. and for sure NOTHING is 
completed with just a handshake .. you must have your attorney draw up papers and have a 
clear understanding what this partnership means. A corporate lawyer would be best.

As far as your specific questions .. I cannot provide a sage answer as numbers are not my 
specialty and I would only steer you wrong. But I can tell you this .. the office worth are 
probably inflated and the worth is also. If you can generate $65,000 a year as an IC .. you 
have a better chance to make more on your own. But business decisions must be made 
correctly and with guidance. Dr. Pete Fernandez has a service of assisting doctors 
purchasing a practice. He takes a percentage of what he saves the DC from the amount 
quoted to him at first. In your case .. you are buying into a practice as if it were your own. 
This decision has built in problems in terms of liability and debt repayment .. therefore a 
carefully worded document must be signed and checked for any legal loop holes. I would 
recommend you consider hiring him as a consultant is you wish to go through with this. 
His number is 1-800-882-4476 and ask if you does this for Canada .. I'm sure he can .. 
it'll be worth a few hundred dollars.

I would also stay away from psying 50% of your billings .. this is wrong .. it should be 
50% of your collections for that service. Billings does not represent what you collect. If 
you are buying a 1/3rd share .. you owns the other 1/3rd? 

If you can find a location close to your patient base .. take the risk and move out and on

Have a Great Day

Dr. M
http://www.chirosmart.net