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Buy-Out Strategies - What's Yours?

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  • Buy-Out Strategies - What's Yours?

    I'm curious how others treat their buy-out in private practice. I know this will depend on the details of your buy-out timeline, what is owned, and amounts invested. But do you view this as a protection against sequence of return risk? Retire early strategy? Part of your asset allocation? Looking forward to your thoughts!

  • #2
    Our private practice eliminated the buy-in/buy-out to the accounts receivable for the professional group. All partners technically own their share of AR while they are partners. If the group is ever sold, presumably the partners in the group will share the windfall of the purchase. If the group implodes or disbands, presumably the revenue trail from the AR would be split by the partners at such time.

    Our partners are individual owners in an LLC, which owns a piece of another LLC, that owns and operates a growing group of imaging centers. New partners are encouraged (but not required) to buy into this LLC, and they buy in at a significant discount to the true market value. The returns have been excellent, better than I imagined when we first started 10+ years ago, even despite the headwinds of this industry. Senior partners who have been in the practice for at least 15 are allowed to stay in the LLC for five years after they retire from the practice, collecting their share of the profit, and then they get bought out at the buy-in rate.

    There is no buy-out for the professional practice so no consideration to the retirement strategy.

    As for the imaging center piece, it certainly plays into the retirement strategy, in a small way, with likely $30-50k per year for the first five years of retirement. Of course, the business model could change, profits could decline, the overall entity could be sold or go out of business, so this small, passive revenue stream is hardly guaranteed, but if it exists at all, it is better than a sharp stick in the eye. When I do my projections, I do not account for it, only the buy-out value of the imaging center investment.

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    • #3
      Following along!

      Thanks in advance to anyone who answers from private practice that is more about staffing/relationship with hospital/relationship with community. No referral stream, no equipment or real estate etc. EM, critical care, anesthesia...

       

       

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