Private Practice Revenue and Exit

[Tim]

“ If that really is what is being offered, will simply work forever and hopefully pass it on to one of my children.”
No offense intended. This probably the best option. It does have advantages of transferring the existing revenue stream and the mechanics of running the business. Once you and your wife leave,, how much would be a “fair” amount to charge for your services? There is a value for your services for transitioning a running business. The future revenues are earned by the new psychiatrist. The value is patient retention and learning curve.
Just a different way that a buyer would consider payment for your practice. I doubt it comes close to 7 digits.
The alternative is to start from scratch.
Nothing wrong with the question. Goodwill or intangibles value compared to startup costs. Just a different lens.

[Random1]

Your price of sale is the price someone else is willing to pay for it, not what you think it is worth. I thought exactly the same way, I would rather work an extra year and close doors than sell for less than I think it is worth. I was not given a good option for what I thought it was worth.

[jfoxcpacfp]

[QUOTE=Is there such a thing as a PE buyout for psychiatry?)[/QUOTE]

Met with a new psych client yesterday who told me they have just joined a practice that has been bought out by PE…curious, has anyone else heard of this?

[Psychdoc2022]

The main benefit to purchasing your practice is having a full patient panel which would accelerate revenue growth by about one or 1.5 years.

However, the alternative to purchasing your practice is to work a part-time job as an employee and build one’s private practice on their own bit by bit. This maintains income and avoids the need to spend hundreds of thousands of dollars on purchasing a practice. Because this alternative costs nothing, one could argue that the practice isn’t worth much at all.

If you had real estate or multiple employees that lead to huge revenues and a very scalable operation that generated revenue when the owner is not seeing patients, that would be a different story.

[childay]

Met with a new psych client yesterday who told me they have just joined a practice that has been bought out by PE…curious, has anyone else heard of this?

Interesting first I've heard of that in psych. I'm sure its leading to better patient care..

[toofy]

Why would anyone sell for 1x when you can hold on for another year and make the same amount.

Why would anyone buy for 4-5x when it will take them 20 years to pay it back?

Have you ever ever actually heard of someone overpaying that much for a psych practice? 4-5x REVENUE is getting into the private equity space and depending on your overhead could be 15-20x EBITDA. But they only pay this if you agree to be an associate for them for another 3+ years to carry on the goodwill, while they pay you less than you get now. They are basically pre-paying you for the next 3+ years with their overpayment up front.

[Zaphod]

Thank you all for the responses. This a telemedicine practice (low overhead). The plan was to grow revenue to 400k-500k and sell for 4/5X revenue, hence the $2 million mark. The values is in the patients, not physical assets. Why would anyone sell for 1x when you can hold on for another year and make the same amount. If that really is what is being offered, will simply work forever and hopefully pass it on to one of my children.

Why would anyone pay you for a business they can start for 5k? Seems even dumber.

There is no business here to be purchased without you having employed docs or midlevels producing income. Sounds insane.

[Kamban]

Why would anyone sell for 1x when you can hold on for another year and make the same amount. If that really is what is being offered, will simply work forever and hopefully pass it on to one of my children.

The reality is that you will work one more year, one more year ...... and one day when you want to retire fully you will have to give away the patients for free, make a small sum by giving your lost to a colleague who wants it as a kickstarter or pass it on to your children, if at all they are interested. The $2M is a pipe dream.