Help with negotiating an offer

[AIdoc]

Greetings to you all. I got a job offer in LA area from a retired physician. He will be paying me a salary for two years while managing the business side of his clinic then retire and leave. He will pay me 180k ( about average nationwide but not sure about Cali) for 2 years and pay my malpractice insurance ( about 8-10 k). No other benefits ( health insurance, 401k, etc). His total revenue is about 800k with 60% overhead. He valued his practice at a little less than 400K with a buy-in over few years without interest ( If I make any profits over my salary/overhead the first two years, it goes towards the buy-in). He offered 1 week off only with schedule to work 5 days/week for 7-8 hours daily.

 

What do you all think about that ? I need more vacation time for sure ( 2 weeks sounds ok ). Should I ask for more salary ( he would probably agree to a small increase) or that will take it from my buy-in anyway ? Should I worry about not having benefits as that will take a considerable share of my salary ? What other things should I pay attention to before signing ? I truly appreciate all your help.

[SValleyMD]

Sorry but that sounds about the worst possible offer you could get regardless of specialty.

<200k, no benefits, one week off, 5 day work week, no clear partnership track.

Other docs in clinic?

Sounds like an old timer wanting to take some basically free labor while he cashes the checks you generate. I’m skeptical of nearly all “partnership tracks” in today’s day and age especially with single mom and pop shops.

Thank him and move on

[MPMD]

I would not buy a practice based on the owner's valuation. You need an independent appraisal. MD practices can be hard to value correctly but I would never trust the founder's estimate.

I'm not super smart about these but if he is retiring I don't know that he should be dictating where your excessive collections go. Basically he's saying they go into his pocket? What if after a year you decide you don't want to buy the place after all? Does he just keep that?

[ajm184]

Agree with others, not a great offer imo.

a. 180K in SoCal won't go nearly as far compared to Kansas.  Offering the median for your specialty in a HCOL area makes your salary below average.  He is offering a salary versus a percent of collections which is certainly a business risk on his/her part.

b. Valuation is subjective and getting an impartial evaluation of 'value' is needed.  In addition, if you are serious about owning this business after a certain timeframe, those details need to put into writing upfront, versus some vague promise of 'I'll retire in a couple years'.

c.  Lack of any health insurance/401K is a bad sign imo.  It also further questions his/her business valuation in b. above and his/her ability to retire given the lack of 401k.

d. If he/she going to be able to get you on staff at a local hospital?  Not sure if this is an issue in your specialty or SoCal from a geographic perspective, but was an issue for my wife starting out in Illinois.

e. Unless you normally have Friday - Sunday off, I would be assertive in the two weeks off.

[VagabondMD]

I am also not wild about the terms, but how and whether to negotiate depends a lot on your leverage and level of interest. Do you have other offers? Does he have other candidates? Is he strongly motivated to add someone (illness, family issue, etc.)? Is there something about this practice that attracts you, something that we cannot see based on your description?

On paper, as described, it does look like a lousy deal. A little tweak here or there is not going to make it any better.

[Dreamgiver]

There are RNs out in Cali making more than that. Just saying.

[pulmdoc]

Not wild about the terms. What is it about this offer that is better than you striking out on your own? Based on the numbers provided, you are making $180k to work and he is making $140k to watch you work. Does that seem fair?

What does buying the practice buy? "Goodwill" for a solo practice doc who is gone should be basically 0, maybe a few patients will stay if he asks them to but it's basically like you starting from scratch.

Agree that practice valuation should be done by independent appraiser.

"excess profit goes towards buyin" is a terrible deal, because 1) you don't get an accounting up front 2) if you don't buy in you never get the money. Far better to have a "base salary + X% collections over threshold," incentivizes you to work harder to make more. Then you can save money towards the buy-in if that is your goal.

[MPMD]

Vagabond MD wrote:

I am also not wild about the terms, but how and whether to negotiate depends a lot on your leverage and level of interest. Do you have other offers? Does he have other candidates? Is he strongly motivated to add someone (illness, family issue, etc.)? Is there something about this practice that attracts you, something that we cannot see based on your description?

On paper, as described, it does look like a lousy deal. A little tweak here or there is not going to make it any better.

Click to expand...

Yeah that's a solid point. If his starting position is no benefits, no retirement, and 2 weeks vacation it's unlikely that he's going to get near where you'd find the offer appealing. Probably best to just back out of this unless there is some really compelling reason you have to be there.

Based on the info you're providing (salary, solo doc) I'm guessing this is primary care or maybe dental? If so you can surely find something better esp w/ some geographic arbitrage.

[Zaphod]

My wife almost makes that as a RN here, with a 7-3 schedule M/F. What specialty is this? Seems pretty bad.

LA is super expensive, you'll be living rough on that and not at all like a doctor. No big deal, but you have to be prepared for it.

Agree with everyone else, deal sounds bad. Also agree that partnership without some kind of passive income generating asset is worthless now a days. Probably was never worth anything really outside of that. Unless you'll be getting ownership of the real estate at a discount, etc...

Let me tell you from experience once you get in a bad deal, even if you manage to make small positive changes, it is extremely hard to get any reasonable or worthwhile changes done.

[AIdoc]

The practice is an allergy practice. Many allergists depends on allergy shots to generate income and inheriting that may make a difference. I'll have to check that out. What's the reasonable salary range that I should ask for /expect to live in SoCal. Thank you all for your comments.

[Zaphod]

AIdoc wrote:

The practice is an allergy practice. Many allergists depends on allergy shots to generate income and inheriting that may make a difference. I’ll have to check that out. What’s the reasonable salary range that I should ask for /expect to live in SoCal. Thank you all for your comments.

Click to expand...

Well if that is an average pay for the specialty thats average I guess. Whether or not that goes well in SoCal depends on how chill you can live and your expectations.

What you want are the practices books and a cpa/audit of it to see what it generates and thats where you find what reasonable % you two can come up with and whether or not its enough for you. What if the business is poorly run (highly likely), etc...I wouldnt want to be on the hook for a bunch of overhead related to some style of practice another doc is used to (lots of hand holding etc...).

Ultimately you have to decide whether its a decent deal all around. Your tax bracket wouldnt be that high at least, and if not in any other kind of debt you'd still have a great life in reality.

[LasixDrip]

Run!

[nolamd84]

That's average pay out there? That sounds awful.

A starting internist in New Orleans makes more than that with benefits straight out of residency. Obviously different markets but you should get multiple offers so you don't get taken advantage of.

[pulmdoc]

As context, $180k for an allergist is far below median, even without factoring in HCOL in SoCal. If you really want to be there, you are better off hanging out your shingle.

[adventure]

I'd open a practice next door, and put up a billboard! Don't underestimate the value of free coffee and free parking!