Help with negotiating an offer

[Zaphod]

AIdoc wrote:

Zaphod wrote:

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.

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RN makes close to 180k, do you mean NP ? That seems too much for RN working normal hours. Isn’t that idea of buying in is getting all these patients and referrals that you would not have gotten otherwise ? What is passive income except for owning part of the real estate ?

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Okay, almost was certainly a stretch. She works 7-3, M-F and makes about 100k. Its not that much different and its an easy position, RNs in Cali make a lot. Passive income being some kind of surgery center, glasses business, imaging, testing, something tailored to your specialty.

I do not believe that getting existing patients even exists, let alone a large enough amount to make it worthwhile to pay for. Pts are fickle, especially in a place like LA, they will go where its convenient or cheaper (maybe doesnt matter if insurance based). Though of course those selling practices do, I've never seen any value in the patient base. They are usually anchored to the doctor, not the real estate. Some will stay, but many will not. After a couple years that well is tapped and will no longer matter anyway. Also, its in your best interest to downplay it whether or not it has any value.

[AIdoc]

Zaphod wrote:

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.

Click to expand...

RN makes close to 180k, do you mean NP ? That seems too much for RN working normal hours. Isn't that idea of buying in is getting all these patients and referrals that you would not have gotten otherwise ? What is passive income except for owning part of the real estate ?

[AIdoc]

so what should be done about these excessive collections that is fair ?

[adventure]

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

[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.

[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.

[LasixDrip]

Run!

[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.

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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.

[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]

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.

[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.

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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.

[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.

[Dreamgiver]

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

[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.

[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.