In the spring of 2003, we purchased all the patients files from an existing practice in our area.

At the time, it seemed like a huge investment for what essentially amounted to a few filing boxes of paper. During the discussions to buy the practice, and in the time leading up to the closing date, we stressed about the cost and worried about what would happen. Was it worth it? How many patients would transition? How long would it take to get our money back? Would we get our money back at all?

Of course, our worries were completely unfounded. We got all our money back in a matter of months, and never looked back.

How Buying a Practice Pays Off: Our Experience

I’ve since been involved in numerous practice sales, from helping with valuations and mediating negotiations, to maximizing the number of patients that will transfer from one practice to another. Every one of them shares one thing: the person buying the practice worries about whether it’s going to be worth it.

In my experience, it almost always is, but that’s often not much help to a cash-strapped new practitioner making a big purchase.

To make the case to students a while ago, we pulled a real-life example from our own experience.

  • The chart below begins at the top with one patient, MR, whose file was one of 200 that we bought.
  • The chart shows MR’s referrals in the 12 months following our purchase of the practice, and the referrals from her referrals, and so on. We took it down to four levels.
  • The number on the image is the total revenue, in those 12 months, from those patients – almost $20,000. We got all our money back just out of MR and her referrals.

There were 199 more files after MR. Not all of them transferred to the practice. Some were dead files when we got them. Not all of them referred like MR did. But the point is that ONE good file can make the whole thing worthwhile. Ten files like MR can change your life.

Why Buying A Practice Matters
Buying a practice is about more than just revenue. Here are just a few more benefits:

  • You’ll Learn Faster. To get good at what you do you need experience. But getting experience is hard when you’re not yet good at what you do. The result is this kind of endless loop that can take a lot of time to escape. Buying a practice is the fastest route to becoming an experienced practitioner. What might take years in a not-quite-busy practice can happen in months in a busy one.
  • You’ll Get Over the Referral Hump. It’s no secret that practice gets easier when you have a large client base referring to you. You don’t have to work as hard at marketing, or spend as much. But building that kind of patient base can take time. Buying it can make it happen almost overnight.
  • You’ll Save Time & Money in the Long Run. There are a lot of ways to invest in your practice–advertising, networking, speaking, etc. All of these things work. The problem is that they all cost something in time, money and energy. I’ve yet to find a way to grow a practice that works faster or better than simply buying one. Spend time and money once, then get on with being awesome.

The Already-Converted
It makes sense that buying a practice works. When you market to an unknown audience, you’re speaking to many people who simply will never hear you, or aren’t a fit for what you offer. When you buy a practice, you’re connecting with a whole group of people who already want what you have. Your odds of finding an MR skyrocket when you’re dealing with people who are already “converted”.

I believe buying and selling practices is great for health care, and great for practitioners. The biggest challenge is that people are intimidated. If you’ve got a success story from buying a practice, please share some encouragement in the comments!

Next time: How to find a practice for sale…

 

 

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Related posts:

  1. How to Value a Practice
  2. The 3 Critical Questions You Need to Ask to Buy The Right Practice
 

7 Responses to “The Case for Buying A Practice”

  1. Tina Dietz says:

    Excellent article on a topic that is often overlooked but a great strategy. I would ask you questions on how you negotiated for the files–but I suspect that may be covered in the next article!

  2. Dan says:

    Thanks Tina! We basically spent a week trying to figure out how to value the files, came up with 3 scenarios of various timelines and payments, and the selling doc picked one.

    I’ll be doing a piece on valuation as part of this series… :)

  3. I purchased this practice in 1989 after the doctor passed away in 1987 during my 2nd year at CCNM. The dispensary revenue was sufficient to continue paying his receptionist and the office rent for 2 years until I purchased. This practice was initially started in 1958 by one of Manitoba’s pioneering Naturopaths. I still kept the original telephone number and his hand me down furniture, instruments and books for nostalgic reasons. I soon discovered that these items provided a sense of warmth and familiarity as they became part of my ongoing work. I paid his family exactly what they wanted and never regretted a penny. Today, the office has expanded quite well and has provided me a gracious lifestyle. Now I am nearing the last third of my career and wish to pass this great heritage practice onto another well qualified person.

  4. Cassandra Tran says:

    I am studying applied kinesiology and was told that because there’s such a huge turn over rate, we don’t have many reoccuring clients. What are your thoughts in that?

    And if I want to move to another country after awhile, and want to sell my practice, how do you find the right people to buy from you?

  5. There is a another very good reason to buy a practice. It increases the value of all of our practices! It is a smart way to keep patients within the naturopathic medical model, while simultaneously making an investment in the future sale of our own businesses. Our businesses are as valuable as our colleagues perceive them to be.

  6. Great article. For those considering purchasing an existing practice – I have a thriving naturopathic medical practice, with branded name recognition, in NW Phoenix surrounded by financially stable, socially active and moderately health conscious seniors. I hope to retire in the next three years and will look forward to future blogs on pricing and networking. I desire to network with potential buyers who find the principles in this article worthwhile and would see the value in my well-developed website and internet presence, branded logo, large community visibility and recognition, recurring revenue from medicinary, dynamic and successful marketing strategy for new patient contacts as well as existing patient contacts. Do you have any suggestions on how to find potential buyers for such a practice?

  7. Sruti says:

    Dr. Hanna,

    I would get in touch with the naturopathic schools and put it on their websites. You could speak at SCNM especially – and see if any of their recent grads know anyone that are interested in buying.

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