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Affordability Analysis for Buyers
It’s the seller’s responsibility to come up with a price for the practice. As a buyer, your job is to determine if the risk of paying the asking price is worth the reward that ownership provides. Summit has a strong reputation for practice valuation. However, when we work with buyers, we don’t perform a full valuation. That’s more than you really need. Instead, we conduct an "affordability analysis" based on historical information from the practice and on what we know will change once you become an owner.
If you are buying a piece of the practice, it’s possible that not much will change. The current owner or owners will likely continue to draw salaries similar to what they make now, keep the same benefits, and operations will continue as usual. As long as you own a minority share, you may not have an opportunity to implement many changes. If this is your situation, we want to make sure, if the seller had a valuation done, that those things were considered in determining the price. If they were not, the asking price may be too high and we will give you specific points to negotiate to get a deal that will work out for both you and the seller. We’ll keep your best interests in mind!
If you are buying 100% of the practice, you may be able to make many changes quickly. If you pay the asking price, will you still have enough money left to make the investments in equipment or other improvements that you are eager to make? We strongly believe that you should buy a practice based on its history, although you hope it also has great potential for growth and future success. However, you shouldn’t pay the seller now for future growth that you will be responsible for creating.
In addition to analyzing the asking price, Summit’s Affordability Analysis will identify areas that need more due diligence, such as exploring facility lease terms and determining reasonable compensation for a seller who is exiting the practice in the next few months. The fewer surprises in store when you become a practice owner, the better!
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