The Practice Manager's Guide to Buying a Practice - McMasters ...

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APPENDIX 1CHECKLIST FOR BUYING A PRACTICEIt is not possible to cover all matters that should be considered by a practitioner before buying apractice. The list is endless and differs markedly from case to case. What is important in one casemay not be important in another.In this appendix we have simply set out in question form a checklist of matters to be considered by apractitioner contemplating buying a practice or buying into a practice, whether as an associate or apartner. Buying into a practice can be a very big step that involves one of the largest cash outlaysmade by a practitioner. Unlike buying physical assets, such as a home, goodwill is not somethingphysically tangible. A practice, and the goodwill within a practice, is an intangible asset without aphysical existence. It can also be a very transitory asset, that is here one day and gone the next. Forthis reason caution at the beginning is prudent and can help avoid problems further along the way.This checklist applies to solo practices and group practices. When buying into a group practice,considering these matters can lay a firm basis for future dealings between the practitioners.Professional adviceA solicitor or accountant who has experience on the sale and purchase of practices should beconsulted as early as possible once a sale or a purchase is in contemplation.Before you start What are your reasons for going into practice as a principal? How does the practice compare with alternatives, either as an associate or an employee? Are you suited to being a principal? Do you have the financial stability to be a principal? What hours will be involved? Have you spoken to an accountant? Have you spoken to a solicitor? Have you spoken to your spouse? Have you spoken to a bank manager? How long have you known the vendor for? How long have you known the practice for?Assessment of value of the practiceHas an expert valuer been consulted?How has the practice performed over the last three years?How is the practice expected to perform over the next three years?Does the practice have a potential that is not yet being tapped?What accounting records, tax returns and source documents are available to support thefinancial performance of the practice?What is the value of the plant and equipment included in the sale?What is the value of the furniture and fittings include in the sale?28
Are comparative figures available for other practices?What is the existing and proposed competition?Are there any key employees or associates?How long has the practice been operating for?How did the current owner acquire the practice?How has the practice grown under the current owner?The premises Are the premises leased or owned? Who owns them? Who has security over them? How will you occupy them, as a tenant or an owner? What does the lease look like? Have you seen a title search? Have you had an architect or other building expert look at the premises? Who is or will be the tenant? Who will own the premises? Does a lease need to be assigned? Is a real estate conveyance involved? Is a caveat required? What covenants, easements or other restrictions apply? Are all rates and taxes and other outgoings paid up to date?The documentsHave you seen a proposed contract of sale?Have you seen a proposed partnership agreement?Have you seen a proposed associate agreement?Have you seen a proposed service contract?Have you seen a proposed unit holders' agreement?Have you seen a proposed lease?Have you seen a proposed licence agreement?Is there a buy-sell agreement?Is there a restrictive covenant/restraint of trade clause?When is the money paid? How?Does a lease need to be assigned?In Victoria, do the provisions of the Estate Agents Act regarding the sale of a business or partof a business need to be complied with? These rules apply to businesses with a total valueincluding goodwill of $200,000 or less.GenerallyHave you read the draft legal documents included in this manual, so you know what thedocuments should look like?Have you read the sections in this manual dealing with legal structures and tax planning, soyou know you have an optimum position?Have you read the section in this manual on owning practice premises?29
Page 1 and 2: The Practice Manager’s Guideto Bu
Page 3 and 4: The value of a practice, and especi
Page 5 and 6: On the other hand, buying into an e
Page 7: A purchaser will normally be intere
Page 10 and 11: that are not shown in the balance s
Page 12 and 13: If the new doctor is buying into a
Page 14 and 15: yields a maintainable net profit pe
Page 16 and 17: given to sharing the premises with
Page 18 and 19: ooyounger doctors do not see propri
Page 20 and 21: Whatever the motivation behind the
Page 22 and 23: BuyerSellerInformationInformationTh
Page 24 and 25: Step 2: Determine the value of the
Page 26 and 27: It does not consider costs. Some pr
Page 30 and 31: Have you read the section in this m
Page 32 and 33: THIS AGREEMENT is made at 17 Brown
Page 34 and 35: Prescribed Occurrence has the same
Page 36 and 37: 3.2 ExclusionAll express and implie
Page 38 and 39: 5.1 Employment of staff(a)(b)(c)(d)
Page 40 and 41: (f)(g)(h)(i)(j)(k)(l)(m)(n)(o)this
Page 42 and 43: 6.4 Purchaser indemnityThe Purchase
Page 44 and 45: Each Party agrees, at its own expen
Page 46 and 47: SCHEDULEPURCHASE PRICEThe written d
Page 48 and 49: Appendix 3 Goodwill as a Component
Page 50 and 51: Appendix 4 Results of recent sales
Page 52 and 53: Sale 11 2008A married couple, both
Page 54 and 55: Appendix 5 Capitalisation of future

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