Orthotown October 2017 - 18
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Is This Contracts Receivable Too Low?
A Townie's looking at buying a practice, but the numbers don't add up
charlestonbraces
Member Since: 06/05/09
Post 1 of 19
I have an opportunity for a purchase practice. The income looks good, but I would have
thought the contracts receivable would've been higher.
By "contracts receivable," I mean work contracted for (patient-signed contract) but not yet
performed. Not to be confused with accounts receivable (past-due accounts).
Here are the numbers:
* Gross Income:
* 2017 (January-August): $581,295
* 2016: $864,233
* 2015: $838,775 (some health issues)
* Net Income:
* 2017 (January-August): $217,150 (Jan-Aug)
* 2016: $324,780
* 2015: $292,115
* Contracts Receivable: $538,128
* Past Due: $59,876
385 active comp treatment patients.
50 Phase One patients.
Wife is receptionist and makes about $40,000.
Now, I would have thought the contracts would have been closer to $800,000, but maybe
I'm wrong. He is slowing down; he is 79, he owns the real estate.
Thoughts? n
9/12/2017
justinudm
Member Since: 09/29/14
Post 2 of 19
Gotta do a chart audit and find out what's going on. You may have patients paid in full who you
will have to treat to completion if this is not caught before the purchase. Ask me how I know. ...
If he won't play ball, walk away. n
9/12/2017
splint123
Member Since: 03/03/06
Post 3 of 19
Yes, that is low. When I was requiring a typical down payment, my contracts receivable were
close to one year gross (like you stated, $800k). Ten percent past due is concerning, considering
the high paid-in-full patients. Could be a great place to turn around, though. Hopefully you can
get it for a steal. Don't overpay. n
9/12/2017
ucla98
Member Since: 09/28/07
Post 4 of 19
Not bad for a 79-year-old orthodontist. I hope I can still bring home that much when I am
that age. The overhead is way too high ($500,000+ a year?). With only 385 active patients, the
overhead should be in the $200-$250K range. If you can find ways to shrink overhead by half,
you'll do fine. Buy it, if the selling price and the rent are reasonable. n
9/12/2017
dhmjdds
Member Since: 11/16/04
Post 5 of 19
18
Hard to guess why the overhead is at 65 percent. But he may be passing large amounts of
personal expenses through the practice. Various types of insurance, especially at his age, could
OCTOBER 2017 // orthotown.com
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