Orthotown October 2017 - 20

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Fenrisúlfr
Member Since: 02/25/09
Post 11 of 19

fesdds
Member Since: 05/22/08
Post 12 of 19

$2,900 x 12 should be around $36,000, not $84,000. Something doesn't add up. n

9/13/2017

Charlestonbraces is saying the real rent is $2,900 = $36,000 for year.
But the owner has been paying rent at the rate of $120,000 a year, thus the "bloated" rent charges. n
9/13/2017

charlestonbraces
Member Since: 06/05/09
Post 14 of 19

Sorry for the confusion! I suspect he pays the bloated rent instead of salary, so he can avoid
payroll taxes (I guess FICA/Medicare). n
9/13/2017

lewbsample
Member Since: 10/24/11
Post 15 of 19

I would think that your contracts receivable would never be equal to one year's gross unless
the practice is really growing (the number of starts increasing each month) or you charge no
down payment. If you charge a 10 percent down payment and repeat the number of starts each
month, then your maximum contracts receivable would be about 90 percent of gross. PIF certainly
reduces this even more. You also have to add the past-due into the equation, because the contract
has been charged out but not yet collected, so the total amount due is contracts receivable + past
due. Makes your numbers look a bit better.
My contracts receivable + past due is about 85 percent of one year's gross revenue. I don't
disagree that a problem may exist, and some digging is certainly warranted. May find some overruns
and PIF, but sounds like he's got a pretty good thing going that could have significant upside. n
9/13/2017

ucla98
Member Since: 09/28/07
Post 16 of 19

Charlestonbraces, if your three-day-a-week corporate job is a stable one and if you think you
can continue to work five days a week (three at corporate, two at your own office) for the next 4
to 5 years, then I think you can afford to buy this office at $450K-$500K. I think this purchase
would be less risky than if you spent $300K to start your own office from scratch and had no
other corporate job to support you.
Buy it before someone else does. Have to take risk. n
9/14/2017

charlestonbraces
Member Since: 06/05/09
Post 17 of 19

splint123
Member Since: 03/03/06
Post 18 of 19

I was thinking for $250K-$300K. He's had it for sale awhile. n
9/14/2017

I agree with ucla98: Even if it doesn't give you the income you would like at the beginning,
it's so much better to have some cash flow and patients/traffic through your door than doing a
start-up. I started out with two distressed practices, much worse than this, and paid 1x net. This
is in line with what you would like to pay. Not sure you can get it, but try.
Also try to get a rent-to-own (a small portion of your rent toward an agreed-upon purchase
price) or at least an option to purchase the building if you can. Even if you don't really want the
building, negotiating this from the get-go gives you options in the future. n
9/14/2017

Trouble with the numbers? Townies to the rescue
Search: "Contracts Receivable"
When it comes to buying a practice, certain lines in the ledger can say volumes about the
practice. Do you know what to look for? Share your knowledge or see what others have to say.
Head to orthotown.com and search "contracts receivable"-this message board will be the
top result.

OCTOBER 2017 // orthotown.com

http://www.orthotown.com/messageboard/thread.aspx?a=11&s=6&f=730&t=298922&g=1 http://www.orthotown.com

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