The first encounter with this issue is typically when a physician is offered an opportunity to buy into a practice with which he or she has been an associate. The most basic issue, of course, is the purchase price. Any special conditions imposed by the seller are equally significant. The impact of the buy-in payments on the buyer s take home compensation and the period of time over which it must be paid are the remaining issues we will address. If the seller has retained a valuation consultant, some form of report should have been prepared which should be made available to the buyer.
Reports come in many formats.
Formal valuations can be costly and in some cases not necessary for the purposes of the buy-in. A good compromise is a written report, which summarizes the salient features of the practice, describes the valuation methodology employed and the valuation conclusion. The report should include the quantitative exhibits so that the buyer s representative can review the computations and provide advice. In some cases, no valuation will be performed and the seller will develop a purchase price based upon prior experiences, conversations with colleagues, articles in trade magazines, or perhaps based upon nothing more than a particular need for cash. He issued a one-paragraph report, of which one sentence addressed the valuation the conclusion of value.