Profit or Pitfall? Owner/Investor Q&A
Hello, I’m Marcelo Bermudez, Chief Executive Officer of Shokunin, Inc.
My journey in the business world isn’t just about capital and advising—it’s deeply personal.
I’ve been at the helm of businesses, managing up to 35 dedicated employees and overseeing several million dollars in revenue.
I know the triumphs of hitting those milestones, and I’m familiar with the challenges that come with them.
Throughout my career, I have forged pathways—connecting promising commercial real estate ventures and ambitious businesses to the capital they need.
And as a certified exit planning advisor, I’ve taught many owners how to figure out if they should grow or sell their business.
But business isn’t just about numbers and strategy.
As a state-certified mediator, I’ve facilitated understanding, turning impossible disputes into moments of collaboration and growth.
I have been listening to my client base and owners I interact with, and I see the need to help people make good choices when they’re buying a business or commercial real estate.
That’s the essence of ‘Profit or Pitfall?’
Every business decision, big or small, can lead to soaring profits or unforeseen pitfalls.
Here, on ‘Profit or Pitfall? Business Owner Q&A,’ we’ll explore these nuances together.”
“With my experience and your ambitions, let’s navigate the world of business, making informed choices and capitalizing on every opportunity.
Let’s dive in!”
How would you evaluate a business that is on the verge of bankruptcy?
Question from the audience:
I am looking at buying a Physical Therapy office on the verge of bankruptcy.
I would be looking at buying the patient list, equipment and lease option instead of starting from scratch.
Now this question didn’t come with financial statements, so I can just offer some general ideas on what to look for.
If you have a business that you’d like us to do a deep dive, click on the link in the video and you can complete a form to submit your deal.
Let’s think about this physical therapy office.
Buying just the patient list can simplify matters considerably, but there are still key considerations:
- Value of the List: The primary value of the patient list is in the revenue potential it represents. Analyze how many active patients are on the list, the average revenue generated per patient, and the potential lifetime value of each patient.
- Patient Retention: Just because you have a list doesn’t mean all patients will automatically transition to you. Consider the loyalty patients might have to their existing therapists or the clinic itself. You’ll need a strong strategy to onboard these patients smoothly and retain them.
- Data Privacy and Compliance: Given the nature of the medical industry, transferring patient data comes with legal and ethical implications.
- Ensure that the transfer of patient information complies with relevant privacy regulations, such as HIPAA in the U.S.
- Patients should be informed about the transfer of their data and, in some cases, might need to give their explicit consent.
- Ensure that the data you receive is securely stored and transmitted to prevent any breaches.
- Price Negotiation: The fact that the business is on the brink of bankruptcy may give you some leverage in terms of negotiating a favorable price for the patient list. It might be worth offering a pay-on-performance model that could generate better numbers for the seller and help you manage cash flow by avoiding an upfront fee.
- Integration with Your Systems: Consider how the patient data will integrate with your current systems, especially if you already have an existing practice. There might be costs and time involved in merging databases or systems.
- Non-Compete Clauses: If you’re buying the patient list, it’s prudent to have a non-compete clause with the seller. This ensures that they don’t start a new practice and try to lure those patients back, undermining the value of the list you just purchased.
- Reputation: Even if you’re not buying the entire business, the reputation of the previous clinic may still affect you. If the previous clinic had a bad reputation, you’ll need a strategy to rebuild trust with its former patients.
- Initial Outreach: Plan an outreach strategy to introduce yourself to the acquired patients. This could be through letters, emails, or phone calls. Initial communication is critical in setting the tone and establishing trust.
- Legal Consultation: As with any business transaction, especially in the healthcare industry, consult with a legal professional to ensure that everything is above board.
- Alternative Costs: Weigh the costs of acquiring the patient list against other forms of customer acquisition. For example, what would be the cost of marketing and advertising to attract a similar number of new patients to your practice?
If you’re new to buying a business, I recommend you build a community of strong advisors, a business broker, attorney, accountant. Business is about collaboration. Don’t try and do it by yourself.
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