Should I Buy an Established Practice or Scratch-Start?

One of the first major decisions physicians make when going into private practice is purchasing an existing practice, or starting one from scratch. Both can succeed, but they involve radically different risk, timelines, and expense.

The Case for Buying an Established Practice

Buying an established practice likely gives you immediate cash flow. You receive a patient base, trained personnel, existing payer contracts, and infrastructure. That is to say that you start making money immediately, instead of taking months or years to establish a patient base from zero.

The finances are likely more stable. You can analyze prior revenue statements, learn about referral patterns, and establish profitability before investing. This is sometimes simpler to obtain financing for.

The compromise is cost in the long run. You are, in essence, purchasing the seller's reputation and systems which may not always be the perfect fit. If the previous owner had poor relationships with referral sources or outdated processes, you will have those problems to resolve.

The Case for a Scratch-Start

Beginning from scratch gives you total control. You choose the location, design the space to your own specifications, hire your own staff, and build the culture that you want. No legacy baggage and no politics of inheriting another person's practice.

The entry cost is sometimes intimidating. Sure, you'll still be paying for build-out and equipment, but you're also not paying top dollar for goodwill. The down side is time and risk. Building up a patient base requires time, and during that time, you'll have expenses while working on increasing your revenue.

Conclusion

If you need to start in a hurry, buying an existing practice is usually the better choice. If you are not bothered about a longer timeline and value autonomy, a scratch-start may be preferable.

There isn't a one-size-fits-all, “right” solution. Talk to advisors who understand practice ownership, be conservative in assumptions, and choose the path that best suits your objectives and risk tolerance. The wrong choice will cost you money and time. The right one sets you up for long-term success.