i have been offered pay only based on my income generated. the offer was at 33 percent. is that reasonable? too risky? practice sees about 20 pt's a day with a doctor who is working on retiring. I am sure I can build up the practice, but nervous about it.
salary based on rev
- Thread starter mme27
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I would want more than 33%. Without a base salary the owner isn't taking on as much risk by hiring you, meaning he doesn't have to recoup anything other than your overhead. The overhead may be a higher % of revenue due to what I would think is a lower pt volume (20/day), but it shouldn't be 67%. I'm sure he wants to make money off of your work prior to retirement, but as a potential associate I would be thinking without a base salary he should be getting his money from me when I buy him out at retirement.
Older guys and the couple of practicing docs that post would give much more valuable insight though.
Older guys and the couple of practicing docs that post would give much more valuable insight though.
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Is he paying your malpractice insurance? How about attendance to seminar's for CME? Lab coat allowance? Unless this is a really fantastic practice, I think you need to ask for more. If it is a fantastic practice, he can afford to pay you a base salary. When I started as an associate over 25 years ago, I was guaranteed $500/week, plus all the items above paid. I think you are right, his money should come from the buy-out. Until you build-up your practice, he will most likely have to take a cut in his salary. That's just my opinion of how it should work. When I bought the practice, I paid him out over 7 years. It worked out fine for both of us.
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The person who made the offer is probably expecting you to negotiate (but secretly hoping that you don't know that you're expected to).
When I first entered practice out of residency I joined a practice management group in which we'd split the collections 50%/50%, without benefits other than a computer. Initially it was good for me because I would make half of whatever I brought in even though I wasn't generating enough to cover my overhead, but as I collected more and made enough to cover my expenses any extra would go to the management company. Eventually as you get busier you'd end up on the short end. At 33% you'd really be on the short end.
Hypothetically, if you collected $300,000 (pretty decent for first year out, IMO) you'd get $99,000 before taxes. Where did the other $210,000 go? Some of it went towards covering your share of the expenses, but $16,750 per month? That would be quite high.
You said the practice sees about 20 patients per day. Would the older doc be stepping out so you could see all of the patients, would you split the current load, or would he keep his patient load and have you go find your own? Is the current patient load highly procedural or mostly nail care? To collect $300,000 you'd be billing somewhere around $500,000, so for a smaller practice I don't know if these hypothetical numbers are even within reach your first year.
Another factor to consider is that it may take several months before you collect money from insurance companies. Without a base salary you'd have to have an alternate source of income for living expenses until money starts coming in.
As Techdoc54 brought up, you need to consider any benefits such as malpractice, paid vacation, CME funds, etc.
I wouldn't take that offer as-is.
Edit: If the ultimate goal is to buy that practice then I think it's in your best interest to find out up front how you're going to determine the buyout price. You don't want to be surprised down the road by, "I want ten million dollars!"
Also consider the ramifications if the practice doesn't work out how you thought it would. Is there a covenant not to compete? If you have to move out of the area, who pays malpractice tail coverage? The tail coverage thing was a total surprise to me when I moved. "You mean I have to pay to leave and start over??? Bogus!"
When I first entered practice out of residency I joined a practice management group in which we'd split the collections 50%/50%, without benefits other than a computer. Initially it was good for me because I would make half of whatever I brought in even though I wasn't generating enough to cover my overhead, but as I collected more and made enough to cover my expenses any extra would go to the management company. Eventually as you get busier you'd end up on the short end. At 33% you'd really be on the short end.
Hypothetically, if you collected $300,000 (pretty decent for first year out, IMO) you'd get $99,000 before taxes. Where did the other $210,000 go? Some of it went towards covering your share of the expenses, but $16,750 per month? That would be quite high.
You said the practice sees about 20 patients per day. Would the older doc be stepping out so you could see all of the patients, would you split the current load, or would he keep his patient load and have you go find your own? Is the current patient load highly procedural or mostly nail care? To collect $300,000 you'd be billing somewhere around $500,000, so for a smaller practice I don't know if these hypothetical numbers are even within reach your first year.
Another factor to consider is that it may take several months before you collect money from insurance companies. Without a base salary you'd have to have an alternate source of income for living expenses until money starts coming in.
As Techdoc54 brought up, you need to consider any benefits such as malpractice, paid vacation, CME funds, etc.
I wouldn't take that offer as-is.
Edit: If the ultimate goal is to buy that practice then I think it's in your best interest to find out up front how you're going to determine the buyout price. You don't want to be surprised down the road by, "I want ten million dollars!"
Also consider the ramifications if the practice doesn't work out how you thought it would. Is there a covenant not to compete? If you have to move out of the area, who pays malpractice tail coverage? The tail coverage thing was a total surprise to me when I moved. "You mean I have to pay to leave and start over??? Bogus!"
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