Recently I met a doctor who desired to sell his practice. He was in his mid 60’s and wanted to “slow down”.He was in good health; however, his wife recently started having some health scenarios. He wanted his golden years to be golden and did not want to postpone their bucket list. In addition, he did not desire to work his normal 50 hours and manage a “generation Y (1980-90) and generation Z (1990-2000)” staff. He had an associate and discussed his/her purchasing the practice. It would have been a seamless transition and the associate’s income would increase. Unfortunately, the associate did not have an interest in ownership.
The practice was in the same location for the past 13 years and the doctor was doing fine. When I calculated his true profit – it was good, not great. He was quite content and enjoyed his practice, seeing his clients, etc. but had grown weary. When you feel you are entering the twilight of your career, most doctors do not add services, raise prices, etc. He did, however, add a digital radiograph 3 years ago.
In gathering information, my team requested a copy of his lease. What started out as a profitable practice quickly diminished. The first problem was the lease only had 16 months left on it. When the owner and landlord discussed an extension, the landlord said it could be done, but the price per square foot would increase from $18.00 to $23.50. He also said, the space next door wanted to expand and they were willing to pay more per square foot. The practice was 2000 square feet and the increased rent cost the owner $45,000 off his selling price OUCH!!! In one move, his practice value fell dramatically and risk being significantly reduced if it was moved to another location in the shopping center.
I am writing this article so new owners and owners that have leases do not make these mistakes.
THE DEVIL’S IN THE DETAILS-Eight Mistakes You Must Avoid in Your lease
- Your lease won’t allow you to get credit from vendors to lease or purchase equipment & supplies.
- Your landlord has defaulted on the mortgage and your building goes into foreclosure. YOU could be headed for financial ruin.
- Your contractor goes bust before the build-out is complete. You’re on the hook to pay for incomplete work, AND you must hire a new contractor to finish the job. You’re using up your free rent period and build-out allowance for all the wrong reasons!!!
- Your contractor does sub-par work – your lease forces you to pay the contractor NO MATTER WHAT!!!!!!!
- Your landlord has the right to relocate you to a different, possibly inferior, space.
- Your landlord has the right to deny the sale or sublease of your practice.
- Your practice’s value is diminished at sale, because your renewal options are voided.
- Your landlord fails to pay you the agreed-upon the build-out allowance.
Your lease is more than an agreement of the rate and term. It is an operative agreement that, if well-negotiated, will offer protections from these, and many more real-life scenarios.
You Don’t Get What You Deserve, You Get What You Negotiate!
Why do you think if you went to a leasing agent representing the landlord, they would create a lease that would be fair to you?
Do you have the knowledge to negotiate your lease? Whether you are re-negotiating your lease or doing a start-up, my team can assist you. My Team has negotiated over 300 leases.
Attending the TVMA meeting in Arlington? Please stop by our booth #405.
“If you have questions on this article or general questions, call me. I do not charge to answer questions”
Randy P. Carsch DVM
Give me the opportunity and I will EARN your business
Phone: 888-500-6711 Fax 1-866-860-6109 Cell: 469-867-3647