Buy vs. Build
A Financial Comparison
The following illustrates the financial differences between buying and building a practice using assumptions based on real-world client case studies:
Buying assumptions
- Practice grosses $350,000
- 50% profit
- 5% annual growth
- 100% financed
- Buyer provides the working capital
Building assumptions
- Base of $100,000
- 20% annual growth; reduced to 5% annual growth when $350,000 gross is reached (same as buying example).
- 65% profit is achieved until year 5, then reduces to 50% profit (same as purchase example)
- Spending is consistent with additional marketing costs of $25,000 annually
| Buy Scenario | 10 years | Build Scenario | 10 years |
|---|---|---|---|
| Gross | $ 4,402,262 | Gross | $ 2,421,188 |
| Expenses | $ 2,515,579 | Expenses | $ 1,130,074 |
| Net Profit | $ 1,886,684 | Net Profit | $ 1,291,114 |
| Debt Service | $ 594,750 | Additional Marketing exp | $ 250,000 |
| Net Available for Buyer | $1,291,934 | Net Available for Buyer | $1,041,114 |
| Buying vs. Building | $ 250,820 |
