A Better Cardiology (ABC) practice has been providing great patient care to the community for 20 years. The 2 Cardiologists at ABC see patients and offer diagnostic testing. The total revenue of ABC is $1 million per year. Based on the stability and location of the practice, the quality of the equipment and a variety of other factors, SMP values the business at $5 million.
The Cardiologists would like to retain 30% of the business, with SMP partnering at 70%. Upon signing, the Cardiologists receive a cheque for 70% of the value of the business, or $3.5M. They also receive the other $1.5 million in the form of shares in the SMP platform, which will (hopefully) go up in value as the network expands. The 2 Physician-Partner Cardiologists of ABC agree to work for at least 5 more years.
Going forward:
The Cardiologists keep 70% of their professional billings. The other 30% overhead goes to SMP, which uses it to run the business (salaries, rent, disposables, etc). Since the office is now under professional management, the operation is smoother, giving a better patient experience and higher total revenue.