Practical advice when the time comes to hand over the keys to your practice
By Lloyd Manning
There comes a time in the life of every chiropractor when age has taken its toll and it is time to lay down the instruments, the activators and the tools for practice, pack the bags and move on. After many years of professional practice, many find this a difficult realization. Still, it must happen and the practice will likely have to be sold.
The first step in selling is coming to the realization that your chiropractic practice is not the jewel to another that it is to you. The second is ensuring that you are selling something that has a tangible value, not just pie in the sky. As with any professional practice, you are selling mostly goodwill. That’s a tough call at the best of times. Traditionally, sellers base their price on past performance. Buyers buy on potential, yet will only pay a price that is based on the practice’s history.
It is important that you sell your practice when it is still viable and profitable – not after all the good has been drained from it. It must be capable of creating value for the buyer and developing a return on the investment.
Price and value must be equal or, better yet, value exceeds price. A practice that is in decline, is poorly located, encumbered with a poor lease, or has obsolete and worn-out equipment will never command top dollar, if you can sell it at all.
Setting a price that is fair to both you and the buyer is one of the more difficult parts of the selling process. There are many rules of thumb kicking around, most of which are worthless. They fail to take in most of the contingencies.
Unfortunately, there is a distinct shortage of professional practice appraisers. Traditionally, accountants do this. Usually, they establish market value by discounting the historical earnings and add the book value of the tangible assets. Before paying an accountant, check with the professional practice and business brokers in your area. They can give you a good idea of what chiropractic practices are selling for and the probability of yours selling within a reasonable time. Of course, the brokers are seeking a listing, and as such, will be optimistic about the price and the time required to sell.
When it comes to selling your practice, remember that you are working into a restricted market. Each potential buyer has a specific purpose in mind. Only another chiropractor, or a larger clinic with several chiropractors that wants your patient base, will buy your practice. A younger practitioner may buy rather than start from scratch. A different one may want your location and your lease, and so forth. Your first step is to determine not what the potential buyer wants, but why. This will guide your entire
Before any potential buyer will say “yes,” this person or clinic must have a complete understanding of what is being sold, that it meets his or her requirements, and overcomes the constraints.
What is the reputation of the practice? What is the principal source of the patients? Are patients satisfied with the level of care given? Why is it being sold? The buyer will request a detailed demographic and patient analysis. What are the strong points? What services can be expanded and what should be downgraded? What is the potential for growth? You must convince this prospect that buying your practice is preferable to buying a competitor or starting a new practice.
You must set the stage, ensure that all of the ducks are in order and that your practice is in condition to be sold. The most important detail is to have a minimum of five years income and expense statements ready for perusal.
The positioning and competency of your staff is also vitally important – who will remain with the practice and who will not.
The question always arises: should you sell your practice yourself or employ a broker? The principal objective is to obtain the best price with the most favourable terms in the shortest period of time, and with the least amount of strain. To obtain all of this, an expert professional practice or business broker – not necessarily an expert in chiropractic practice – is required. If you are that expert, by all means self sell. If not, employ the services of a professional practice or business broker that has a sterling reputation, is well qualified and experienced. For this, you will pay a commission, not less than five, but it could be as high as ten per cent of the selling price.
Should you choose to self sell, you must do everything a broker would do, while managing your practice at the same time, making certain it doesn’t go into the tank while you are performing the selling function. You must get the word out to as many potential buyers as possible. Select appropriate advertising media, prepare effective copy, and
You must develop a selling regimen that displays all of the good points. As for the bad points: don’t deny them, but don’t elaborate on them either. Be prepared to ward off dreamers and tire kickers.
So, if you’re up for it, go for it. If not, use a broker but keep in mind they are not miracle workers. You are not selling a restaurant or a convenience store, but a specialized business that will attract only a specific class of buyers who are knowledgeable.
Be careful about having your practice up for sale for too long. The word gets around and some will wonder what is wrong with it if the market exposure is lengthy.
Before becoming too fixed on the asking-selling price, consider seller financing. By carrying back part of the purchase price you will probably get a better price and perhaps save some tax dollars. Still, ensure that the practice generates sufficient profit to make the payments and provide a decent standard of living for the buyer. Verify that without secondary financing, the buyer has sufficient equity so that he or she cannot walk if things do not work out exactly as planned.
Lastly, sell when your chiropractic practice has a strong and growing patient base, when it’s profitable, and when there is something there for the buyer. Too often, professional practices and businesses are offered for sale when all the good is gone and nothing remains but the dregs. They are on the market month after month waiting for a foolish buyer who never comes. Eventually the owner folds his tent and steals off into the night.
Lloyd Manning is a semi-retired business appraiser and financial analyst who is now a freelance business article writer. He resides in Lloydminster, Alta. He can be reached at firstname.lastname@example.org.