Many chiropractors are reaching a point where they are more frequently having thoughts about how to transition out of the profession. In many cases, this is due to the simple fact that Baby Boomers are not only the largest segment of people on the planet, but in the chiropractic setting, they are the largest demographic of full-time practicing chiropractors in the country today. And since, baby boomers are in or soon approaching retirement age, conversations about the future of their business and life after chiropractic are to be expected.
Even if Baby Boomers make up the bulk of business owners who are looking to sell their chiropractic practice, slow down or transition in some fashion, they are not the only business owners looking to do so. There is always a percentage of chiropractors who are looking to move on to other business ventures and trying to discern what the best move may be for them and their family.
After years of working with our chiropractic transitions coaching clients, I’ve noted that there are two things that all chiropractors have in common in regards to transitioning their chiropractic practice: (1) they must choose the transition option that works best for their needs, time frame and circumstances; and (2) there are more options (and more complications) than most chiropractors realize.
In today’s post, we will focus on three essential ingredients needed in your decision-making process that will help you reach the ultimate goal of successfully selling or transitioning your chiropractic practice.
Persistent Rumors That Prevent You From Fulfilling Your Exit Strategy Dreams
Before you begin the journey, let’s first dispel a few myths that can derail your train before you get to your destination:
- No Financing Fears: Some DC’s are still holding on to an age-old tale that banks don’t lend to chiropractors. While it is true that some banks have this policy, the good news is that this certainly is NOT the case at every bank. So, it’s essential that you don’t let this myth fool you into believing you must self-finance any prospective deal. What’s more, knowing which banks to use (and which to avoid) is a critical piece of information that can expand your options even further.
- Un-bankable Buyers. It’s no secret that today’s young chiropractors enter the profession with some sizable debt. But that doesn’t mean that they are ineligible for loans to purchase your practice. On the contrary, banks understand that the “entry ticket” to becoming a doctor is (typically) student loan debt. Consequently, they view it very differently than consumer debt, such as credit cards.
- Associate Buy-Ins and Buy-Outs Don’t Work. While many chiropractors have seen their fair share of failed associateships and owner opportunities that never materialize, it would be inaccurate to conclude that these type of transitions don’t work. If that were truly the case, you would see similar rates of failure in other professions and an equal opposition to them among dentists, medical doctors and professionals of all types. However, if you were to study transitions in these professions, you would actually find the opposite happening: buy-in and buy-outs are “the norm” in many cases and far outnumber doctors who start from scratch. The real bad news here is not only does this myth potentially eliminate a profitable path for the owner and a win-win opportunity for the associate, it is often propagandized by unscrupulous practice brokers who want to con you into a sale now, so they can collect their commission. In short, don’t believe the hysteria: a properly structured associate opportunity can and does work.
Narrowing Down Your Options
So if you are considering a chiropractic practice sale or transition in the future, how do you go about narrowing down which options would serve you best?
When working with my transition coaching clients, there are three questions that we often ask to put you on the right path towards your transition goals:
- Your Ideal Practice Sale or Transition Timeframe
The first question that you must answer is in regards to your timeframe. Whether you want to sell your chiropractic practice, take on an associate now with the hopes or selling to them later or transition in some other fashion, once you can determine your ideal timeframe, you can eliminate and prioritize your options.
For example, if you want out in a year, then a partnership is usually a bad choice. That’s because the primary strategies behind a partnership is that the combination of two (or more) doctors working together allows the owners to take more time off, slow down and grow the practice over time with the production of partners vs a solo doc. But if you’re looking to check out in a year, you won’t have time to grow the practice with your partner. And you are probably not looking for vacation, you’ve got retirement on the mind. So your end goals don’t fit with the partnership strategy.
Similarly, if you want to exit in 10 years and you have a prospect interested in your practice, it makes no sense to listen to some broker who tells you to sell now and tries to scare you into taking the opportunity in your lap. Don’t get me wrong, I am in favor of “striking while the iron is hot,” but such opportunities also have to fit your long term goals – otherwise they are just distractions.
Case in point, I recently spoke to a doc approached by a young chiropractor who is seeking to purchase a practice or get into an associate opportunity where he can own within a year. The problem was that this owner didn’t want to exit for 10 years. So, if this owner sold now, what would he do? He likes practicing and financially, he’s not ready to retire. He could start again from scratch, but that’s not attractive to him at all. And since the young doctor wants to buy within a year, an associate buy-out won’t work because their timeframes don’t match.
Again, your first step in narrowing down your options is to set your timeframe.
2. Figure Out Your Finances
The second ingredient is often closely related to the first, but is also a critical one to calculate.
After you can decide your ideal time frame to transition, you must then figure out the finances to make it happen. Often, doing a little math up front, can move the timeframe sooner or further off. So it’s imperative you take this step before too long.
Occasionally, your finances can surprise you, especially if you take into account the value of your practice. For example, we recently worked with a doc who estimated that he needed 5 more years to practice. Emotionally, he was ready to go. He had an associate who was ready to buy. So, I asked him “why 5 years?”
Turns out, the five year mark was both an arbitrarily deadline he had set for himself and one that his financial planner had proposed about two decades earlier. But as he dug into his finances a little deeper, it turned out that his investments were doing better than anticipated, his expenses were lower than budgeted and that his practice was worth more than he needed to retire (because his financial planner had not included it in the projections at all!). In short, this doc could retire now!
Had he not figured out his finances, he would have worked five more years (unnecessarily) and potentially missed out on selling to his associate.
Of course, the news is not always that good. But if you don’t take the step and figure out your finances, you will be guessing at your future goals, which will make them very difficult to reach!
3. Defining Your Perfect Prospect
The third step in transitions process is to actually envision the perfect person who will take over or transition into your practice. If this sounds a little woo-woo, it’s actually quite the opposite. I’m not advising you to meditate on the perfect person and ask the universe to drop them into your lap via some attractor factor magic. Instead, I’d recommend that you focus on the type of chiropractor who would make an ideal fit for your practice, for your patients, for your circumstances. With our transition coaching clients, this is a concrete questionnaire, not some wishy-washy magic lamp. But we also go one step further and create the advertisements for that person, based on your profile of who would be the ideal prospect.
In essence, what you need to do is to proactively plan for the person that would be the best fit. Because, far too often, chiropractors are completely reactive in this process and it usually produces extremely poor results. In other words, you (the owner) are approached by someone who is interested in buying your practice, becoming your associate or “partnering” up with you.
While these spontaneous offers may be flattering, the first thing you should know is that 90% of them will never materialize into anything. This is primarily because you are not ready to sell or transition and they are. Or that, these DC’s are seeking opportunities from any and every chiropractor within the area and trying to find a bargain to buy (or a DC who will let them practice as their associate or in their building, without a non-compete, until they can get enough money to open up across the street). In many of these deals, the offer is completely one-sided because it was created by the young doc and it doesn’t favor your needs at all.
Here’s my encouragement: have the strength to say “No” if you don’t have your criteria met for your perfect prospect which, of course, implies, you’ve spent some time writing down exactly who that may be!
Putting Yourself on the Path To Transition Success
If you take the above steps, you can position yourself for success and avoid a lot of heart ache (and headaches).
And if a spontaneous deal (or any deal) does come along that is NOT truly a win-win arrangement, don’t bother. You can waste a lot of time and effort entertaining every offer that comes in. Worse, you can go in a thousand different directions if you have no clear goals.
Instead, focus on these first three steps: what timeframe you need, what financial goals you must meet and what the perfect prospect looks like to you.
When you have clarity on these three criteria, you have the building blocks in place to position your transition for success – regardless of whether you want to sell, hire an associate, take on a partner or move in some other direction.
Anything and everything else is just a distraction that will further delay possibly derail you from your transition goals!
Need More guidance on your chiropractic practice sale or transition? Check out our upcomingFREE WEBINAR: Sell, Switch or Slow Down – How to Maximize the Value of Your Chiropractic Practice Sale & Minimize Costly Mistakes.