A chiropractic practice sale contract bomb is secretly waiting to explode on your chiropractic business sale or transition — many chiropractors just don’t know it yet!  The two biggest and most basic reasons for the potential bomb is that far too many chiropractors either (a) neglect proper planning for their sale in advance or (b) they oversimplify their sale and suffer the consequences.

Prior to having children, I naively thought that raising kids was a relatively simple undertaking. Like many armchair experts, I looked upon the situation from afar and concluded that childrearing was much easier than most folks were making it out to be. Keep them fed, clothed reasonably well-educated and entertained and you’ve got your job down. Simple.

Then I actually had children…of my own.

I was progressively enlightened to understand that strange gadgets like child-proof locks were made for a reason, that upset children are able hold their breath far longer than adults and they can outscream and outpoop (if that’s a word) a grown man 6x their size.  I survived the toddler and elementary school ages only to find that the teenage years bring a new set of challenges in areas we take for granted.  Parents soon discover some children test the limits of a hot water tank while the odor produced by others seems to indicate that there must be a shower or soap malfunction. And while every parenting book, seminar or workshop prepares you for some of these surprises, but none cover it all (that or I’m just blessed with children breaking new ground).

Good Parenting Needs Proper Planning – So Does Your Practice Sale!

My point is not to ponder parenting, but you give you a bit of an angle to approach to your chiropractic practice sale or transition. In other words, a successful chiropractic practice sale contract must be properly planned in advance.

Some recent conversations I have had over the past several months inspired me to consider that many chiropractors take a similar “know-it-all” stance towards their practice sale or transition as I once did towards parenting.  In fact, for most chiropractors, the sale or transition of their practice is something they have absolutely zero experience with despite the fact that they believe they can handle it on their own.

And while parenting typically affords you many opportunities to redeem your mistakes over the course of the next eighteen or more years you have with your children, the mistakes you make with respect to your chiropractic practice sale or transition can be final (or fatal) and are mostly inflexible.

That said, for today we will talk about several specific mistakes you can make in respect to the chiropractic practice sale contract that you will utilize to “seal the deal” on your chiropractic practice sale or transition: the buy-sell agreement.

1.  The Premature Chiropractic Practice Sale Contract

Some chiropractors mistakenly believe that because the final vehicle that delivers their sale is the purchase agreement, they should start their transition with a chiropractic practice sale contract.  While it may be correct to assert that the “vehicle” that gets you to the finish line is a purchase agreement, it’s not the place to start.  That would be like jumping in your car without a clue of the specific roads or routes to use to get to your destination. If you take Route A, then it would naturally lead you in one direction down specific streets and roads that Route B would not necessarily utilize.

Your chiropractic practice sale contract is similar.  Because there is no one “universal” way to sell or transition your chiropractic practice, you must first map the route of your sale.  The contract, therefore, can then just spell out the terms that you have already agreed to – along with some legal requirements that need to be in place to ensure your “vehicle” (the sale of your business) can safely travel down that road. Therefore, it just doesn’t make logical sense to use a Chiropractic Practice Sale Contract too early in the game.

Chiropractors who prematurely start with a Chiropractic Practice Sale Contract will often cause themselves to incur lots of legal expenses because most laywers would be thrilled to write 16 versions of your purchase agreement — while billing you for each one!

But the premature contract not only creates logical or financial problem, it can simply scare away your buyer if brought out too soon.  Most buyers want to get to know you, see the practice, be assured that the business is a good deal for them and that they can get a loan to purchase it – long before they have any interest in seeing a purchase agreement.  After all, if they don’t like the practice, don’t feel its priced right or can’t get a loan – there’s no need for a purchase agreement!

2. The One Size Fits All Contract 

To most chiropractors, any contract will do that spells out a few terms of the sale or transition arrangement.  I can’t tell you how many docs have asked me for a sample, as if there is a one-size fits all contract that can simply be inserted trouble free into their transition like some sort of plug-and-play component for your computer.

In fact, many buy-sell agreements are ticking time bombs, ready to explode with virtually any event that occurs after its signing. And depending on the extent of the explosion, the results could be devastating or, at the minimum, very messy to the success of your sale or transition.

So while there may be some basic elements common to most or all chiropractic business sales and transitions, it’s important that your chiropractic practice sale contract isn’t a simple clone you’ve copied from someone else – else you may be in for a bomb that explodes your business sale or transition!  Sadly, attorneys seem to be more likely to work with the “one size fits all” business sale template than most chiropractic practice brokers or those with more experience in the matter.

Over the years, I’ve seen attorneys copy and paste a restaurant sale contract and try to pass it off as a chiropractic purchase agreement (the client was immediately baffled when reviewing the language as to what was going to happen to the commercial kitchen and dishwasing equipment!). I’ve seen lawyers use generic business sale template that failed to mention any specifics that go along with a healthcare practice such as HIPAA, provisions for the storage or records, patient notifications and other major gaps.

Here I don’t mean to throw attorneys under the bus because I’ve seen far more chiropractors attempt a shortcut with their chiropractic practice sale contract and make mistakes like using a standard stock sale agreement (when the business was being sold as an asset sale), failing to allocate the portions of the business sale for tax purposes and many more.

The long and short of it is this — one size fits all rarely fits all your needs to get you a proper purchase agreement that will both accurately convey the terms of the sale AND protect the parties involved.

3. Accounts Receivable Nightmares Before & After the Sale

Sadly, some chiropractors fail to prepare their practice for how to properly handle refunds requested by a payer after a sale, how to discuss accounts receivable, pre-pays or other financial obligations BEFORE the sale — in order to create smooth sailing AFTER the sale.

As you can imagine each of these issues can create a sticky situation if not properly addressed prior to the purchase agreement and then if not adequately documented in the chiropractic practice sale contract.

We’ve seen squabbles related to sales conducted by other practice brokers where the Buyer (who was now the practice owner) did not feel that it was his obligation to refund the patient who asked for their pre-pay money back when the former Owner / Seller retired.  Of course, the former owner didn’t feel obligated to pay the Buyer for those funds either. The situation got even uglier when the Buyer began to make accusations that other details of the sale were not disclosed and that accounting errors had been made.  The Buyer even threatened the former owner with reporting them for fraud if he didn’t repay the refunds.

This mess could have easily been solved by a well-written working agreement that spelled out the details of the transaction, made provisions for refunds and was agreed upon by both sides BEFORE trouble took place.

Want to Avoid More Mistakes (And Exit Without Them!)

 I’m sure there are some of you who are reading this and concluding that you would never be so dumb to commit one of these obvious errors with respect to your chiropractic practice sale contract. I do hope that it true.

But the fact remains that it is difficult to protect yourself from dangers you don’t know that are lurking to get you.  Additionally, there are many more mistakes that can be found under the microscope in addition to some of the common ones mentioned in this post.  Whether these mistakes lurk inside your contracts or they occur before you even get that far, I return to my original point: there is too little room for error in your exit strategy.

To prevent this, I will repeat a simple statement that I’ve said many times over the years — your chiropractic practice sale (in general) is not a DIY project — and your chiropractic practice sale contract is certainly not a specific agreement that you should attempt to cut, patch and paste without experienced advice or assistance.

If you agree AND if you are looking to sell or transition your chiropractic practice in the near future, then we’d be happy to help!  Check out our FREE WEBINARS to learn more – or contact us today at info[at]strategicdc.com so we can help you avoid a bomb exploding in your practice sale!