November 2002

Bob Levoy’s success file
Is it Time to Transition Your Solo Practice?

If you are a chiropractor who owns a successful practice that is at or near its peak, now may be the time to think about beginning the transition process to acquire an associate or partner. Solo practitioners who procrastinate, thinking they have another five to 10 years of continued high earnings, may lose the opportunity to sell their practices at the best price later on down the line.

The reason? Businesses of all types – including professional practices – typically experience a “life cycle” consisting of essentially four phases:

1. The Start-Up (two to three years of gradual growth)

2. Growth Years (three to 20-plus years of steady growth)

3. Maturity (a leveling-off phase)

4. Decline

The rate of growth and decline varies from one practice to another, as does the duration of each phase.

Chiropractors who wait until their practices are in the Mature Phase, or worse, the Decline Phase, face several obstacles.

Those obstacles may include:

· A likely decrease in the practice value, and ultimately a lower practice sale price.

· Increased pressure to maintain high revenues and profitability.

· A decreased ability to attract and relate to younger patients.

· Inability to take more time off.

· Greater likelihood of becoming ill and being away from the practice for long stretches.

· Possible obsolescence of practice equipment and facilities, resulting in a less desirable turn-key practice in the eyes of potential associates or buyers.

Chiropractors who are in the Growth Phase of their practices and at peak earnings are in a prime position to hire a younger associate. If the associate isn’t able to cover his or her full cost for the first few months, the senior doctor should be prepared to take slightly less income, or perhaps more personal time off. The goal is to begin the transition.

The associate should specifically understand that he or she will begin with a trial period, for example, of six months, leading to a “buy-in” or “get-out.” This agreement should be put in writing from the start. Typically, a guaranteed buy-in option provides some assurance the associate will remain, and have greater incentive to make the arrangement work.

When this process is successful, practice revenues grow. The “life cycle” is extended. Other benefits may include more leisure time for the senior doctor, and a higher practice value for the buy-out.

Mr. Levoy, a management consultant based in Roslyn, N.Y., has conducted more than 2,500 seminars for health-care professionals. Those seminars have included programs for the American and Canadian chiropractic associations and numerous state and provincial chiropractic associations.