To be, or not to be…
A clinic owner, that is
By Todd Crabtree, DC, JD, MBA

Why is it that almost half of recent chiropractic graduates open their own clinics? You do not see high numbers of other professional graduates opening their own practices. Are chiropractic graduates uniquely capable of starting their own business?

Al Traina, DC, retired president of Northwestern Health Sciences University, stated the most common concern expressed by chiropractors is that chiropractic schools do not provide enough business education to prepare them to run their own clinics.

Northwestern has launched an effort to address those concerns.

If chiropractic students were given an additional year of business training, would they be more capable of starting, building, and sustaining a successful practice?

Perhaps not, if the graduating class of 65 MBA students at the University of Minnesota’s Carlson School of Management is any indication. When asked, only three graduates planned to start their own businesses.

Indeed, the Wall Street Journal and the Small Business Administration estimate­ that 65 percent to 70 percent of new businesses fail within the first five to eight years of operation.

Moreover, the U.S. Department of Labor predicts that employment opportunities for chiropractors are expected to increase faster than average. Increasing competition will only erode the chances of success for new solo-operated chiropractic clinics.

Fortunately, the number of people availing themselves to chiropractic treatment is increasing, thereby somewhat ameliorating the effect of competition.

BEFORE YOU OPEN A CLINIC

Before you march down to the bank for a loan to open a clinic, first make a good assessment to figure out if you have what it takes. For example:

• Are you a risk taker? Some risk can be reduced with careful planning.

• Are you a finisher? Once you start, you must be able to finish.

• Do you value relationships? Being a business owner requires the ability to foster enduring relationships.

•  Can you make decisions quickly, correctly, and decisively? Running a new business requires constant and quick decision making.

• Are you a hard worker? Running a new business is a lot of hard work for a long time.

• Are you organized? You can’t run an operationally efficient business without strong organizational skills. However, your lack of organization may be compensated by surrounding yourself with organized and structural employees.

• Do you have the support of your family? Your family will be strongly affected by the long hours and inconsistent cash flow.

SHOULD YOU OPT OUT OF A SOLO PRACTICE?

If you currently own a clinic and have become dissatisfied, should you consider selling your practice and becoming an associate for another clinic?

Assess your aptitudes for small-business ownership, then make a calculation:

Does your pretax income exceed the average annual pretax income of an associate doctor? If it does not (and you do not expect it to within a reasonable period of time), then consider selling the clinic.

The total value of the clinic is its liquidation value (assets – liabilities + collectible accounts receivable).

The Chiropractic Economics 10th Annual Salary and Expense Survey reveals that the average gross salary paid to associates was $60,973. Therefore, if your annual pretax income is less than this amount, your best options are to consider a significant change in how you run your clinic or sell it.

By remaining in a practice that makes less money than an associate earns, the owner-chiropractor is in a financial trap that has negative value.

Granted, this scenario may offer benefits unrelated to money, but if you are in this situation, give serious thought to the worth of those benefits.

If the net income is on a trajectory to exceed the average associate’s income within a reasonable period of time, as is the case with a thriving new practice, then the practice has value in excess of the owned assets.

Chiropractic has a rich history of maverick entrepreneurship and risk taking, but as the profession grows and competition intensifies, carefully consider all the pros and cons of clinic ownership.

Todd Crabtree, DC, JD, MBA, is the founder of Crabtree Law Firm PA, specializing in personal injury, and Clinic Doctor Inc., an outsource business service provider offering chiropractors billing services, claims-denial management, customized marketing, and practice management consulting. He can be reached at 866-999-5859, online at www.ClinicDr.com, or by e-mail at Todd.Crabtree@ClinicDr.com.

LEGAL DISCLAIMER: This column is provided for educational purposes only. The accuracy or timeliness of the information presented herein is not warranted. The information presented is not intended to be advice and the information contained herein is not presented as legal advice with respect to any matter and that no attorney-client relationship is established.