When it’s time to sell your practice, combine the art of subtle persuasion with an airtight process.
The largest asset most chiropractors will ever sell is their practice, so maximizing the return on this sale is paramount. The proceeds may become the monetary cornerstone to your retirement or give you the opportunity to move to your next career goal.
Most sellers reflexively try to jump ahead and skip key elements in the selling process to enhance expediency. But each step is equally important and must be completed before advancing to the next.
Typically, when sellers receive the first phone call from a prospective buyer, they are so excited that they attempt to sell the buyer on the spot. This overreaction can repel the interested party and build distrust. You can’t verbally make a sale this big. The seller-buyer relationship is like a dating dance: The prospect first buys into the seller’s integrity—and then considers buying the practice.
Many national and regional chiropractic practice brokers offer to market practices for sale and generate leads.
When a lead or prospective buyer shows interest, the broker intervenes and begins the sales process.
This approach has an inherent flaw for chiropractors: Working with a broker may be advantageous when selling a house with no intangible personality, but not with a practice where a chiropractor’s character makes up much of the value. Brokers put forth promotional efforts to justify their fees, but they are primarily interested in the sale, not the chiropractor. It’s often more effective for the seller to communicate directly with the buyer and build a trusting, transparent relationship. No broker can educate a buyer as well as a plainspoken, well-coached business owner who inherently understands the practice.
Most buyers are so fearful of the transaction that, given any inkling of misrepresentation, the relationship breaks down. When the seller is forthright, the transaction progresses inch by inch toward finish line until the buyer signs on the dotted line.
Use this outline of the process to organize your method:
1. Build a marketing sales package.
Your selling strategy should be in progress years before you market your practice. Being able to present the past three years’ financials including tax returns, statistics, and a practice appraisal is crucial. The more professional your presentation, the more valuable your practice will be.
2. Market the practice.
By using the Internet as well as classifieds on chiropractic state association and college websites, you increase the odds that someone looking to buy a practice will come across your ad. A listing with a link to a virtual tour of your practice including pictures, information, and demographics is the most effective presentation and will separate your ad from the rest. The longer prospective buyers spend on your ad, the more interest they will develop.
3. Sign a confidentiality agreement.
Before a seller-buyer relationship begins, a letter of confidentiality must be signed. This protects the seller from the public and other staff members who know that the practice is for sale. It also establishes a professional relationship between parties.
4. Make the first phone call.
This is where the relationship begins, and the tone and intention is developed. Establish that, as the seller, you will control the process. The goal of this phone call is to invite the prospect to visit your practice outside of office hours.
5. Arrange the first visit.
The first face-to-face physical tour of your facility should be scripted to keep you in control of the conversation. Don’t attempt to sell the practice at this meeting. Give buyers all information relevant to the practice. It’s better to do this at the first meeting then to have interested parties ask for bits and pieces over time. Allow buyers to have plenty of space and time to tour the facility.
6. Schedule a second meeting.
The goal of this subsequent visit is to encourage the buyer to shadow the doctor and envision working there. Allow the buyer to act as the owner for a given period of time, interacting with the staff and patients.
7. Follow up.
Answer all of the buyer’s questions and offer any additional information that could be useful. Provide complete transparency for all aspects of the practice for sale. Do not contact prospective buyers to gauge interest even when you are anxious to close the deal. That call will cost you, without exception. If they’re interested, they will contact you.
8. Obtain a letter of intent.
The buyer should offer a letter explaining how and when they would like to purchase the practice. The letter is a brief outline of the formal contract and is presented with a good intention check. This is a pivotal step in the negotiation; once money has changed hands, the intensity increases.
Negotiation is not a fight—it’s a time for both the buyer and seller to become familiar with each item in the document. Once the parties understand the issues, a compromise should smoothly move the process along.
10. Draft the contract.
Once agreed upon, the contract is carved in stone. This is the playbook to transfer the assets. Everything should be in writing to fully explain the conditions and protect all parties concerned.
11. Finalize the loan.
Secure financing or draft a seller financing agreement (seller note). Acquiring outside financing is a step that may take a great deal of time and energy, so be prepared to gather your personal and practice documentation in full.
12. Close the deal.
Once all parts of the puzzle are in place, a date to sign the documents can be set. At this point, the transfer of ownership to the purchaser and payment to the seller should be executed.
To sell your practice, take the intellectual (not the emotional) approach. Get personal with the buyer; before the transaction can take place they must believe in you first and in the practice second. Follow these steps without jumping ahead or taking shortcuts.
And, most important, be honest and forthright in educating the purchaser about your practice.
David Foster, DC, has practiced for the past 25 years and has co-owned 12 practices. He has consulted chiropractors in the areas of appraisals, buy-sell negotiation, obtaining financing, marketing a practice for sale, and associate and independent contract agreements for the past 15 years. He can be reached at 973-885- 8078, firstname.lastname@example.org, or through backofficeconsults.com.