Steps to ensure you leave your practice in good hands
YOUR PRACTICE ISN’T JUST A PLACE OF WORK — it’s a reflection of your dedication to your patients. However, the reality is that every chiropractor will eventually leave their practice.
Despite this, many chiropractors do not have a transition plan to ensure their practice’s survival after they leave. Chiropractors are not alone in this oversight. According to Entrepreneur magazine, 48% of all business owners do not have an exit strategy, and nearly 60% have never even had a business valuation done. This lack of preparedness has a far-reaching impact on the economy and our communities. However, in the case of a chiropractic practice, the impact hits much closer to home, as it’s ultimately the patients and staff who will feel the effects of the doctor’s lack of planning.
The good news is you can take steps to ensure your legacy lives on after you retire. This article explores how to approach transition planning, different succession options and vital ways to set up your practice for long-term success.
Reflecting on your practice legacy
Before planning for the transition of your practice, it’s essential to take a step back and identify what aspects of your practice’s legacy are most important to you. This will help guide your decision-making process and ensure your practice maintains its core values and principles even after retirement. While most doctors would love to achieve all of the following goals, as with most things in life, achieving a win in every category is unlikely. So take some time to determine what aspects of your practice’s legacy are most important to you so you can tailor your transition plan accordingly.
Serving existing patients and the community
Consider whether it is a priority for your practice to continue providing care to the patients you have built relationships with over the years. This goal typically includes seeing the practice continue to operate in a similar structure to what you have built by maintaining the same quality of care and patient experience.
Practice name and reputation
Think about whether it is important to you for the name and reputation of your practice to carry on after your retirement. Preserving these aspects can help maintain the goodwill you have built with patients, employees and the community.
For many doctors a key desire is for the employees to have the opportunity to stay in their roles and continue working in a familiar environment. Review your employees’ life stages, personal situations and likely employment goals after you leave to determine how much of a role this idea needs to play in your succession plan.
After spending decades building a practice, most doctors hope to get some financial return on their investment. Review your finances to determine the importance of achieving the highest financial return as you transition out of practice ownership.
By clearly defining what key aspects of your practice’s legacy are most important to you, you can make informed decisions and seek a transition plan that aligns with your values and goals.
Succession options for practice continuity
When considering the transition of your practice, there are several options to evaluate. Options like being absorbed by another local practice or closing the practice offer little to nothing in terms of preserving your practice’s legacy; instead, focus on the following practice succession options:
Sell the practice to a new doctor
A doctor who is buying a practice often wants to maintain the practice’s existing structure, which helps preserve many components of the original doctor’s legacy. The original doctor also participates in an in-office transition with the new owner to provide extra assurances the practice will continue to thrive under new ownership. While the new owner may have plans to change the practice under their ownership, most doctors are buying a practice as a risk mitigation strategy, and therefore will implement any changes gradually to preserve patient and staff retention. However, ultimately the new doctor will have autonomy in making any changes once they assume ownership, so make sure you have a clear understanding of their long-term vision for the practice. Additionally, the more they want to maintain of your current practice infrastructure, the more value they will likely see in the practice.
Keeping your practice within the family is often a very strong option for preserving the practice legacy. However, because the practice remains closely held, it is not uncommon for the original doctor to maintain a strong presence in the business, and that can feel less like a retirement. Practice sales and transfers to family are often not top-dollar, limiting the financial return to the original doctor. And most importantly, be careful to structure this transfer carefully and intentionally to avoid the power struggles and disagreements that can erode the foundation of both the practice and family relationships.
Sales to established associates can also present a strong option for legacy preservation. As they’re already familiar with the practice, associates require less training and can effectively continue the practice as is; in fact, it’s much easier for them to continue the status quo than to make any changes. However, these sales can be unreliable because very few are set up early and properly. This means many retirement-ready doctors who were planning on an associate buyout are sent scrambling back to the drawing board to find another succession option at a time they were hoping to start stepping out of the practice.
Investor clinic owners have become more common in chiropractic over the past few years. Investors are typically well-funded, which can optimize practice stability because there is a minimal risk of the new owner encountering financial problems. These sales may also result in a higher financial return to the original doctor, especially if they maintain a minority ownership position in the practice, and the practice grows under the investor’s tutelage. However, selling to an investor can also lead to the highest loss of legacy because this type of acquisition often includes a change in the practice’s treatment protocols, staff, practice name and/or branding. Therefore, this may not be the best option for those who prioritize maintaining a community presence that strongly reflects the original ownership.
Establish a foundation for transition and long-term success
Even if you’re months or years away from retirement, there are many ways you can begin to prepare your practice for a successful succession. Here are some important steps to set up your practice for a smooth transition in the future:
Reduce reliance on the founding doctor
- Transfer and train staff to handle important tasks and responsibilities.
- Document everything that relies on the doctor or spouse to ensure seamless continuation. You should write down all pertinent information in a way that’s easy for someone new to understand.
- Organize and store all documentation securely, ideally on a cloud-based storage service like Dropbox or Google Drive.
Build a strong staff
- When the staff stays, the patients tend to stay as well. Create a work environment your employees relish so they will want to stay, even after you go.
- Focus on creating a team that retains patients and fosters employee loyalty.
- Invest in staff training and development to enhance skills and job satisfaction.
Prioritize cash flow management
- Implement effective strategies to manage prepaid programs. You want to avoid a large number of potential refunds when you leave the practice.
- Many long-term doctors have excellent patient referral numbers, but those don’t always transition seamlessly to a new doctor. Develop and execute marketing initiatives that will also attract and retain patients.
- Diversify revenue streams to minimize risk. Consider maintenance programs with automated payments or even sublessors to increase predictable monthly revenue.
- Keep expenses lean and optimize operational efficiency.
Get a plan in place
- Very few practices are retirement-ready. It takes time and expertise to reorganize the financials and some key aspects of the operations to support a high-value sale. Work with a professional who specializes in chiropractic exit strategy planning to make sure you aren’t leaving value on the table, and that your practice operations are structured to best achieve your ideal succession strategy. To capture optimum value this will start four to five years before you are ready to exit the practice.
You’ve waited so long for this moment, be it to spend more time with family or enjoy traveling to places you’ve never been. Nonetheless, retiring from a practice you’ve spent so long building can feel daunting. Regardless of your succession plan, you can take steps to ensure your legacy lives on after you retire. Your CPA will be key to providing insight into your financials, a business contracts attorney will ensure you are protected in the transaction, and a practice transition advisor who is experienced in chiropractic practice sales and transfers will provide expert guidance to manage all aspects of the sale. This dynamic trio will provide you with the best chances of a successful transition.
The insights above should help you see things more clearly and begin working toward your transition to retirement. When well-planned, your transition of the practice to a new owner should feel like a final professional achievement to cap off your career, but it will only feel that way if it is well-planned.
CRYSTAL MISENHEIMER, leading expert in chiropractic practice sales, is the first and only chiropractic broker to earn the coveted Certified Business Intermediary (CBI) designation from the International Business Brokers Association (IBBA) and sets the gold standard in expertise, quality and service. A former clinic owner herself, she is uniquely qualified to provide comprehensive support on the many complexities of clinic valuations and practice sales. You can contact Misenheimer and her team at 888-508-9197, email@example.com or online at progressivepracticesales.com.