After completing their studies at chiropractic college, most students dream of owning a practice.
They yearn for a place where they can make their mark and practice the skills they learned during their years in school. Some chiropractic colleges help prepare their students with classes on the business side of practice prior to graduation. However, it’s not until you experience the reality of being out on your own in the world of chiropractic entrepreneurship that what you might not have learned in school becomes apparent.
One of the most common questions new grads ask is, “Where is the best place for me to practice?” This question often implies that they are seeking a location where the laws and reimbursement most favor chiropractic. The reality is that you can be successful wherever your practice is located—as long as your heart is there as well.
Chances are high that the city or town you start your practice in is going to be the town that you will practice in for your entire chiropractic career. So make it someplace you’d really like to live. If the mountains appeal to you, look there. If you want to be on the plains or near the ocean, make those your priorities. Want family nearby? Small-town life or urban professional? The choice is yours.
Starting a chiropractic practice from scratch takes the same work ethic and stick-to-itiveness that creating a start-up in any industry requires. The reason that most start-ups don’t survive past their first year is due to a lack of capital. Don’t underestimate the capital required to start your practice. If you haven’t written your business plan prior to graduating, be sure you do so before signing a lease on space or making any other long-term agreements.
As the owner of a new business, your goal is to keep overhead as lean as possible. When you begin, quite likely it’s going to be you and voicemail until you can hire your first chiropractic assistant.
Be sure to include expenses for the lease, build-out costs, marketing and, most importantly, living expenses in your business plan. It’s challenging to grow a chiropractic practice if your attention is split between running your practice and a working on a side-hustle to pay the bills.
Rent as little space as possible and implement a floorplan that allows for easy patient flow in a limited area. Purchase as much gently used chiropractic equipment and furniture as your budget allows. Scour listings in your local chiropractic association’s journal, search online, and look in local shops for the best deals. An upgradeable, modular computer system can help you manage technology overhead and remain compliant with documentation and coding requirements.
Rather than start a practice from scratch, new grads are increasingly looking for mature practices with which they can partner and eventually purchase. A “sweat-equity buy out” (SEBO) program is a great way for an undercapitalized new grad to partner with a senior owner interested in an exit strategy.1
Whether you eventually purchase the practice that you associate with or move on to another associate position, look at an associateship as a learning opportunity. With the wisdom of a senior owning doctor to guide you, your learning curve will be significantly reduced, it will be shorter, and you’ll make fewer costly mistakes. This “tandem practice” model provides advantages for both the associate and the owner.
New grads are typically more technologically savvy and can help senior doctors implement electronic records management and other software programs. Senior docs provide a sounding board when challenging patient cases present themselves.
There are as many associate contracts as potential associate positions. Most involve the payment of a base salary with some sort of a bonus structure. Most also typically include some sort of a restrictive covenant (or “non-compete clause”) limiting the associate’s ability to practice within a certain distance of the existing practice when the contract expires.
Whichever form of compensation you choose, be sure to have everything in writing prior to accepting a position. This includes salary, bonus, insurance and time off. Robert Frost said, “Good fences make good neighbors.” Likewise, good contracts make good associate experiences. Consult with an attorney or practice management coach prior to entering into any legal agreements.
If you’ve decided to purchase all or part of an existing practice, the next step is to obtain a practice valuation. A rule of thumb here is to take the average monthly collections for the past 12 months and multiply the amount by six to 10. For example, a practice that generates an average of $35,000 in gross income per month would have a market value of between $210,000 and $350,000. This value does not include the accounts receivable and can vary based on the longevity of the practice, percentage of cash versus insurance, and any undepreciated practice equipment.
Many senior chiropractors are interested in remaining employed by the practice once they complete the sale. This “retirement in practice” model helps smooth the transition to the new ownership. It also provides the new purchaser with support during vacation or seminar time and helps to maintain the continuity of care current for patients. The senior doc has the ability to transition gradually out of their career and into their next phase of life.
Purchasing a practice in which you have worked as an associate for a series of years makes obtaining outside financing for that practice much easier. Banks are far more willing to provide funding for the purchase of an existing business, particularly one in which you have an established track record.
Whether you start up a practice on your own, work as an associate, or purchase an existing practice, a solid grasp of the fundamentals of running a business and managing a practice is essential. But you don’t have to go it alone. Seek out coaches and mentors to help guide you along the way. Be sure that the individuals you look to for advice are familiar with practicing chiropractic in today’s dynamic health care environment.
Mark Sanna, DC, ACRB Level II, FICC, is a member of the Chiropractic Summit and a board member of the Foundation for Chiropractic Progress. He is the president and CEO of Breakthrough Coaching and can be contacted at 800-723-8423 or through mybreakthrough.com.
1 Sanna M. “The silver lining: Leverage the power of the sweat-equity buy out.” Chiropractic Economics. 63(13):37-38.