Practice acquisition and what to look for when looking to buy your first clinic
Whether you’re an experienced doctor or a recent graduate, practice acquisition and buying your first practice can be daunting. In addition to searching for the right clinic, you need to save for a down payment, secure a loan and prepare yourself for ownership.
Don’t let the stress of the process stop you from making the leap. If you know what to look for in your first clinic, you can turn the opportunity into a long, rewarding and profitable career. I’ve collected the advice I’ve found most useful for buyers as they find a loan, shop for a clinic and become owners for the first time.
Practice acquisition: find the ‘Goldilocks Clinic’
Too often, buyers try to look for maximum value or maximum income. They end up with either a bargain clinic that needs serious attention or a large clinic requiring elite management skills.
Yes, fixer-uppers do offer strong value and growth potential. Under the right circumstances, buying a struggling clinic can turn into substantial profit. But I never recommend this for first-time buyers. New owners generally underestimate the time, money and experience necessary to turn a clinic around and generate consistent growth. Doctors who have successfully run practices can draw on their experience to identify areas for improvement. For new buyers, the process involves much more trial and error.
That means additional risk, which is especially hazardous when you need to start making loan payments. As a result, I always recommend that first-time buyers look for a clinic that covers their financial needs right from the start.
It’s equally counterproductive to dream too big. A qualified buyer can certainly afford a thriving, spacious clinic, but large businesses come with extra responsibilities for the owner.
New doctors are still refining their skills in patient care. Adding large-scale management of services, staff and space is counterproductive. Even with an extended transition, the learning curve in a big, complex clinic is often too steep for owners without having managed a similar practice, or prior ownership experience.
Whenever possible, look at the strengths and weaknesses of a clinic to shore up your own. If you’re new to billing and office management, find a clinic with established systems and long-term staff to take the burden off your shoulders. If you’re comfortable with social media and online marketing, look for a clinic where advertising provides a growth opportunity.
Don’t overcomplicate it
The nature of chiropractic work creates a high number of variables for buyers to assess: location, practice model, treatment modalities, clinic layout, patient demographics, etc. Many selling doctors are more focused on patient care than business management, which means that financials and operations may be poorly organized or documented.
As you look for a clinic, sorting through those details will require a great deal of time and attention. This is where a team of experts, like a broker with significant experience in chiropractic sales and a certified public accountant (CPA), can use their experience to provide you with invaluable practice acquisition insight. This expert team can identify and explain a clinic’s operational processes, tax strategies and growth opportunities. Their main job isn’t to force a sale through, but to ensure buyers have the information they need to be confident in their practice acquisition choice. Then, to preserve your focus (and sanity), streamline the rest of the process as much as you can.
First-time buyers will almost always seek funding through a loan from the Small Business Administration (SBA). SBA loans are designed for entrepreneurs and have favorable terms for new business owners.
More importantly, they’re often the only loans first-time buyers qualify for due to lower down payment, experience and net worth requirements for the borrower. But while SBA loans are more attainable, that’s not to say they’re easy to secure. Most buyers will need 10% down, a credit score above 680, and at least two years of chiropractic or business experience. And because the SBA is a government-backed program, understand and expect that the lending process will have a burdensome number of rules, regulations and red tape to navigate through.
Again, this is a situation where an expert like a loan broker who specializes in chiropractic SBA loans can be crucial. Because the SBA lending process is so intricate, doctors are typically unaware of how a seemingly innocent question or statement can be the difference between getting the loan or getting declined.
Because the SBA process is so intense it may be tempting to look for financing outside the standard approach, but it rarely works well. Alternative funding sources tend to be expensive in the long run, which adds risk. And going through the rigorous SBA process is also one more level of due diligence, performed by the bank on the practice you are buying, to give you another layer of assurance that the practice passes muster.
That frees up the buyer to focus on one of the most important aspects of practice acquisition: finding the right fit.
What to do after you buy
You found the perfect clinic, received SBA funding and successfully navigated the purchase process. Now what?
As tempting as it is to make adjustments right off the bat, the best answer is: Don’t change anything. Not for the first 6-12 months, anyway.
You may be ready to start improving things, but your staff and patients may not. The people you serve and work with will be more willing to help you grow your clinic once they’ve established relationships with you. At the start of your clinic ownership, put your energy into building those relationships.
Retaining existing staff members is especially important. Your staff can be a big part of the glue that holds the clinic together, as they’re an important bridge between you and your patients. As you learn the ropes of running the practice, your staff are one of your most important resources.
Finally, the first year provides time for you to get to know the clinic. Any changes you make down the road will be much more effective when you have a strong understanding of the strengths and shortcomings of existing systems. Once you’ve solidified connections to your clinic, staff and patients, then begin to make changes. Be deliberate about this process. As you tweak your practice’s hours, services, systems or technology, take the time to understand why some actions are successful and others aren’t. Avoid sabotaging successful systems in a rush for growth.
Stay humble and prosper
For all of these steps to succeed, it’s essential to stay humble. Even experienced doctors need time to learn the intricacies of a new practice. For first-time owners, humility and open-mindedness are the two most important tools in your kit.
Practice acquisition and buying a clinic is a major life transition. Although it requires good preparation and a level head, there’s no reason to get discouraged. First-time buyers have nothing to fear if they follow the recommendations above: Keep it simple, find a goldilocks clinic and stay humble.
For doctors who make the transition, ownership offers significant financial benefit as well as the uniquely satisfying experience of controlling your own destiny. As someone who has helped hundreds of buyers find their first clinic, I can tell you firsthand — it’s worth it.
CRYSTAL MISENHEIMER is the co-founder of Progressive Practice Sales. Their team harnesses the power of today’s technology to help doctors sell and acquire clinics, and save them time, money and effort along the way. She can be contacted at 888-508-9197, firstname.lastname@example.org, or through progressivepracticesales.com.