Should I list my chiropractic practice for sale on the open market?
Listing a practice to sell can raise concerns; however, you may be surprised to discover that listing on the open market can result in a faster, smoother and more profitable sale. Although many DCs assume selling a practice will involve an associate they’ve mentored and worked alongside, listing on the open market has several advantages.
Before listing your practice, first ask yourself the following questions:
- How long will a listed sale take?
- Are listed practices selling?
- Will a doctor who’s never worked in my office qualify for a loan?
- Can a new doctor retain patients?
- Will I get a fair price?
- What will the transition be like?
How does listing a chiropractic practice on the open market impact practice value?
The value of an owner-operated practice is based on seller’s discretionary earnings (SDE), which is the tax return profit plus “addbacks” for certain costs that won’t transfer to a new owner. A valuation multiple is applied to the average SDE, with lenders setting allowable valuation ranges which are refined by factors like amount of profit, location, growth pattern, profit margin and transferability. Buyers new to the practice typically defer to market-based pricing, so with the right marketing strategy and access to a large pool of qualified buyers, practices can sell at full market value. This can differ from a sale involving associate buyers, who may expect discounts due to their practice-building efforts.
How will I be compensated when I sell my chiropractic practice?
Sellers who work with chiropractic-specific brokers will have access to chiropractic-friendly lenders, so they are often funded 90-100% of the purchase price at closing. In contrast, “for sale by-owner” transactions often rely on owner financing through payments over three to 10 years. While some sellers assume owner financing increases value, chiropractic buyers rarely pay above market value. Additionally, owner financing exposes the seller to significant risk, as they typically face costly and lengthy legal proceedings to recover the business if the buyer defaults.
When do I need to start planning my practice sale in order to be successful with this model?
The best time to start planning is three to five years in advance. Practice valuation is based on the previous three years of tax returns and current year financials, so this allows time to optimize value. Chiropractic practice sales take an average of 12–18 months, so most doctors should start working with a broker about 18 months before their target exit. However, timing varies; practices in high-demand areas may sell faster, while those in lesser-known locations, states with fewer DCs or with niche practices may take longer. If you don’t have years, the best time to start is now; waiting only makes the process harder and more stressful.
Where will I find a DC to be my successor?
The chiropractic marketplace is very active, with thousands of DCs across the US searching for practices every day. However, it can still be challenging to get in front of the right buyer. Doctors who try to list their own practices often rely on personal networks or ads with associations and colleges. While this often generates inquiries, many of the prospective buyers will not yet be ready to buy. In contrast, chiropractic-specific brokers connect sellers with a wide pool of motivated, financially-prepared buyers through targeted marketing, a strong web presence and established buyer relationships.
What professional help do I need listing my practice on the open market?
A skilled chiropractic-specific broker is one of your most valuable assets. They manage the entire process, including preparing your data, steering negotiations, guiding due diligence and advising on lender requirements and obstacles. Brokers also improve success odds by keeping emotions out of the sale conversations, adding professionalism to the transaction that is reassuring to buyers and having tough, uncomfortable conversations around buyer qualifications, sale boundaries and challenges. Selling without a broker’s expertise and support often leads to delays, reduced value and failed deals. An involved and responsive CPA and an attorney who specializes in business contracts are also essential.
What will the transition to a new DC look like?
While some DCs worry that a buyer new to the practice will need a lot of support, the typical after-sale transition is just four to six weeks. The seller provides limited patient care while introducing the new doctor to patients and providing training on clinic operations. A sale to an associate typically won’t have post-sale support, but can bring other challenges; for example, shifting an associate into ownership can unearth underlying resentments and tensions between buyer and seller or practice staff. In contrast, selling to a doctor who is new to the practice has a more straightforward focus. To minimize attrition, the doctor new to the practice should focus on building strong relationships with the staff and patients while minimizing change after the sale. Additionally, buyers should leverage the practice’s goodwill by reactivating former patients and increasing marketing efforts, which can more than offset any natural attrition.
Is listing my practice a good fit as a sales model?
Selling a practice requires effort, including keeping financials updated, responding promptly to sale needs and supporting the buyer through a standard transition. Without these efforts, practices rarely sell, even at heavily discounted prices. Flexibility is also key. While many sellers have an ideal vision for their buyer, holding out for “perfect” can lead to years of waiting. During which time, the practice’s value may decline, due to the seller’s waning focus or changes in market conditions, making a sale even harder to achieve.
This model is also best suited for doctors who do not plan to continue practicing in the area or providing services to their former patients.
Final thoughts: Key recommendations for listing your practice
Get a professional valuation and exit strategy analysis to understand your current value and actionable steps to improve your practice’s value and marketability. Increase its buyer-friendliness by cross-training staff and making operations less dependent on you or your spouse. If you have a niche practice, consider adding mainstream techniques to widen buyer appeal. Modernize your practice, but carefully; avoid large equipment investments close to selling. Finally, connect early with a chiropractic-specific broker to get a strategic advantage and increase the likelihood of a smooth, successful sale.
Crystal Misenheimer, a 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, she is uniquely qualified to provide comprehensive support on the complexities of clinic valuations and practice sales. Contact Misenheimer and her team at 888-508-9197, marketplace@progressivepracticesales.com or via progressivepracticesales.com.
