You are dedicated to healing and serving, so when retirement looms, it’s natural to feel conflicted about leaving behind the practice and legacy you’ve built.
However, done right, your retirement can be your final professional accomplishment. It’s a chance to pass the torch to a new doctor with the passion and skill to continue to care for your patients so your legacy lives on while you embark on your next adventure with pride and peace of mind.
But the key to a smooth transition is knowledge and planning.
According to Margaret Masucci, DC, “Be proactive in creating a plan well before retirement. Many, including myself, are not realistic with how long it may take to sell nor on valuation.” Without that work, the transition into retirement can look like months (or years) of frustration, headaches and heartbreak.
A retirement that feels good for the doctor
For most DCs, a retirement strategy centers around planning to have enough money to retire and identifying a successor.
While the details of financial planning for retirement are outside the scope of this article, it is essential to work with a financial planner to evaluate your retirement needs and income. Your practice income or value will play a large role in this plan. The market value of a practice is the amount a reasonable and knowledgeable buyer would pay in today’s marketplace. Getting a professional valuation to understand your practice’s market value early is crucial for effective retirement planning. Some DCs are surprised by how practices are valued, and most greatly benefit from an exit strategy plan to increase the value of their practice before retirement. Because marketplace conditions and lending norms change and vary by industry, it is crucial that you get a valuation from experts who are active in chiropractic practice sales.
When considering your succession plan, you have two primary options: retain ownership or transfer ownership.
Retaining ownership of the practice typically means bringing in another DC to provide the bulk of patient care and manage daily operations. This model allows the retiring doctor to retain income from the practice and see patients on a more limited basis. These benefits are very attractive to many DCs, but this model also carries ongoing risk. If the associate leaves or if there are any insurance audits, regulatory changes or patient-related issues, the retired DC will be responsible. For this retirement strategy to be a good fit, you should have a higher risk tolerance, strong management skills and systems, the time and ability to step back into the practice full-time if needed and interest in long-term mentorship and partnership with the incoming DC.
Another common retirement strategy is to transfer ownership of the practice, typically through a sale to a new DC, a partner or a family member. This approach eliminates the risks and responsibilities of clinic ownership, allowing for a less stressful retirement. And provided the sale is prepared and conducted professionally, most DCs will not need to “be the bank” and finance their sale. By getting the full sale price up front, there is no risk of losing clinic value if the clinic numbers go down under the new owner. Today’s active sale environment makes this a good fit for DCs with a low appetite for risk, and those who prefer not to manage the practice or maintain flexibility to step back in.
There are also hybrid variations of these models; for example, you can sell a portion of the practice, set up a buyout over time or remain an employee of the practice after a sale. However, hybrid strategies add complexity and can limit financing options for a sale.
For most DCs, finding a qualified successor is a crucial step in the retirement process. Some DCs will opt for a do-it-yourself approach through placing ads for an associate or a practice sale, but those can be less effective in today’s competitive marketplace. Many DCs find that engaging associate placement companies and practice brokers can save vast amounts of time and maximize odds of finding the right successor. These experts bring structure to the process and eliminate the need for the retiring DC to learn the intricacies of practice transitions on the job.
As with anything, the details matter; a retirement plan that feels good to the doctor will also have the following components:
It isn’t rushed
DCs often delay retirement planning due to their deep connection with their practice and patients. But for best outcomes and the least stress, DCs should start contemplating their exit strategy early, ideally three to five years in advance. According to David Mallory, DC, “I was very unprepared for the enormous amount of information required of me in the valuation process of selling my practice. I would recommend beginning the process of selling when you still have an above-average energy level and enthusiasm for practicing.”
This timeline is important because your sale value is based on the last three years of practice data. Being strategic in those years can greatly impact value and salability. However, while early planning yields the most benefits, even late planning is preferable to no planning at all.
Another reason for building in a longer retirement planning timeline is that, industry-wide, chiropractic practices take 12-18 months to sell, with rural or highly specialized practices potentially requiring two to three years. While DCs with shorter timelines can sell faster than this, the lack of time to prepare can result in sales at lower values and with less satisfying outcomes.
It’s also important to allow time for the unexpected, as initial plans may not always work out. Gary Beytin, DC, shares, “We thought an associate buyout was a possibility, but we never found and kept an associate long enough. We then listed with a small broker with no results. Then got serious and listed with a national broker.” His practice sold 19 months later.
It is well-informed
According to the National Association of Corporate Directors, fewer than 25% of private companies have a formal succession plan. A poll by M&T Bank revealed that 98% of small businesses were unaware of their company’s value. If these statements describe you, it’s time to start your retirement education. Talking to retired colleagues and reviewing webinars, podcasts and articles from industry experts is a great start. However, every practice is unique, so a winning strategy for one doctor may not be right for you.
To understand your best action plan, you need to assemble your retirement team, according to Debra Hoffman, DC. Her best advice is “Use a professional service. [DCs] know healthcare but not selling a business.” A specialized chiropractic practice broker can provide a valuation and invaluable insights on optimizing your practice for a future associate buyout or sale. When it’s time to implement your plan, the broker will manage the complexities of preparing for, negotiating, funding and closing your sale. An experienced business contracts attorney will ensure the contract fully documents the associateship or sale and limits your liability exposure, and a CPA will handle tax strategy and critical financial reporting.
A retirement that feels good for the staff
For your retirement to feel good for your staff, they need to feel supported, valued and prepared. Start by communicating to the staff that you are planning for the future by considering different retirement strategies. Emphasize this proactive approach is positive for their jobs and the practice legacy, as practices without a succession plan typically shrink gradually and eventually close their doors. This conversation should take place years before a transition is likely to occur. If that is not possible and you are planning for retirement in the next year, it is often best to wait until a contract is signed. Sharing that you are retiring soon but without a specific successor and a definite timeline often leads to staff anxiety and turnover, and the news can leak out to patients and cause attrition.
As your retirement nears, make sure to recognize your staff for their loyalty and contributions, and celebrate their milestones in the practice. Highlight the impact of their work on the practice’s legacy and the lives of your patients. This helps them see their importance to the practice whether you are there or not, which helps maintain the practice’s value and the continuity of quality patient care throughout this transition.
A retirement that feels good for the patients
Your patients are also stakeholders in your retirement, so it is important that your retirement feels good for them, too. Just like with your staff, it’s ideal to communicate with patients about your retirement plans early and generally. Be sure to emphasize that you are focusing on a proactive approach to finding the best replacement to ensure the continued provision of quality care. This early communication helps patients get comfortable with the idea of your retirement in a low-pressure environment.
Once you have a contract signed with a successor, create a transition plan to ensure uninterrupted care for patients. This should include the HIPAA-compliant transfer of the custodianship of the patient records, reviewing the treatment plans with the successor or providing referrals to other providers.
As your retirement gets closer and a firm date is finalized, establish a board-compliant plan to communicate your retirement formally. Consider the unique needs of any of your patients; emails often get delivered to junk folders, and older and longer-term patients may have hurt feelings if they don’t receive a personal call.
Final thoughts
A carefully planned and managed retirement strategy can create a positive transition that sets the stage for continued success under new ownership. This peace of mind frees you to enjoy what comes next. Eric Carson, DC, who practiced for 29 years, shares, “I am truly enjoying my time with family, traveling and freedom without the constant attention toward the practice. I loved being in chiropractic practice, which created a whole new phase in my life for which I am very thankful!”
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 online at progressivepracticesales.com.
