Retirement is a significant milestone for all DCs, and it’s not just about personal and financial planning.
Practice owners, who typically care deeply about their patients and staff, must also make plans for the future of the practice and their legacy. From associate buyouts to a sale on the open market to lucrative private equity acquisitions, today’s sellers have many options, but they are often more complicated to navigate than doctors expect. In this six-part series, we explore different retirement models, offering insights and strategies to help you identify the best path to transition your practice.
The associate buyout model is a popular transition path for DCs. The associate starts as an employee, then gradually buys into the practice over time, starting with a minority share and eventually becoming the majority owner. Many DCs love this approach because it gives patients and staff time to adjust, and it allows the seller to step away gradually. But there’s a catch: This model often fails due to poor planning, lack of communication and unclear expectations.
The reality is, it’s not just about finding an associate who is a great adjustor or technician and has some money to buy in. A successful transition hinges on shared expectations, clear communication and a well-thought-out plan.
By employing the right strategies at the right time, you can significantly increase your chances of a successful sale and transition.
How do associate buyouts impact practice value?
The value of your practice is all about profit, specifically, the profit a new owner can sustain. Problems can arise when associates feel they deserve a discount for their work that has contributed to the practice value, or sellers feel justified asking for more due to the extended training and support provided over the years of a long buyout process. Both perspectives can be valid to a degree, but problems are bound to occur if these parameters aren’t agreed to upfront. To avoid issues, practice value should be determined at the start of the associateship, with a written agreement outlining how value will be calculated at the time of the buyout.
How will I be compensated for the sale?
Associate buyouts usually take years. There are limited lending options for purchasing partial ownership, so early payments typically come from cash, sweat equity and/or owner financing. The final payment is often funded through a bank loan.
When should I start an associate buyout?
Turnover is very common in associate buyouts because the long timeline increases the chances of changes in the buyer’s circumstances (such as marriage, family emergencies or spouse job changes) that can derail the buyout. Start early—ideally three-plus years before you want to start your buyout, so you have time to find the ideal candidate and the flexibility to handle these challenges, if they arise.
Where will I find a successor?
You might find a successor through your personal network, but most sellers cycle through multiple associates before finding the right fit. Advertising the opportunity can help, but the market for associates is competitive. This is where premium placement agencies and chiropractic-specific brokers come in. They can connect you with candidates who not only have the skills for the associateship, but also the aspiration and aptitude for ownership.
What help do I need?
Many DCs think selling to someone they already know is simple, but that’s rarely the case. Without professional guidance you risk costly mistakes, delays or even a failed sale that sends you back to square one. An experienced broker greatly boosts your success odds by serving as a quarterback for your sale. They guide the process, coordinate everyone involved (buyers, attorneys, CPAs, lenders) and make sure everything moves forward. They’ll also ensure your practice data is accurate, complete and presented in a way that inspires confidence in buyers and lenders. And maybe most importantly, a skillful broker is adept at handling the tough conversations that are often needed in buyouts. The broker will ferret out any underlying resentments, frustrations or misunderstandings that commonly arise as the employer-employ—ee dynamic evolves into a buyer-seller partnership and help both parties understand chiropractic sale norms and best practices. This guidance not only maintains sale momentum but also fosters trust, prevents delays and keeps emotions in check until the sale reaches the finish line. A good broker will also be adept at working with your attorney (who needs to specialize in business contracts to ensure the contracts fully meet your needs and situation), and your CPA to verify financials and advise on the tax implications of different sale terms, helping minimize your hourly sale costs.
Is the associate buyout model right for you?
The associate buyout model works well for sellers who want to stay involved in their practice for years to come, and for practices with niche models or specialized techniques. It’s also a good fit for DCs who enjoy teaching and mentoring, and who are willing to handle the inevitable challenges that come with shifting the employer-employee relationship to a buyer-seller partnership.
When is an associate buyout a bad fit?
This model isn’t ideal if your practice can’t support an associate’s salary (often $80,000+), or if you’re not ready to commit to a clear sale timeline. DCs with strong personalities or associates who clash with key staff are likely to face additional challenges, leading to stressful conflict or expensive practice disruptions. If you lack the energy and enthusiasm to keep buyout conversations going over time, you risk losing the buyer’s trust and commitment, jeopardizing the sale. And if you want to step back while maximizing your sale price, the dynamics of a buyout could create conflicts that actually devalue the practice.
Final thoughts
The associate buyout model can provide a smooth transition, but it’s not for everyone. To avoid unnecessary setbacks in your retirement timeline, carefully evaluate all aspects of the buyout model before choosing this approach. If you find that this model best fits your goals, your success will depend on clear communication, thorough planning and professional guidance.
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.
