Sell a practice during times of economic uncertainty

Many chiropractic practice owners feel like they’ve spent the last decade on a roller coaster.

With little control over the ups and downs as they were forced to navigate changes in regulations, falling reimbursements, increasing competition, a global pandemic and dramatic spikes in the cost of doing business. These pressures have led to burnout and fatigue for many chiropractic practice owners. Now, with growing economic uncertainty, questions about the future loom.

What is economic uncertainty?

Economic uncertainty is the unpredictability of future economic conditions. It’s driven by factors like political instability, market fluctuations, natural disasters and changes in government policies. This uncertainty is amplified by the flood of conflicting opinions we encounter daily. For example, the New York Federal Reserve recently estimated a 50% chance of a recession within the next 12 months,¹ while investment bank Goldman Sachs projected only a 15% chance by the end of 2025.² The Harvard Business Review’s World Uncertainty Index highlights this growing instability, showing a sharp rise in uncertainty over the past few decades,³ with current levels surpassing even those seen after 9/11.

Economic uncertainty suggests a greater likelihood of negative events such as volatile inflation, higher unemployment and reduced economic activity. A recession, which is a prolonged economic downturn, is one possible outcome. The U.S. has experienced a recession every 6.5 years on average since World War II. While the last recession occurred in 2020, indicators like persistent inflation, rising unemployment and increasing credit delinquencies suggest a recession may come sooner than expected, and concerns about this will likely plague business owners for the foreseeable future.

How does economic uncertainty impact practice sales?

It may seem unwise to embark on a practice sale in times of economic uncertainty, but many businesses successfully sell during these periods. Skilled business brokers who present strong, data-driven cases often see an increase in business sales during economic downturns. Practices that remain stable through uncertainty maintain valuations comparable to those in prosperous times, and demand for resilient businesses increases as buyers seek safe investments in the turbulence of economic uncertainty.

Also, while economic uncertainty often causes anxiety, it’s important to keep things in perspective. Despite inflation, high levels of uncertainty and a constantly shifting economic landscape, the U.S. chiropractic practice sale marketplace is currently very active. Practice valuations remain strong and loans for practices are is eis ris eadily accessible through chiropractic-friendly lenders.

Additionally, even if the economy deteriorates into a recession, sales still happen regularly. However, the sale environment does become less favorable in several ways:

• If practice revenue decreases, value decreases. It can take three years to rebuild practice value to pre-recession levels.
• Salability. Buyers become more risk-averse and selective.
• Sale timelines are longer as buyers thoroughly investigate any perceived risk in the business.
• Sale structure. Lenders become more discerning, reducing access to lending and increasing the need for owner financing.

On the other hand, practices that demonstrate stability through consistent revenue, a strong patient base and efficient operations will continue to attract serious buyers throughout a recession. Some buy because they believe the business is likely to continue to grow and cost more later; many others see a thriving practice as a stable shelter in an economic storm where associates are often laid off and weaker practices may not survive.

While economic downturns can limit access to certain types of funding, many institutional buyers have more capital to invest than ever before, thanks to inflation-driven growth. As of July 2024, private equity and venture capital groups collectively have a record $2.64 trillion in cash available for acquisitions. These groups have become even more active in recent years, although they primarily seek clinics with over $1 million in annual revenue.

Economic downturns also drive increased buying activity from large practices and groups. To protect themselves from economic uncertainty and pave the way for post-recessionary growth, they often acquire competitors. These groups often have an interest in everything from larger acquisitions to buying a closing practice’s patient list.

Who should consider a sale in an economic downturn?

While the current market conditions for chiropractic practice sales are strong, economic uncertainty means this can change quickly.

For doctors considering a sale when conditions become less favorable, the decision is deeply personal and often difficult. Doctors who are considering a sale due to urgent financial situations, chronic health challenges or mental burnout don’t have the luxury of waiting out an economic trend. These situations often lead to declining practice income, which in turn lowers the value of the practice. It’s also important to remember that chiropractic practice sales typically take longer than expected. Industry-wide, the sale timeline averages 12-18 months, and it can be even longer for highly specialized practices or those located in non-metro areas.

There are also risks to holding onto a business during a recession. The Harvard Business Review conducted a study of business performance during recessions⁴ and found:

• 17% of businesses failed or changed ownership.
• 40% didn’t rebound to pre-recession income until at least three years after the recession.
• 40% didn’t rebound to pre-recession growth rates until at least three years after the recession.
• Only 9% of businesses flourished and grew during and after the recession.

For a DC who is ready to move on, the odds are strong that waiting out a recession will add at least three years onto your sale timeline, just to achieve pre-recession practice value. And during that time uncontrollable events like health issues or a lagging local economy could further stall reaching pre-recession valuation.

It is also crucial for DCs to honestly assess if they can afford to wait to sell until a floundering market recovers. Recessions can strain even healthy practices, so those with declining income trends or high debt and low cash reserves may not survive a tough recession. In those cases, selling the practice to someone with a stronger financial foundation can be the best way to ensure its survival.

What chiropractic practice owners should do now

To maintain practice stability during times of economic uncertainty, owners should focus on preserving their practice (and its value) through strategic planning with a focus on increasing flexibility in your operations. This lets you be responsive to both challenges and opportunities. Also look for ways to increase your operational efficiency. Cut costs by implementing systems and improving processes, an effort which often has the side benefit of improving patient satisfaction. Other proven strategies for emerging in a place of strength after a recession include:

• Adapt to patient needs. Regularly monitor patient demand and payor mix to adjust services and marketing strategies accordingly.
• Focus on retention. New patients are expensive. Strengthen relationships with existing patients through consistent communication, such as email and social media.
• Continue marketing. Resist cutting marketing. Maintaining visibility while competitors reduce their promotions can give your practice an edge.
• Optimize services. Explore growth opportunities with a focus on essential services that are less impacted by economic fluctuations.
• Consider acquisitions. If you have the financial strength, consider buying a struggling competitor to expand your services and build market share.

Taking these steps will not only improve your practice’s performance during challenging times but also help build its long-term value. As a potential seller, it’s important to keep an eye on the future. Preparing a business for sale — and maximizing its value — takes time, often a year or more. If your timeline is longer or you believe your practice will continue to thrive despite economic uncertainty, now is the ideal time to get your house in order. Partnering with an expert in chiropractic practice sales can ensure you’re building the most value and salability for your unique practice and target buyer profile. This process includes getting a professional valuation, cleaning up your financial and operational records, and refining your bookkeeping and operational strategies for the remainder of the pre-sale period.

Final thoughts

The truth is that in today’s fast-paced world, the dizzying rate of change will likely keep economic uncertainty high. But the constant that remains true in all scenarios is chiropractic practice sales are complicated, multi-faceted transactions with a lot on the line for both seller and buyer. Your best hedge against that uncertainty is engaging a highly-specialized, seasoned expert in chiropractic practice sales. Their expertise and experience in conducting hundreds of similar transactions throughout a vast range of economic conditions is your key advantage for navigating a shifting marketplace and securing the best possible sale outcome. 

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 progressivepracticesales.com.

References

1. Moore S. Is a recession coming for the U.S. economy? Forbes. August 30, 2024. https://www.forbes.com/sites/simonmoore/2024/08/30/is-a-recession-coming-for-the-us-economy/. Accessed October 25, 2024.
2. A U.S. recession in 2025? Goldman Sachs says only 15% chance. The Economic Times. [News]. https://economictimes.indiatimes.com/news/international/us/a-us-recession-in-2025-goldman-sachs-says-only-15-chance/articleshow/114126480.cms?from=mdr. Accessed October 25, 2024.
3. Bloom N, et al. Visualizing the rise of global economic uncertainty. Harvard Business Review. September 29, 2022. https://hbr.org/2022/09/visualizing-the-rise-of-global-economic-uncertainty. Accessed October 25, 2024.
4. Gulati R, et al. Roaring out of recession. Harvard Business Review. March 2010. https://hbr.org/2010/03/roaring-out-of-recession. Accessed October 25, 2024.