Execute the transaction using these five steps when buying or selling a chiropractic practice
Most doctors envision selling their practice as a one-step process. Many doctors equate selling a practice to selling a chair on Craigslist — place a classified ad and someone will stop by, drop off a check and take over the practice. The reality is this emotionally-fearful process is made up of many small steps. Each step must be completed before moving to the next.
These small steps are like a dance. Having consulted countless buyers and sellers over the years, I have learned the emotions held by each party at each step. If you have ever bought or sold a house you can relate to the emotional roller coaster within the process. The development of the sale is predicated by how the dance will move — slowly, and then increase speed, hit a rough spot, and then hopefully make it to the finish.
Understanding the buyer
Emotionally the sale of the chiropractic practice is unique for the buyer and seller. The seller cannot sell his or her practice, as the buyer must fall in love with it, seeing themselves within the practice serving the patients. The seller must sell the buyer by being personally forthright and honest, not pushing their practice by citing how good it was for them. The buyer is looking for the real value of a professional practice, which is the moral character of the seller.
Here are the general stages of the selling process with insight into some of the emotions of the buyer and seller:
Step 1 — Marketing your practice for sale
When marketing your practice for sale, your advertisement or post must stand out from all the others. Buyers need to be drawn into your practice with the aid of technology.
Promote your practice in a complete format, statistically and demographically. I recommend a virtual tour of the practice available on the internet, enclosing any and all pertinent information. The longer a potential buyer views your information, the more investment they have in purchasing the practice. Never hold back information, especially negative information.
If a buyer finds out about a negative aspect of your practice they will never trust you again throughout the process. Always be forthright.
Step 2 — Fielding inquiries
When a potential buyer contacts a seller to discuss the practice for sale, the only question the buyer should have is “What is the asking price?” All other information should be presented within the online marketing package.
The goal of the seller on the first phone dialogue is an invitation to visit the practice for a physical evaluation. The seller should not discuss the practice in detail on the phone, email or text. You will not be able to sell the practice by phone, but you can chase the potential buyer away.
Step 3 — Buyer visit of the facility
Welcome the potential buyer into the facility and let them walk around the facility alone. Leave them to fall in love or leave with no further interest. As a seller, sit at your desk and fiddle with some paperwork. Say, “I will be happy to answer any questions you may have.”
The hardest job for the seller is to keep their mouth closed. The buyer must be able to envision himself or herself as the doctor within this practice to make it to the next step. The buyer should be given any and all information pertaining to the practice, including all practice management financials, lease and employee contracts. All financial information is given to the buyer upon meeting for the first time, when the seller presents all information with honesty and good intention. The seller will lose credibility when the buyer must continually ask for pertinent information.
This package must look well-organized and very professional, and should be produced not only for the buyer, but with the buyer’s council, attorney, accountant, banker or parent in mind.
Step 4 — Negotiation
The negotiation process has two stages: pre- and post-Letter of Intent (LOI). Discussion prior to a Letter of Intent is general in nature discussing price, terms, transition and non-compete agreement. The Letter of Intent defines the intention of the buyer.
The relationship intensifies post-LOI as the buyer scribes a general agreement and transfers funds as a good-will intention. Once the general terms are agreed upon, a formal Contract of Sale is crafted. The Contract of Sale defines all aspects of the transfer of ownership. Additional topics within this document include indemnification, accounts payable and receivable, transfers and other liabilities.
Emotionally each party should approach the negotiation process in a business-like manner by transferring ideas and offers in writing, not verbally. The negotiation process is uncomplicated when both the seller and buyer have earnest intents with a similar goal.
Step 5 — Execution of contract
I recommend utilizing a professional who has experience in executing a health care facility transaction. Use a clean, readable, non-wordy document. Do not get sold by a lawyer that this transaction is bigger than it is — you may end up teaching your local lawyer what is needed and pay for it in the process. This negotiation and document are predictable to an experienced professional.
The execution of the Contract of Sale document is the culmination of your efforts. As the ink dries upon the contract and the funds are deposited into your bank account the transaction is complete — no sooner. Now it’s time to look back and savor the moment of success and work on your plan for the future.
DAVID FOSTER, DC, has practiced chiropractic for the past 28 years and has co-owned 12 satellite practices. With his acquired knowledge and experience, Foster has consulted the chiropractic community for past decades in appraisals, buying-selling and associate agreements and strategic negotiations, in addition to a wide variety of legal, financial and strategic issues related to the business of chiropractic. For more information go to BackOfficeConsults.com, call 973-885-8078 or email Dave@BackOfficeConsults.com.
