Avoid these pitfalls for a smooth, successful transaction when you’re selling a chiropractic practice
Selling a practice can feel like climbing a mountain. There are records to organize, marketing and sales materials to create, and logistical details to take care of. And the statistics on selling a business aren’t great; according to SCORE.org, only about 30% of businesses listed for sale ever actually sell. The rest are doomed to close their doors.
What can you do to put yourself in the 30%? Avoid these six pitfalls and you’ll be well on your way.
1. Your pricing doesn’t add up
The chiropractic market is crowded. Baby boomers are retiring, and today’s population is more willing to pick up and move. This means prospective buyers have more options than ever. And a well-established marketplace for chiropractic clinics makes it easier for buyers to compare the various options.
As a result, aligning with market expectations is more important than ever. Some clinics priced above the norm may still sell, but it will likely take longer. Historically, spending a long time on the market damages the reputation of clinics for sale. This could lead to a final sale price lower than one you could have gotten if you had priced appropriately from the get-go.
What You Can Do:
Even if you are selling a chiropractic practice without a broker’s assistance, get a professional valuation. This will allow you to price your clinic at the maximum that stays within market expectations.
2. Your financials are a mess
Buyers are looking for certainty just as much as you are. And rest assured, they will do their homework. Financial records hold a great deal of important information: what the overhead is, what the cash flow is, and the fluctuations the buyer might expect in both categories. Further complications come from addbacks, the adjustments made to remove tax strategy and show true profit to prospective buyers.
If a buyer looks through your financial statements and can’t untangle where income originates or what the true profit is, they’ll lose interest. Outright errors or omissions are even worse.
This is especially a problem area for doctors who are selling a chiropractic practice for themselves. Sadly, we hear countless stories of buyers spending months trying to unwind “for sale by owner” financials and stats, or even trying to get a loan based on amateur-prepared financials.
What You Can Do:
Prepare an informational package that won’t confuse potential buyers. Your financials need to be so clear that even a new graduate could understand them at a glance. Clear information not only builds trust, it gets a buyer excited about your clinic. Have an expert like a broker or CPA advise you about what addbacks are reasonable and customary.
3. Your buyer doesn’t trust you
Most salespeople have heard the saying “Time kills all deals.” What makes deals take longer?
A lack of trust.
From the beginning, it’s important that your buyer feels you’re being completely transparent with them. If they don’t — if they get the impression that information is unclear, misleading or withheld — they will get cold feet. Ideally, every buyer who requests information from you gets a clear, thorough and comprehensive information package to help assess what’s for sale.
What You Can Do:
If you’re listing with a brokerage, review any sales materials to ensure that they’re clean, comprehensive and up-to-date. If you’re listing your clinic yourself, assemble all information about your practice into one sales package. That includes financials, clinic statistics, practice history and management details.
4. Your clinic is a mess
If you were buying a house but the pictures showed tacky curtains, water damage and desks overflowing with paperwork — would you be excited? Chiropractic buyers are the same way, but worse. For many practitioners, this is the biggest purchase of their lives. You don’t want to give buyers any reason to say no.
We hear this story often. A buyer looks at a clinic; it’s in a nice town, and the financials seem to be in good shape. Then they see it in person. Maybe it’s cluttered, or filled with bugs or leaks, or the treatment room is dark and dreary. So they move on. With so many options on the market, you want to do everything possible to make your clinic stand out. Patients may not mind a little mess if they’ve been seeing you for a while, but buyers will be seeing your clinic for the very first time.
What You Can Do:
It’s human nature to become immune to clutter in our daily environments. To see with fresh eyes, walk through your clinic and take pictures of every room from multiple angles. Address anything that makes you cringe.
5. Your marketing is invisible
Think back to the major purchases you’ve made in your life. What marketing worked on you? When you shop for a car, do you shop blurry photos in classifieds? Or do you check online for up-to-date information and pictures from every angle? If your marketing is low-budget, outdated or doesn’t feel upscale, it will devalue your practice.
First, your marketing needs to be as clear as your sales materials. Buyers need to understand what’s for sale, what the cash flow is, and where it’s located. Much has been written about the Millennials, who are becoming a larger segment of chiropractic practice buyers every day. So we know they care about lifestyle more than any previous generation — they want to know what they’ll be doing when they’re not working. And we know where to find them: online.
That means your marketing needs a message, too. It needs to highlight recreational activities and the positive aspects of living in your area. That includes attractions like lakes or skiing, but also good schools, a low cost of living and a high quality of life.
What You Can Do:
Create marketing with a strong online focus, ideally with a dedicated landing page for your clinic. Having a dedicated page lets you show up in searches instead of competing in the classifieds. Update your marketing frequently.
6. You’re at the wrong bank
We’ve talked a lot about buyers, but there’s another party you need to impress: the bank.
This is another good reason to have your financials in order. If a bank isn’t confident about your numbers or the outlook of your clinic, your deal goes to the bottom of the stack. When that happens, you’re stuck carrying a note or letting a buyer walk.
However, even with strong financials, some banks won’t lend on chiropractic acquisitions thanks to a higher rate of default associated with the chiropractic NAICS code. Your local banker may not know this if they’re not the decision maker. You might not find out right away, in part because banks benefit from having deals in the pipeline (even if they’re deals that will never close). In a worst-case scenario, a buyer might work with a bank for months only to be declined because the deal was never going to meet the bank’s internal criteria.
What You Can Do:
Assuming you already have a detailed and clear sales prospectus, your next step is to connect with a reputable loan broker. Ideally, work with a brokerage with established connections for chiropractic lending. Emphasis here is on reputable. Business loan brokerage is an unregulated industry, and we’ve seen buyers lose significant funds to dishonest brokers.
If all those steps sound like a headache, consider the alternative: waiting for months, slowly dropping your asking price, hoping a serious buyer will materialize. Putting in the work up front gives you the best odds at a smooth, quick and profitable sale. Alternatively, skip the headache. Brokerages exist to handle the analysis, data and marketing with the necessary care, so that you can focus on keeping your practice numbers up and planning for your next move.
CRYSTAL MISENHEIMER is the co-founder of Progressive Practice Sales. Their team harnesses the power of today’s technology to help doctors sell and acquire clinics, and save them time, money and effort along the way. She can be contacted at 512-523-9110, firstname.lastname@example.org or through progressivepracticesales.com.