Selling your chiropractic practice involves more than simply finding buyers once you decide to sell. To achieve the best price for your practice, you need to plan the sale, have an expert value it, and make suggested improvements.
At Dental & Medical Counsel, we have extensive experience assisting chiropractors in selling their practices. The key question you should be asking is, “What can I do so a potential buyer does not perceive the purchase of the practice as a high risk?”
Ideally, you should plan for 1-2 years before putting your chiropractic practice on the market if you are a sole practitioner. Practices with multiple partners may require even more time to prepare.
When you have definitively decided to sell your practice, the first step is to have it valued. You can get a basic idea of its value by summing up your assets and subtracting your liabilities. This calculation provides the minimum value of your business, essentially showing your equity in the practice. However, this does not account for your goodwill and patient base.
Having a neutral third-party professional conduct a chiropractic practice valuation or appraisal will give you a clearer picture of what a potential buyer, who will likely have their own valuation methods, will see.
If the valuation is higher than your expectations, you are in a good position. You can confidently place the practice on the market. If the value is lower than expected, you can either adjust your expectations or take steps to enhance the value before listing it for sale. It's important to remain realistic about the value of your practice. We have some tips for actions you can take during this time that may help.
10 Tips for Increasing the Presale Value of Your Chiropractic Practice
1. Grow Your Revenue: To boost your chiropractic practice's value before selling, focus on increasing your revenue. Many chiropractors decide to sell as they near retirement, which may lead to fewer practice hours and reduced revenue. Buyers will review several years of tax returns; a downward revenue trend could be a concern. Expand your patient base and extend practice hours to elevate revenue and the practice's market appeal.
2. Reduce Your Accounts Receivable: Enhance your chiropractic practice's attractiveness by lowering accounts receivable. High outstanding balances suggest risk to buyers. Implement an effective billing system, follow up promptly on payments, and consider outsourcing to increase efficiency in collections.
3. Identify and Clarify Your Add-backs: Maximize your practice’s valuation by clearly identifying and justifying add-backs. These are expenses that won't continue post-sale and should be added back to enhance the reflected value of your business. Common add-backs include discretionary spending like business travel, meals, and one-time expenses such as legal fees or technology updates. Your practice is valued according to a formula referred to as EBITDA:
4. Maintain an Updated Asset List: Keep a regularly updated list of your practice's assets to maximize value. An accurate, comprehensive asset list simplifies the valuation process and assures potential buyers of the practice’s maintained and transparent asset management.
5. Make Capital Investments: Invest strategically in your practice to boost its market value. Upgrade outdated equipment and modernize your practice environment to create a welcoming atmosphere. Investments that enhance both functionality and aesthetics make your practice more appealing to prospective buyers.
6. Hire a Practice Broker: Utilize a practice broker to facilitate the sale of your chiropractic practice efficiently. Brokers have the expertise to identify buyers and can offer strategies to enhance your practice’s value, allowing you to focus on patient care during the transition.
7. Negotiate Better Prices for Inventory: Review and compare prices and service reliability of various suppliers. Don’t hesitate to negotiate with current suppliers for better deals.
8. Cut Down Overhead: Lower overhead costs by examining and reducing unnecessary expenses. Employ a financial expert to audit your spending and find cost-cutting opportunities that do not compromise patient care quality. Efficient overhead management can significantly improve your practice’s profitability.
9. Reduce Debt: Decrease your practice's debt to enhance its value. Assess and address high-interest debts, exploring consolidation or better financing terms. A reduced debt load makes your practice more financially stable and attractive to buyers.
10. Maintain a Strong Inventory: First impressions matter. Ensure your inventory, such as therapeutic equipment and wellness products, appeals to your patient base and reflects current trends. Outdated or unappealing inventory can deter patients and devalue your practice. Keep a well-stocked inventory of chiropractic tools and equipment to impress and retain patients. Regular updates to your inventory with the latest in therapeutic technology demonstrate a commitment to quality care and help boost patient satisfaction and retention.
By following these tips, you can enhance the attractiveness and value of your chiropractic practice, making it more appealing to potential buyers and helping to ensure a successful sale.
Frequently Asked Questions
Q: How far in advance should I start planning to sell my chiropractic practice?
A: It is advisable to start planning 1-2 years in advance if you are a sole practitioner. If your practice involves multiple partners, you might need even more time to prepare.
Q: Why is it important to have a professional valuation of my chiropractic practice?
A: A professional valuation provides an objective assessment of your practice's worth, taking into account factors like assets, liabilities, goodwill, and patient base. This ensures you set a realistic price and understand your practice’s market position.
Q: What can I do if the valuation of my practice is lower than expected?
A: If the valuation is lower than expected, you can either adjust your sale expectations or implement strategies to enhance the practice's value, such as improving revenue, reducing debt, and updating equipment.
Q: Why is reducing accounts receivable important before selling my practice?
A: A high accounts receivable can signal financial instability to potential buyers. Reducing this amount demonstrates effective billing practices and financial health, making your practice more attractive.
Q: What are 'add-backs' and how do they affect the sale of my practice?
A: Add-backs are potential one-time expenses or owner-specific expenses that are added back to your earnings to show a more accurate picture of your practice’s profitability. These adjustments can significantly increase the perceived value of your practice.
Q: How can hiring a practice broker help in the sale process?
A: A practice broker can provide expertise in the chiropractic market, assist in finding qualified buyers, suggest operational improvements to enhance value, and help negotiate terms that favor your interests.
Q: What kind of capital investments should I consider before selling?
A: Investing in modern equipment, making necessary repairs, and updating the practice’s decor can make your practice more appealing to potential buyers and can increase its market value.
Q: How does reducing overhead impact the sale of my practice?
A: Reducing overhead can improve your practice's profitability, making it more attractive to buyers. Efficient management of expenses demonstrates a well-run practice that is likely to continue thriving post-sale.
Q: Why is it important to maintain a strong inventory?
A: A robust and appealing inventory, especially of therapeutic and wellness products, ensures that the practice appears well-stocked and current, enhancing its appeal to prospective buyers and contributing positively to the practice’s image.
Q: What happens if I decide not to sell after beginning preparations?
A: Preparing your practice for sale generally involves making improvements that can benefit your practice whether or not you decide to sell. These improvements can enhance operational efficiency, profitability, and patient satisfaction, benefiting your practice in the long term.
At Dental & Medical Counsel, we've been instrumental in realizing the practice goals of countless chiropractors. Whether you're looking to purchase, launch, or sell a chiropractic practice, our expertise is your guide. Beyond the initial stages, we're committed to ensuring your dental practice remains legally compliant.
We provide comprehensive support, including employment law protections, chiropractic contract reviews, and assistance with chiropractic employment agreements. Additionally, we specialize in incorporating chiropractic practices and securing trademarks. And for long-term planning, our services extend to helping dentists with succession and estate planning. Trust us to be your partner in every step of your chiropractic practice journey.
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About Ali Oromchian, Esq.
Your Dental Lawyer
Ali Oromchian, JD, LL.M., is a leading legal authority in dental law and the founding attorney of Dental & Medical Counsel, PC, with over two decades of experience. His deep connection to dentistry comes from his wife's nearly two-decade-long career as a pediatric dentist.
This personal insight fuels his dedication to empowering dentists to navigate their legal challenges and achieve their practice goals. In doing so, Ali has helped thousands of doctors open their practices while maintaining legal compliance.
Ali is frequently quoted and contributes articles to dental publications, including the California Dental Society, Progressive Dentist, Progressive Orthodontists, Dentistry Today, Dentaltown, and The New Dentist magazines, further showcasing his commitment to the dental community.
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