Chiropractic practices generally sell for less than the fair market
value of a comparable small business, all else being equal. This is
largely due to supply and demand. Because of generally low demand,
chiropractic practices sell at a discount (25 to 33 per cent) compared
to equivalent small businesses – an astonishing but true fact.
Chiropractic practices generally sell for less than the fair market value of a comparable small business, all else being equal. This is largely due to supply and demand. Because of generally low demand, chiropractic practices sell at a discount (25 to 33 per cent) compared to equivalent small businesses – an astonishing but true fact.
To estimate the value of a chiropractic practice, you can use a number of valuation methods and multiples. However, coming up with an exact amount is unrealistic. It is more reasonable to produce a “value range,” which also allows room for negotiations. You can work out a number of estimates. Each estimate may differ, depending on how closely a specific practice compares to its peers, and the result can be a significant range of values. This method can be time consuming. On the other hand, using all methods could produce an average of all the practice value estimates and this average can offer a pretty close idea of what your practice is worth.
The next obvious question is: are there legitimate ways to increase the value of a chiropractic practice so that buyers would be willing to pay at least fair market value; i.e., 25 to 30 per cent more than the historical averages. A good place to start would be improving your Internet (local) presence. But there are other bigger fish to fry to increase the value of a practice.
Stop for a moment and think: what would it take for you personally to pay a premium for a practice, if you were in the buyer’s shoes? I’ll bet you could come up with a lot of things that would increase the value of any practice. High patient volume and high collections are obvious. What are the less obvious features that you would be willing to pay a premium for? Interestingly, the answers to these questions cross over to provide ideas for building a successful practice, long before you think about selling it.
In this two-part article, I will be discussing some practice value parameters and calculation methods that will assist you in buying a practice, or getting the most for yours when you’re ready to sell it. I will begin discussing certain elements that can influence the value of a chiropractic practice. I hope you will discover that in developing a practice that will sell at a premium, you will also be developing a practice that is fruitful for you while you are its owner.
LET’S BEGIN WITH YOU, THE DC
Quite enough has been written about the failure of governments, and so forth, to account for the stumbling economy in which we find ourselves. I have no intention to fan the flames. However, you may be feeling the pinch and, so, the question is, what should you do?
Frankly, most of us know what to do. However, fear and disappointment in weak economic times, and the uncertain early years of practice often “mess with our heads” and contribute to zapping our enthusiasm.
For many of us, getting out of “a funk” may require a psychological taser – something to jolt us out of a blue mindset. If you have found any book, speaker, audio recording, author, prayer or meditation that has helped you in the past, this is a time to reach out once again. Alternatively, collaboration with another DC, or kindred soul, or working with a professional practice coach, may be time and money investments that make the difference between struggling and revitalizing your practice. As well, treating yourself to continuing education opportunities may not only refresh your knowledge and ensure that you remain an astute and effective chiropractor, but also may open your eyes to new ideas to enhance your practice and the care you provide.
It’s really a matter of drawing on our courage to move away from the relative comfort of where we have been, and how we did things before the economic downturn. Perhaps it’s time to reorganize
and see your practice and lifestyle in a somewhat altered perspective. The result might not only be that your practice turns around, but also that it pays dividends, later on, when the time comes for you to sell it.
WHERE DOES STAFF FIT IN?
When we valuate a practice, we put a premium on first-class, continually and well-trained staff who are accustomed to regular weekly staff meetings. If you are buying a practice, and know the staff are good communicators, are personable, and have extraordinary service skills that they deliver to you and to your patients/clients – and are regular chiropractic patients, themselves – you would be willing to pay more for that practice. Yes or yes?
Many chiropractors are too shortsighted when it comes to staff training, even failing to hold weekly staff meetings as a system of quality control. Furthermore, the number 1 gripe among chiropractic assistants is that they have not been well trained. In fact, it’s the biggest reason they quit or get fired.
Thomas Peters (In Search of Excellence) had it right when he said: “Staff is the chief cause of our success.” I can’t make it much clearer than that. Does Peters’s description apply to your staff? If not, you may be due for a little housecleaning, and this means it may be time, to make some tough decisions.
First, try to salvage the staff you have by having a little heart-to-heart and sending them out for training. Follow this up by developing exacting and consistent office procedures; perhaps you require a new office discipline, with tighter procedures and quality control methods. Put a manual together that explains exactly what you, and they, actually do, from the first phone call to discharge. (Remember to set a good example by following your own directives and the procedures you develop.)
Finally, in-house, targeted seminar training sessions are essential to keep the staff on their toes, and teach and inspire them to act like the first-class ambassadors they can be.
WHY SYSTEMS CAN SAVE YOUR PRACTICE
Most chiropractors who have been around more than a year or two have some practice management notes stuffed in a bottom drawer, somewhere, begging to be put into action in some systematic manner. The average chiropractic office is usually not very well organized, because it usually lacks “systems” that help the office to run like a well-oiled machine.
Systems can help with your staff training and enhance their efficiency as well as furnish channels through which to carry out quality assurance and introduce improvement measures. Systems can provide ongoing optimal provision for business equipment, clinical tools and the most efficient software.
Systems free up your creativity, as well as that of your staff, because your procedures are then on autopilot and you don’t get fazed by the many little mundane (annoying) decisions that seem to be part of a disorganized office routine. This allows you to pay more attention to your patients, which, after all, is the reason you are there in the first place. When you are taking good care of your patients, the rest – inspiration, fulfilment, success, lifestyle, and optimal selling value for your practice – will just happen. It’s a win all around.
A lack of systems in your practice saps your energy and has the effect of reducing the overall value of that practice.
You could start by picking up a couple of copies of The E-Myth Revisited by Michael Gerber. Get a copy for everyone in the office. This could be the spark that lights a fire under your practice. Make sure you get a copy for yourself as well.
Once everyone reads it, make it the basis of your office meeting agenda. Use this as a watershed time for the changes you need to bring you and your crew to a higher level of efficiency.
And make sure everyone in the office is on a regular chiropractic adjustment schedule. How can they be expected to sell it if they don’t own it? •
In Part 2, Dr. Whitney will discuss the best way to drastically reduce overhead, the importance of marketing, bringing other DCs into your practice, and methods for valuating your practice.
Dr. John Whitney graduated from CMCC in 1957 and practiced in Guelph for 30 years. He has also been a practice management consultant and practice appraisal specialist for over 20 years. Dr. Whitney has trained over 5000 new graduates to successfully enter practice in Canada and the USA.
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