Few chiropractors understand the factors that affect the value of a chiropractic office for sale and so when it comes time to sell or transition their practice, they often ask what can be done to increase the value of their chiropractic office for sale.
In this post, we will focus on a few primary and easy to understand components of chiropractic practice value that you need to know sooner — rather than later — as in NOW!
Practice Size: Beware of the Extremes
It makes sense to virtually all buyers and sellers that the size of your practice will direct impact the price of a chiropractic office for sale. What is surprising is that the toughest practice sizes to navigate are at the two extremes.
Generally, smaller practices (in chiropractic, this would be practices that are collecting less than $200,000 per year) are considered somewhat riskier for a number of reasons. Smaller practices generally have a lack of diversification of services offered which makes them a bigger target for economic shifts or payer changes. For example, if a small practice is 85% insurance-based (which is fairly common) and the major payer for that practice represents 50% of their income, any changes from that payer could dramatically affect collections, cash flow or profitability. Similarly, a smaller practice may be more affected shifts in the local economy if they do not have a diversification of services that would allow them to sail through temporary downturns. Finally, smaller practices may also be affected by the loss of key personnel to a greater degree than larger practices. While every practice may have an office manager or billing person or other superstar that greatly contributes to the health and bottom line of the business, in a smaller practice that key person may be either the entire staff or a good portion of it!
It may seem that there is safety for larger practices that are immune to the above challenges. Certainly, big practices (>$1,000,000 per year in collections) are generally better positioned to weather economic storms, are not as dependent on one staff member and have a more diversified income streams when compared to small practice; but big practice challenges of their own.
For large practices, their primary obstacle is finding the right chiropractor (or several) who have sufficient capital, risk tolerance and management skills to captain a big ship. Statistically speaking, fewer chiropractors will have enough cash to produce a downpayment for financing a practice that is very large. And even if they do, they may not have desire or the skills to lead a large team.
So, yes, size absolutely matters not only in the value of your chiropractic office for sale, but in its attractiveness to potential buyers.
Your Location: Hot Spots & Helpful Hints
A second factor that some chiropractors fail to consider when placing their chiropractic office for sale is their location. The location of the chiropractic practice can not only have an impact on the transaction price, it can impact the general attractiveness of the business. For example, geographic “hot spots” shift periodically as certain cities or regions gain popularity. This is generally tied to the real estate or job markets in those cities. So, in 2018, some of the hottest markets are Seattle, San Francisco, Las Vegas, Denver, Dallas, Nashville, Orlando, Raleigh and New York City. While you can’t change your location to be in a hot spot (and they are temporary anyway), if you are located near one of these cities, you can expect more potential prospects to be interested in your chiropractic office for sale.
Beyond the latest trends, there are also some historically tough areas to sell a chiropractic practice. In general, these are cities or areas that are in decline or economically stagnant or where the net migration is negative (more people leaving the area than moving into it).
If you are in a less attractive area, don’t lose hope. You simply need to allow more time to advertise your chiropractic office for sale. Fortunately, all buyers do not want to live in the “hot spots” and not everyone is moving to the “big name” cities. Buyers make decisions based on where they want to live for family reasons or personal reasons too – even if the area is not as economically vibrant.
Why Timing Your Chiropractic Office for Sale is KEY
In many ways, the most important – and perhaps least considered – factor that will affect the value of your chiropractic office for sale is your timing. While little can be done in terms of changing your location and, in general, your practice size is going to be fairly immovable as well, timing is one component that is both extremely variable and vital to maximizing the value that you receive from your business sale.
Certainly, there are economic factors such as the strength of the economy (particularly in your region) will affect both your ability to sell and the buyer’s willingness to buy that are somewhat out of your control. Similarly, interest rates tend to dictate the availability of financing (which currently, is at or near its all-time best – which is why this may be a great time to sell, buy or transition a chiropractic practice).
But the biggest boost in the value of your chiropractic business can be obtained by arranging your chiropractic office for sale at the right time in respect to the performance of your chiropractic practice. In short, your practice value is best at the peak of The Sell CurveÔ — which is most easily described as the time where you are historically collecting the most. While that may be simple to define in retrospect, it’s important to understand the trends and the “feel factors” that go into maximizing The Sell Curve and the timing of your chiropractic business sale. (For a deeper discussion of this issue, see our webinar: Sell, Switch or Slow Down: How to Maximize the Value of Your Chiropractic Practice Sale & Minimize Costly Mistakes.)
Put simply, many chiropractors wait far too long to sell and miss out on thousands of dollars in the process. Worse, by failing to understand the options and different choices you have in transitioning your practice, you can potentially miss out on even more money.
In short, the main point here is that when you are seeking to maximize the value of your chiropractic office for sale, your timing will be critical. For most, there is no such thing as “perfect” timing – but there is definitely better and worse timing, along with better and worse options for transitioning your practice.
If you are in the consideration phase and somewhat stuck on the fence of wondering if or when the best time would be to place your chiropractic office for sale, then I’d suggest you check out our Sell, Switch or Slow Down webinar to help educate yourself more on the process and the parameters that can influence your practice sale for the positive.
On the other hand, if your still in that planning phase, consider getting our Ultimate Chiropractic Exit Strategy as a resource to help you in that direction.
And certainly, if after reading this post, you realize your time is NOW, then I’d suggest you contact us about our Chiropractic Transitions Coaching so that we can discuss how to best strategize your practice sale or transitions timing.