If you are wondering if buying or selling a chiropractic practice during times of economic uncertainty is a good move or even possible, you are certainly not alone. In fact, in most chiropractic practice sale situations, there are three people in this equation who are all curious about how economic instability may impact a business – the Seller, the Buyer and the Bank.
As a Seller, you are obviously curious as to economic instability will affect the value of your business. Buyers are equally concerned about purchasing a chiropractic practice during these times and they want to make sure that the business will sustain their needs. Since most Buyers will seek a loan to buy a chiropractic practice, naturally banks want to know the scoop and want to minimize their risk too.
That said, buying or selling a chiropractic practice during unstable times is not only a possibility, but it can definitely be a good move for all parties involved – if the circumstances are right. And the good news, is that history is on your side to do so – as Great Depression Business Success Stories and many businesses that started during hard times are still here to prove this point!
Big Reasons Why Practice Transitions Still Make Sense
· You are Buying More Than a Moment In Time – the first and biggest reason practice sales still make sense is that the sale is more than just a brief moment in time. In many (if not, most) cases, a business being sold has decades worth of performance and revenue history that will continue well beyond our current crisis. Likely, the practice has even weathered similar economic slumps in the past and came out of those too. Certainly, I do not want to minimize the reality of the financial impact that COVID19 is put on some chiropractic businesses or even the severity of the damage some practices are facing if a natural disaster hits their area. But to put it plainly, a practice that has been in successful existence for 30 years amounts to more than a few months of challenging times.
· Not All Practices Are Impacted Equally – as unfair as it sounds, the experience of buying or selling a chiropractic practice during challenging times may vary a lot depending on the circumstances of each individual business. The truth of the matter is not every chiropractic business is faced the same level of challenges during the Great Recession, the pandemic and/or whatever other instability impacted their area. As we saw during the pandemic, some states forced shutdowns, but most declared that chiropractic practices were among the “essential” services allowed to stay open. Beyond that, some practices partially closed and saw some significant reduction in volume or revenues of 50% or more; others barely saw a 15% decline. To generalize and think that it’s a bad time to buy or sell any practice is an erroneous assumption.
· The Future Is Still Present – even if a practice has struggled in the present, buying or selling a chiropractic practice during times of economic uncertainty may still make sense because the future is still around the corner. It’s unlikely that any single event, recession or economic uncertainty is going to make a permanent dent in a healthy, solid practice. Sure, for some, it will make a visible impact on figures in that immediate year. But others the impact will be minimal and still others, the damage will be barely perceptible because the business was on a heavy growth curve, the practice is positioned to sustain such challenges or due to other factors which are unique to each business. And with each practice, business and life will recover and go on and we will get past this – as has been done with similar and past crises.
3 Key Questions To Determining If Buying or Selling A Chiropractic Practice During Challenging Times is Right For You
If you can agree that it is possible that a purchase or sale can still make sense even in these situations, your next question is likely this:
What are the key questions to determine a healthy practice right now?
Logically, if the practice looks healthy, then it can be one that is bought or sold. Unhealthy practices will either not sell or will do so at a deep discount. In this respect, Buyers and Banks are asking (or should ask) three things:
1) How much did the “instability event” impact the business? Obviously, if the business was closed for a month or more, as that takes more recovery time and a bigger toll on revenues.
2) How is the business recovering to date? Perhaps the more important factor is to look at more than how long a practice was closed, but to focus on how quickly and well the business is bouncing back. A practice that was fully closed for 2 weeks but bounces back quickly and well is in better shape than a practice that was partially closed for two weeks, but takes two months to fully recover. The key here is to look at year to date comparisons between this year and last year – and not just take a snapshot of one particular month. For example, it could be that the event happened during a historically slow month for the business (for whatever reason) and its impact didn’t really make much of a difference compared to the same period of time in prior years. Or, it could be that the practice was ahead of pace at the start of the year – and even with a slight slow down, the revenues are still on track compared to last year.
3) What is future prediction of full recovery? While it is certainly impossible to predict the future of any business at any time , it is reasonable to look at projections based on the current position of the practice. Here, it’s important to focus on the trends of practice collections, patient visits and perhaps even office hours. To illustrate this, let me show you an example from one of our practices we sold during the pandemic.
In 2020, the business shut down for 2 weeks completely in March and saw a patient visit decline and revenue drop of approximately 40% as a result (so they still produced 60% of normal, historical revenues). In April, the office was open on a reduced schedule, which also meant fewer patients, but the revenues were now at only a 20% decline (80% of normal, historical revenues). By May, the office resumed a mostly normal schedule with one-half day less than pre-COVID hours. Patient visits were back up to 95% of normal and revenues were 95% of normal. By mid-June, the practice had not only matched the same level of patient visits as they did last year, but saw a slight increase from previous years. In addition, revenues increased to the degree where half of the month of June equaled the same amount of revenue than the full month of June 2019 — and the practice remained at a reduced schedule by one half-day.
In this example, the practice demonstrated a quick recovery from the pandemic that calmed any fears from the Buyer, who moved forward to purchase the practice. This would be an example of a healthy practice to sell or buy.
If you’re wondering if this is a time to look to buy a practice, consider our FREE Practice Match, where we can help you find a perfect fit for you. If you are unsure about whether you can afford a practice purchase, check out our FREE Practice Financing 101 webinar to get more details and insight into the process of making it possible.
If you’re on the other side of the fence, wondering if this is the time to sell, check out our FREE Exit Essentials webinar where you can learn the basics ingredients for selling or transitioning your practice well.