Are you thinking of selling a chiropractic business? If you’re a practice owner considering a potential sale, knowing what chiropractic buyers are looking for in the marketplace right now will certainly help your chances of a successful sale.
So, that’s exactly what we’re going to focus on in today’s post.
Marketplace Factors in Your Favor
If you have been keeping up with my latest articles on selling a chiropractic business, you’ve undoubtedly heard that this is an excellent time to consider selling your chiropractic practice.
Bank financing available to buyers is phenomenal – including low interest rates, low downpayment requirements and willing lenders – all of which are necessary ingredients for most sales.
That said, just because the marketplace is creating a positive environment for selling does not mean it is EASY. As the old saying goes “If it was easy, everyone would be doing it!” And the fact of the matter is that the majority of small businesses (including chiropractic practices) will never sell by owner.
Those last two words are key to understanding how to sell your business. For sale by owner sales often fail because the Seller (that’s you!) does not understand the chiropractic marketplace, is too emotionally close to the sale, values their own business to highly and/or just does not have a smooth process (or experience) in selling a business.
While addressing all of this is beyond the scope of this simple article, today we’ll focus on one aspect – understanding what chiropractic buyers are looking for in the marketplace right now.
Types of Chiropractic Buyers
When speaking to docs who are interested in selling a chiropractic business, one of the most common misconceptions I hear is in respect to “who” their buyer may be. Essentially, most DC’s are confused about the marketplace and the buyers who are in it. To clarify, there are 5 primary buyer types:
New Graduates (< 2 years out of chiropractic school) – interestingly enough, most selling doctors presume that a new graduate is going to be the buyer and most are confused how that would happen because they wonder how a new grad would have money to purchase or how they could be able to qualify for a loan. They are concern with their patient or practice management experience. And if the Seller has spent time thinking about this, they just can’t envision how it would happen practically speaking. These reasons are all valid challenges and why it is difficult for new DC’s to purchase. Certainly, there are we’ve sold practices to DC’s who were less than two years out of school and things have gone well – but those are the exceptions to the rule. As a result, New Graduates make up approximately 10% of the chiropractic buyer marketplace.
Experienced Associates (3-5+ years post-graduation) – the bulk of the marketplace is actually made up of what I like to call “experienced associates.” These are chiropractors who have spent the last several years working for another practice and have gained the confidence, clinical and practice management skills to make them ready to own a business. They’ve also likely been able to save some money for a purchase. And they generally realize that the best opportunity to increase their income with the lowest possible risk is to purchase an existing practice (as opposed to starting one from scratch). Consequently, many experienced associates make excellent buyers and some are ready to buy the practice they are working in. As a result, Experienced Associates make up approximately 50% of the chiropractic buyer marketplace.
Relocators (5+ years experience) – Experienced docs who have been in practice 5+ years, owned their own business and who are looking to relocate also make excellent buyers. Most of these docs understand what it takes to build a practice and at this point in their career cannot afford the financial risks of starting over – so buying an existing practice makes great sense to them. They have the practice management, clinical confidence and cash to make it happen – and now they are just looking to do it somewhere other than where they are currently living. Interestingly enough, COVID concerns has significantly increased this segment of buyers as DC’s are looking to leave states with heavy regulations and migrate to states that are perceived as more business friendly climates. As a result, Experienced Associates now make up approximately 30% of the chiropractic buyer marketplace which is higher than years prior to 2020.
Investors – most chiropractors who are considering selling a chiropractic business do not realize that there may be Investors who are looking to purchase their practice. While it’s tough to generalize much about investors, we can broadly define them as a Buyer who is looking to purchase a practice to manage the business (as opposed to most sales which are owner-operator sales). Investors can be chiropractors looking to expand and purchase a second or satellite office or buy a local business to fold into their practice. Investors can also be other medical professionals looking to create a multidisciplinary practice by adding their services to yours. Or investors can even be non-medical buyers who are looking to buy a chiropractic business they can run with their management experience. Beyond these basic types, investors also come in wide variety of sizes – from single practice owners looking to expand to their second location to larger groups or franchises looking to add to their portfolio. Investors are also tough to categorize in the type of practices they are looking for – some look for large practices they can passively own and operate, while others are seeking small or medium size businesses. The two challenges that limit Investor interest in many practices are state laws (in some states it is difficult or expensive for non-DCs to own a chiropractic practice) and profits (if an investor needs to pay another DC to replace you to see patients, there has to be enough profitability in the practice where they can pay that DC and still make some money as owner). Consequently, Investors make up approximately 10% of the chiropractic buyer marketplace which is higher than years prior to 2020.
Students – while the last category of buyer types may be the most emotionally appealing for many docs who are on both sides of the fence (Student and Seasoned DC), selling a chiropractic business to a student is logistically a long shot. The chiropractic student that you inspired to go to school may be interested in the opportunity that you have in terms of returning to work with you and buy your practice. But there are so many steps in between, it rarely works out. For starters, your timeframe and theirs need to line up – but students often can veer of course if they do not pass boards, have to wait for licensure or have financial setbacks that can prevent a purchase if their finances change (or family money they were anticipating dries up). Similarly, a Student can enter school with the intention of returning to his or her hometown and then fall in love along the way – either with the person they wish to marry or the place they want to live – and they now no longer want to return home. Unfortunately, we’ve also seen some serious misunderstandings cause the sale train to derail when a student expected that the practice would be theirs under certain terms and the seller expected the student would purchase under a different set of terms. That said, like new grads there are exceptions to the rule and over the years, we’ve actually coordinated a few sales that were in motion while the buyer was still a student. But your least likely route is that a sale will happen while the student is still in school and happens upon graduation. Even though many students (and sellers) would be eager to make this happen, Students make up < 1% of the chiropractic buyer marketplace.
WHO IS NOT BUYING YOUR PRACTICE
It’s important to note that there is a few buyer types that are frequently mentioned by chiropractors who are considering selling a chiropractic practice, but these types are absent from this list. Here are a few examples of who is NOT buying your practice:
The “Fell Into My Lap” Buyer – occasionally, I will hear from a DC who tells me that a prospective buyer just “fell into my lap.” Typically, the story tells of a doc who randomly called their office or stopped by to express interest in their practice which was not listed for sale. Unfortunately, these situations rarely work out (maybe 1 in 1000, if I’m being generous). Most of these buyers fall into one of two categories: (a) they are looking for a job and feign interest in purchasing your practice or (b) they are low-ball investors who are willing to offer you pennies on the dollar for purchasing your practice (or any practice) they can get on the cheap.
The “Build It & They Will Come” Buyer – this buyer is closely related to the “fell into my lap” buyer and equally rare. It’s basically the same strategy except the plan is set in motion by the Seller that if they build a great practice, a buyer will appear. While building a great practice will certainly help your sale, it does not automatically produce a buyer largely because no one knows it is for sale! To use an analogy from real estate, which is an expoentitally larger market, this would be similar to remodeling your house or building an addition and expecting that to attract a buyer who will knock on your door, admire your great work and offer to purchase your house. With thousands more potential buyers in the real estate marketplace than the chiropractic sale marketplace, I know this is mathematically more possible. But that doesn’t mean it’s common. Nor should it be considered part of your gameplan.
The Interested (But Financially Unable) Buyer – One of the most common buyers we see when helping our clients who are selling a chiropractic business is the “interested but unable” buyer. These docs are interested in your practice; they like the location, the price, how you take care of your patients, etc. But they are UNABLE to buy because of their financial situation. No one volunteers this information, but as a practice broker we routinely discover in discussions with the buyer that they have no money, a poor credit score, a bankruptcy, 3 ex-spouses chasing them down for past-due alimony or child support and other financial conditions that just do not make them ripe for buying during this season. Unless you are willing to be the bank and owner finance a risky prospect like this, they are essentially unable to buy and you need to move on. Sadly, there are a lot of these which is why one of the chief tasks of having a chiropractic practice broker help with your sale will be for us to filter out and qualify buyers who are both interested AND able to purchase.
NEXT STEPS
Once you better understand WHO the buyers really are, you can begin to take the appropriate steps towards selling a chiropractic practice and get a realistic portrait of where your future buyer is going to come from – and perhaps even who is not going to buying your business.
Stay tuned — in Part 2, we will dive into details of WHAT the chiropractic buyers are looking for (and what they are not). That’s in the next post…coming soon!
MORE QUESTIONS – NEED MORE HELP? Check out our FREE webinars on the topics of your chiropractic practice sale. Or shoot us an email — info [at] strategicddc.com and we’d be happy to help you take the next step!
