There are many potential reasons to buy a chiropractic practice. Depending on the season and situation in your career, there is even a “right time” to make such a move. But admittedly, few chiropractors or chiropractic students are taught to recognize the proper timing or reasons to buy a chiropractic practice – even though this decision can profoundly affect your chiropractic career.
So in this post we’ll address to Shakespearean-like dilemma of “To buy or not to buy?” That is the question all chiropractors will eventually face – and we’ll identify the five basic times in the chiropractor's career when it makes good sense to make this investment: Let's analyze these five common reasons to buy a chiropractic practice and evaluate the results.
1. Buying a first practice
Approximately 70-80% of the chiropractors buying a practice are “first time” buyers. Most of these DC’s have either been practicing as an associate for the practice they plan to buy or another practice. Others have been working inside another chiropractors office as an independent contractor and are looking to buy an established business somewhere else. And some move right into buying a chiropractic practice straight out of school. All of these reasons to buy a chiropractic practice make good sense primarily because the vast majority of chiropractors who enter the profession do so because they want to be self-employed and want to own a practice at some point.
For those who desire to own a business, the choice then comes down to either purchasing an existing business or starting one from scratch. Even though chiropractors have visions of starting their practice by scraping together a few dollars and watching it grow into a dynasty of time, the actual numbers show that the reality is very different. According to SCORE (Service Core of Retired Executives), the #1 reason that small businesses fail is lack of cash flow; in fact, their figures cite that 82% of small businesses (including chiropractic practices) will fail because they are uner-capitalized and lack sufficient cash flow to float the expenses of the business until profitability arrives. So the notion that you will invest a tiny amount and somehow make it as a new chiropractic business immediately puts you at great risk that the plan will work.
Mathematically, it also may not make sense to start a practice from scratch. Banks report that loan requests for startup healthcare practices commonly range from $250,000 to $350,000. (This price includes amounts to purchase equipment, working capital for overhead and $100,000 for living expenses over a two-year period to help the chiropractor get started!) That means that the chiropractor can afford to pay themselves approx. $50,000 per year and they start in $300,000 debt on a 7 year payment plan. Or a chiropractor can purchase an existing business for a similar loan amount that will bring the DC an income stream will produce 2-3x that amount (and has a track record to prove it).
Even if you set the loan payments on the above two examples to be exactly the same, the start-from-scratch chiropractor must wait years to build production to the level at which it can service the debt. The chiropractor who buys an existing practice has an immediate source of production to cover loan payments. In addition, the start-from-scratch doctor will spend a lot more time “growing the practice” and learning how to run a business.Consequently, the startup DC will actually need greater management, marketing and organizational skills than the chiropractor who purchases an existing practice with patients already on the books, years worth of good reputation in the community already built up and a staff in place that knows how to run the business.
2. Moving To a New Location
The second major time in a chiropractors career that is a great reason to buy a chiropractic practice is when relocating to a different community. Most chiropractors who are moving are experienced DCs who may have had their own practice for years or decades and now are looking to live somewhere else. In addition to the same reasons buying an existing practice vs a startup make sense (as covered above), there also are important psychological reasons to consider for buying a chiropractic practice when relocating. Experienced chiropractors are accustomed to a certain income level and they are also used to being busy seeing many chiropractic patients each day. To start all over from scratch in a new location will feel like a tremendous “downshift” or even a big step backward in their lives as they are now forced to go out an market for new patients, wait for patients to arrive and most importantly, patiently wait for their income to grow back to its previous level.
For these reasons, when relocating, most experienced chiropractors should and do consider buying an existing practice.
3. Making a slow practice busier
Occasionally, chiropractors seek to buy another chiropractic in the community as a method to increase their patient base and boost practice productivity. We typically advise chiropractors wanting to increase productivity NOT to buy an additional practice. Let's analyze the situation to see why:
First, you must consider why you are not busy enough in your practice in the first place. Common answers we here are:
- That the staff is not providing excellent service (or that it is difficult to retain good staff);
- That the doctor is not good at marketing or that the business lacks an effective advertising program to bring in enough new patients; or
- That the chiropractor is an excellent clinician but not a good businessman of chiropractic
- That the practice is in the wrong location to attract a good demographic of patients.
Of these four reasons, purchasing a new practice will only complicate matters and increase the likelihood that the practice will fail when taking on another practice and new debt. If the staff is an issue, a second practice will only magnify that problem and make the lack of good staff now apparent in two locations or with a larger amount of patients to serve. Similarly, if the business cannot bring in enough new patients to sustain one practice, adding a second (and the overhead) will complicate an already challenging scenario. Also, purchasing a second practice will require the DC to be a better businessperson; so if there are already shortcomings in this area, this problem will also be made much worse with a purchase.
Finally, if the practice is in the wrong location, buying an existing business in a better part of town and moving your practice into that location may seem like a logical move that could work. And if that is truly the only problem in your business, you possibly have a valid reason to buy a chiropractic practice. But more than likely, you will also have one of the three other reasons going wrong in your business – and so moving the location won’t necessarily fix the entire problem.
In short, buying another practice is a short-term and expensive way to improve an existing business that is performing below par. In most cases, you’d be better off addressing the problems within your practice before attempting to take on another in hopes of fixing it.
4. Buying a Practice to Expand Yours
In dentistry and other healthcare professions, approximately 20% of practice purchases fall into the “expansion” category whereby the owner of an existing business looks to buy another business in the community to expand. Unfortunately, this strategy is less commonly used in chiropractic – but it can be an excellent one for owners who already have a good practice, possess good management skills and are in growth mode. Here, there are two common situations where it can make economic sense to buy an existing practice in the same or similar location as yours.
The first is to buy existing patients from another practice and migrate those patients into yours. This is the case in which the patients can be purchased very economically without also buying the facility or the equipment.
Typically, this situation is seen with a retiring chiropractor who has a small practice, with an old facility, worn furnishings, and outdated equipment that no one will buy. Here, a nearby chiropractor may do well to buy the patient base of the retiring chiropractor at a tremendously reduced rate. This purchase of a patient base can provide a wonderful service to the community, since the retiring chiropractor`s patients will need someone to provide for their care. In this situation, the purchasing chiropractor can increase productivity with only a small debt service or cash purchase.
The second scenario where it makes sense to buy an existing practice in the same or even a nearby local community is to expand your present operations by establishing a satellite clinic in a second (or third or fourth) location.
This can make sense for a chiropractor who has a wide patient base where the patients have to travel for treatment. Even better if the satellite area is growing and there is a practice for sale in that area, the chiropractor can both serve their existing patients better by opening a second location AND immediately expand their operation by adding the patients from the second practice that they purchase. To prevent overhead from getting out of control, it makes sense to staff the second location with only necessary personnel to run the front desk and to assist the doctor. Billing and administrative work can be done from the main practice so that all administrative tasks can be centralized for cost efficiency. We’ve even seen situations where the phone is answered in the primary location only and the satellite clinic has very streamlined staffing needs.
Caution – either of these strategies work well for vibrant businesses that are already doing well, that already possess excellent management skills, robust new patient strategies and a solid team. If you don’t have ALL of these things in place – do not try to expand by buying another practice.
Sadly, over the years I have seen many chiropractors with mediocre incomes who divide their time between two locations. In every case, without fail, I advised them to sell one practice to help improve the other. The DC usually resists this idea but if and when they finally sell off the added weight of their second practice, the practice they kept increases, the staff is happier; the chiropractor is more focused, and the financial health of their business improves dramatically.
NEXT STEPS
Our original question focused on the reasons to buy a chiropractic practice. As you can see the simple question of “to buy or not to buy?” is one with a complex answer that depends on the context of both why and when you are planning to buy. Hopefully, this article was able to give you some food for thought, insights and some situations to avoid when considering your own reasons to buy a chiropractic practice.
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