How to Sell a Chiropractic Practice: What You MUST Know

Whether you are retiring or making a career change, selling your chiropractic practice takes time and can be stressful. It takes careful preparation to realize top dollar. You’ll want to rely on the services of professionals to guide you every step of the way. This high-level view of how to sell a chiropractic practice will outline the steps from start to finish. 

Get Your Business in Order

Every broker and potential buyer will want to pore over your financial statements. Make sure your balance sheet and income statements are current. If you haven’t filed your tax returns for the prior business year, it’s time to get that done!

Not only do you want your financial statements to be accurate and current, but you also want to show that your practice is growing and profitable. Consider expanding services or adding new revenue streams. If you aren’t already offering nutritional supplements, talk to Nutri-West New York about how to grow your practice before you put it up for sale. Buyers look for the strong cash flow that supplements and additional services generate. 

If you use your company accounts to pay for personal expenses, it is time to stop that practice. It’s a good idea to keep company and personal expenses separate. Co-mingling expenses muddies the financial statements and the financial health of the practice. 

Strategize With Your CPA

Even when you are in the “considering it” phase of selling your practice, you should strategize with your accountant.

Chances are, you’ve previously been following a strategy that minimizes income to reduce your tax liability. That might be appropriate when you plan on owning your practice long-term, but if you are even thinking about selling, you need to develop a new strategy with your accountant. 

Potential buyers and their lenders will want to go over your tax returns. Your tax returns and current financial statements are the basis for the sale. Don’t be surprised if the broker wants to look them over too. Everyone wants to see the practice earning revenue and paying taxes on the profit.

In the three years before your practice comes up for sale, you want to show as much revenue as possible. That could mean implementing a new tax strategy.

Review your Lease

If you rent your office space, you’ll want to review your lease. Buyers and their lenders are looking for long-term leases. So, see how many years remain on your existing lease.

You’ll also want to review clauses about the assignment of the lease. If you sell the business, can the buyer assume the lease, and will you be released from liability?

If you aren’t comfortable understanding the lease language, ask your attorney to review the lease as well. 

Interview Brokers and Review Valuations

Once you’ve got clean financial statements and know where you stand on your lease, it’s time to begin interviewing business brokers.

You don’t want to try to sell your chiropractic business on your own. A business broker with extensive experience selling medical care practices and chiropractic practices is well worth the commission you will pay.

Brokers approach business valuation from different points of view. The most common methods of valuing a chiropractic practice are the income approach, market approach, and cost approach.

Income approach

This approach either capitalizes current earnings or cash flow, or discounts future earnings or future cash flow. It focuses on calculating the present value of the future benefits the new owner will receive.

Market approach

This valuation approach assumes that your practice will sell for about what other practices in the area are garnering at a sale. Of course, if there is limited activity, the data set will be small, and the valuation will be difficult. This approach looks at the average sales price and compares your practice to the practices that sold. 

Cost approach

The cost approach looks at the value of the business assets. Assets include furniture, fixtures, medical equipment, office equipment, and goodwill. With a chiropractic practice, goodwill is one of the most important assets. A thriving practice depends on good relationships between the practitioner, office staff, and the patients. 

Hurry Up and Wait

Depending on your location and the economic conditions in your area, your practice may sell in as little as six months, or it may take a year or longer. It may never sell. 

A healthcare-related practice in a highly populated area will generally sell faster than one in a rural area.

Continue business as usual with a focus on maximizing your revenue streams and profit while your practice is up for sale.

Consider When to Notify Staff

Telling staff that the practice is up for sale is a sensitive subject. You’ll want to get advice from your broker.

You don’t want to notify staff until you have a serious buyer with qualified financial backing. Inform staff too soon, and they may become anxious about their future and seek employment elsewhere. Buyers are looking for a practice with long-term staff. If you wait until the practice sells, the staff will feel bitter. This can harm the relationship with the new owner.

Opening your practice required careful planning and strategizing. Selling your chiropractic practice requires the same.

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