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10 Things to Know About Sweat-Equity Buyouts

For new graduates of chiropractic colleges who are saddled with thousands of dollars of student debt, it may feel impossible to build or buy a practice any time soon. Luckily there is a way to buy a practice in a matter of years, while gaining fundamental clinic experience — through the sweat-equity buyout method.

Ten things to know about SEBO:

A SEBO arrangement allows associates to join a practice without putting down money and earn the down payment to buy a practice down the line. It’s considered beneficial for both the buyer and the seller, who is typically a retiring chiropractor looking for a reliable exit plan.
The SEBO method also allows for seamless patient transitions, as the associate and the patients will become familiar with each other over the course of the agreement.
This buy-sell strategy is common among other health professionals like dentists and physicians.
Under a SEBO arrangement, the associate earns a base salary and saves toward buying the practice. The base salary should pay the associate a comfortable living wage and cover any student debt payments.
Income generated by the associate first goes toward their salary and overhead costs like malpractice insurance. What’s left over goes into an escrow account that is used for the future down payment on the practice.
If the associate decides not to buy the practice, the owner keeps the funds in the escrow account.
The length of the arrangement, typically about 2-5 years, should be predetermined.
The arrangement helps associates secure financing from banks, which often look for two or more years of clinic experience.
The buy-sell agreement should be put in writing at the outset. This agreement should be revisited throughout the contract period.
This strategy requires solid communication and dedication. The chiropractors should enlist the help of an attorney or consultant to draft a fair agreement that both sides benefit.


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