Many chiropractors dream of having the professional freedom to run their own practice, be their own boss and set their own schedule. Experience level, finances, goals and practice preferences, all factor into how chiropractors may choose to pursue practice ownership. Luckily there’s a path for everyone, from the starry-eyed associate to the experienced pro.
Here are four ways doctors can become practice owners:
Starting from scratch
Starting a chiropractic practice from scratch allows for complete flexibility and a blank slate to build a dream practice. However, the challenges of starting from scratch mean it’s a strategy that is often best left to the more experienced chiropractors or those with deep pockets.
Building a chiropractic business from the ground up is like launching any other business — it requires some business acumen, funding and a lot of grit. Owners will need to develop a business plan, find a physical practice location, obtain licensing and certification, hire and manage staff, and grow their patient base. They also need significant capital to cover startup costs like rent, equipment, advertising and establishing a web presence.
Though this strategy is often recommended by chiropractic colleges, it can be one of the toughest paths to success for young doctors, who may not have the business know-how or access to the capital they need to get started.
“Most chiropractic schools do not give you the tools to be successful in private practice,” says Kevin Misenheimer, a broker with Progressive Practice Sales. He says he sees many practice startups go under within a year. “A lot of people, if they have some family backing, will open the doors on a place and sink up to $100,000 — or sometimes more — into opening a practice. Then they fall flat on their face because they’re not making ends meet, or they don’t know enough about marketing or getting new patients in the door.”
Default rates also make it difficult for young doctors to access funding for a scratch. “A person getting out of school, walking into the bank and getting an [Small Business Association] loan to do a startup or scratch, those days are over,” says Sam Reader, a practice management consultant who works with chiropractors nationwide.
Buying a chiropractic practice
A more common route for chiropractors is to buy an existing clinic. This strategy presents a much lower risk: existing clinics come with an established patient base, staff, billing systems, and insurance credentials. Buyers can see that there’s enough demand in a community to support a thriving business. For young associates, buying a practice also offers the opportunity for mentorship from the previous owner during a transition period.
“I’ve always thought it’s been a buyer’s market with chiropractic because there’s just not enough qualified young buyers out there for all the practices that are for sale,” Mr. Misenheimer says. While there are some pitfalls buyers should be aware of [LINK to article #1], this strategy comes recommended by both Mr. Misenheimer and Mr. Reader as the most fail-proof option to ownership.
Buying a clinic does still require a significant financial investment. Buyers should have good credit, a score of 680 or up, and have access to funding for a down payment of 10-12%. Most practices are valued at roughly 1.5 times the net income. This means a practice with net cash flow of $500,000 would sell for $750,000. An interested buyer should have $75,000 to $90,000 for the down payment.
For new graduates with hundreds of thousands of dollars of student debt, this may mean buying is off the table for at least a few years. However, many experts recommend graduates spend a year or two as an associate to learn more about the business side of chiropractic and save up for a down payment. This is also helpful when it comes to getting approved for a loan, as not all banks will finance new graduates.
Sweat Equity Buyout
An alternative to buying a clinic outright, a sweat equity buyout (often abbreviated as SEBO) is a legal arrangement between a clinic owner and an associate to work toward buying over several years. Typically the associate is paid a base salary, and income they generate over the base goes toward overhead costs, the clinic owner and into an escrow account to buy the practice at the end of the agreement period. This strategy works well for young chiropractors who don’t have access to funding for a down payment and who want to learn and train under an experienced doctor.
SEBO is often promoted as mutually beneficial for buyer and seller. The arrangement creates a reliable exit strategy for the seller. It maintains practice value while providing an on-ramp to ownership for associates. The buyer can know the years of work they put in to grow the practice as an associate will directly benefit them later on. However, because this process takes years to complete, it requires some foresight and planning. It is critical to reach a fair, well-defined agreement at the outset and to find a good cultural fit, where techniques and practice styles are a good match.
Another path to ownership is to buy into a franchise, such as Joint Chiropractic or NuSpine. Franchising offers chiropractors an easy, out-of-the-box solution to get started quickly. Most franchises offer support for marketing and management. They also offer a degree of brand recognition that can help attract a steady stream of patients, allowing chiropractors to spend more time working with patients and less time troubleshooting how to run a business.
Mr. Misenheimer cautions chiropractors that franchising is not a budget option even if it appears so. “What [doctors] are spending to get the doors open on that franchise would have bought them the 10% down to buy the practice,” he says. In addition to costs and fees, franchising also comes with the cost of independence, offering the little long-term flexibility for doctors.
[Image ideas: I think a general image of a chiropractor would work well here, or a spine. You could also do a key — like the “keys to the business.”]