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Why 2020 is the Year to Buy and Sell Chiropractic Practices

The COVID-19 pandemic and economic slowdown have ushered in record low interest rates for loans. These conditions have also accelerated doctors’ retirement plans, flooding the market with motivated sellers. For associates ready to start their own practice, experienced chiropractors looking to expand or relocate, or even new graduates unsure of where to turn next, this means now is the time to buy a chiropractic practice.

This environment isn’t bad for sellers either. Low interest rates are favorable for sellers hoping to get maximum value out of their practice, and create an incentive for buyers to ink the deal, meaning your retirement on a sandy beach is closer than ever. Read more about why it’s a win-win to buy and sell clinics in 2020:

The SBA loan forgiveness program and low interest rates have created an ideal lending environment. The Small Business Association is paying principal, interest and associated fees on current and new small business loans for six months. This debt relief, which is part of its coronavirus response, applies to existing loans and those disbursed before Sept. 27. This opportunity, combined with low interest rates (the market prime rate was 3.25% as of March 16), creates favorable conditions for buying.

Low interest rates are also good for sellers. Interest rates factor into practice valuation, according to Sam Reader, a practice management consultant who works with chiropractors nationwide. A general rule of thumb he uses to gauge practice value is 1.4 to 1.5 times net cash flow. The multiplier is inversely correlated to interest rates. “Right now with the interest rates being at an all time low, the multiplier right now is at an all time high,” Mr. Reader says. Cash flow is generally based on the last full fiscal year, or an average of the last few years.

Pandemic uncertainty has motivated sellers near the end of their careers. “People are saying this virus was just the last straw,” says Kevin Misenheimer, a broker with Progressive Practice Sales. Many chiropractors nearing retirement don’t want to put in the effort it requires to rebuild after the pandemic, and in some cases, may be willing to sell at a discount. While there are many distress sales given the current situation, buyers can be assured most practices are still in good condition. “We’re talking to a lot of motivated sellers right now that have really pretty strong practices, especially compared to the idea of opening from scratch,” he says.

Business is bouncing back. Both brokers confirmed sales closed this spring. Additionally, business is returning in many areas of the country that have successfully lowered coronavirus case counts. “Confidence is back up again,” Mr. Reader says. “And a lot of the docs are telling me that their [patient volume] numbers are snapping back to what it was pre-COVID.” This is critical as many banks want to see patient volumes trending back to normal levels before processing loans.

Ownership gives chiropractors more control. For associates who were laid off, or even for the well-funded new graduate, ownership is the path to a more stable financial future. “It’s a really good time for buyers to be able to control their own financial destiny,” Mr. Misenheimer says. “If you are a business owner, no matter what the economy is doing, you do have the opportunity to go out and grow that practice.”

Associates and other potential buyers can learn more about how to gauge their financial readiness here [LINK].

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