Start from Scratch or Buy a Practice?
By Loren Martin
Every year, a few thousand chiropractors either start a practice from scratch or acquire an existing practice. Advantages of starting from scratch include being not as restricted geographically, selecting the patient base you are interested in, and customizing your floor plan. You also do not have to be concerned with another doctor’s way of doing things. If you know what you are doing and are well capitalized, this could be the way to go.
However, starting from scratch is a much greater risk compared to acquiring an established practice. With a new practice, you have to do absolutely everything. There are no patients or name recognition. Most doctors underestimate the amount of money and involvement required just to reach a break-even point.
Buying a practice offers an opportunity to avoid the starvation period during the years when certain costs were incurred without realizing a profit. The benefits of buying an established practice include:
- Access to existing patients;
- Patient referral sources, and a known location;
- The office and chiropractic equipment are in place;
- Practice operations and management systems are in place, including insurance billing and collecting procedures;
- Computer software and filing systems are in place;
- Staff are already hired;
- Phone numbers are established;
- Financing options are greater when acquiring an existing clinic;
- Use of former doctor’s name for a limited time;
- Transition assistance to assure a smooth transaction; and
- The right practice purchase allows instant income.
The practice should have the cash flow ability to pay all of the overhead expenses, the buyer’s new loan debt service, the buyer’s compensation, and income taxes plus extra profit.
There are numerous creative financing options for acquiring a practice. These include various Small Business Association guaranteed loan programs, a low down payment with an aggressive pro-chiropractic bank, and also seller financing.
Sometimes an opportunity becomes available to intern or associate after licensure with a buy-out option.
It is imperative that would-be buyers do their due diligence. Without this, it is difficult to determine profit potential, how to conduct a suitable manner of effecting the sale, and whether it will be compatible from a personal standpoint.
Network with fellow chiropractors and chiropractic consultants. They want to help you for the good of the profession. Entering into practice should be the most exciting and rewarding time in your life. Explore your options, and get off to a good start!
Loren Martin is President of Practice Opportunities Inc. and specializes in consulting, appraisals and brokerage. He has completed more than 180 successful chiropractic transactions. For a free consultation, he may be reached at (800) 736-0089 or loren.martin@charter.net.