Editors Note: Don’t let the fact that the title contains the word chiropractic get in your way of seeing the value that this article has for all different types of businesses. Enjoy and let me know if you have any questions.
Maybe you’ve invested the last 30 years of your life to your practice and community. Maybe you’re looking at bringing in your first associate or dare I say, parting with a partner.
All of these are reasons to know where you stand financially with your practice.
Before you look into getting an appraisal for your chiropractic practice, you want to ensure you are doing everything in your power to maximize the value.
So what are the top factors that will move the needle that you can implement immediately?
At Full Circle Coaching and Consulting, we have helped hundreds of chiropractors sell their practice or appraise it for the next step of the journey.
We have found a common trend among most of these practices and have collated the top 5 factors you can implement in your practice.
#1 – TEAM TRAINING
Somehow, you’ve found the time to read this article. The reason you have this time is likely because you have a team behind you that can handle the front desk activities, support on financials, and keeping the practice running efficiently.
The team that you have hired to help you run the practice is also the team that can help you get more out of the valuation.
Ask yourself the following:
Do you have a written system and protocol for how to train your team?
Do you train regularly or just wing it?
How often do you do evaluations against a standard protocol for practice?
To have a clean transition, an incoming doc will want a team that runs the show for the doctor and has the systems beautifully articulated on a day to day basis.
Start to build an operations manual, training module, team evaluation module and create team systems.
No, this won’t happen overnight, but start with a step in the right direction. Make these actions a daily practice and it will become second nature.
Having this all in place means you can slip out the back and someone can easily walk into the practice without interrupting your client’s experience.
#2 – PATIENT EDUCATION
You know those big golden arches? Pretty famous, right?
How has McDonald’s been able to carry on so successfully without their founder since 1984?
I’m talkin’ goodwill here!
The odds of duplicating the profitability of your practice are directly correlated with goodwill.
The higher the goodwill percentage, the greater chance a doc can walk off the streets and create the same or higher profitability as you.
So how can we ensure your practice maximizes goodwill?
Two words: Patient Education.
Patient education is one of the most crucial aspects to creating a life long practice member, a high PVA, and therefore predictable income month over month, year over year.
When your patients are educated and have “buy in”, they not only keep coming back but they tell other people too! This is going to be in high demand for people looking to buy a practice, and they’ll be willing to pay for the predictability.
Here are a few things to consider:
- Invest the time to repeatedly educate the members of your practice.
- Document and implement these systems. Anything you are doing to educate your patients should be documented.
- Could any Dr. Tom, Dick or Harry come into your practice and effectively execute? If the answer is no, create templates or written scripts so they can.
Having your educational system structured and documented will add HUGE value to your practice’s valuation. And as a bonus, it makes it easy to transition new staff when necessary.
#3 – SYSTEMS
Alright, what’s next? More about systems.
Systems are the glue that hold your practice together. They are what allows your practice to run smoothly while you’re on some beach, some where.
A quality team is key, but a practice built on systems removes the risk of human error and you can be less dependent on the quality of your team.
Do you have the systems in place that creates the same profitability whether you are the practicing doc or a hired locum?
The most successful practices seem to have one thing in common – they are team driven rather than doctor driven.
Remember earlier when you slipped out the back door? Ya, you can do this when your team works as a unit to keep things running smoothly.
Now you can do what you do best, be a chiropractor! Find out whether you are a doc driven or team driven practice by asking yourself these 3 questions:
- Do you “run the show”?
- Do you have a written manual that documents every last detail of running your practice?
- Do you have “rules” for the practice? (who you do or do not work with, for example).
The easiest way to guarantee reproducibility of income to prospective buyers is by showing them exactly how you operate so they can kick you aside and take the helm all while maintaining similar profits.
#4 – MARKETING
The second biggest hole in chiropractic practices across the profession…MARKETING.
We get it, marketing can be a daunting and overwhelming task.
The fact is that marketing in its simplest form is just the ability to share your gifts and talents with those who will benefit from it most.
We aren’t going to spill all the beans on HOW to market your practice, but we will tell you it could get you an extra $10,000 when you are selling your practice.
Not to mention the increased revenue by pulling in more patients! WOAH.
What marketing systems can maximize this area of the valuation? Let me tell you about two of them.
- A well documented marketing planner. Plan, document, reflect, etc. Think of all the ways you can market your practice (promos, newsletters, community events, and the like) and plan for them so you’re ready to go!
- A tracker for return on investment (ROI). You must know where your patients are coming from. Track what efforts are producing new patients and what those efforts cost. This is how to make marketing predictable and manageable.
With these in place, you can confidently show prospective buyers that your marketing systems are producing results that are repeatable!
#5 – CONTROL THAT OVERHEAD!
Last but, stereotypically, not least – controlling overhead.
We’ve completed hundreds of appraisals in the past and the biggest difference maker in the selling price of a chiropractic practice is percentage of overhead!
It is unfortunate, but we see docs with expenses that are consuming 60-80% of revenues! Talk about insane.
You’ve got to hone in on what is causing your practice to bleed that much money in overhead.
Take the time to sit down and really understand what your overhead is and if there is any opportunity to reduce it in areas where it’s not required. Even if you have a million dollar/year practice, but spend $900K in overhead, your practice’s valuation is going to be inline with the person down the road bringing in an easy $150,000/year with low and controlled overhead, and much more time with their family.
Every 1% you can bring down your overhead equals thousands in your pocket in the long run when you sell it, but also in yearly profitability leading up to the sale.
So, sit down with your favorite bean counter to look at the books, create a monthly rhythm to look for opportunities to reduce overhead and get creative with ways to maximize your money by minimizing your expenses.
All of these are manageable steps you can take today to start to create a more systemized, repeatable practice. This helps the eventual sale, but watch as your team becomes more efficient, more effective and more profitable in the process.
Author: Mike Tielemans, Appraisal Director at Full Circle Coaching and Consulting. Having 100’s of appraisals over the past 2 decades.