After completing Chiropractic College, most students have the dream of owning a practice of their own. They yearn for a place where they can make their mark and practice the skills that they learned during their years in school. Some chiropractic colleges help prepare their students with classes in the business side of practice prior to graduation. However, it’s not until the reality of being out on your own in the world of chiropractic entrepreneurship that what you might have learned in school becomes very real.
One of the most common questions that I’m asked by new grads is, “Where is the best place for me to practice?” This often implies that they’d like to know where the laws and reimbursement most favor chiropractic. The reality is that you can be a success in practice wherever your practice is located—as long as your heart is there as well. Chances are very high that the city or town you start your practice in is going to be the town that you will practice in for your entire chiropractic career. So make it someplace you’d really like to live. If the mountains appeal to you look there. If you want to be on the plains or near the ocean make those your priorities. Want family nearby? Small town life or Urban Cowboy (or girl)? The choice is yours!
Starting a chiropractic practice from scratch takes the same work ethic and stick-to-it-iveness that creating a start-up in any industry requires. The reason that most start-ups don’t make it past their first year is due to a lack of capital. Don’t underestimate the capital required to start your practice. If you haven’t written your Business Plan prior to graduating, be sure you do so before signing a lease on space or making any other long-term agreements.
As a new business, your goal is to be as lean in overhead as possible. When you begin, quite likely it’s going to be you and voicemail until you can hire your first Chiropractic Assistant. Be sure to include expenses for lease, build-out costs, marketing and most importantly living expenses in your Business Plan. It’s challenging to grow a chiropractic practice if your attention is split between your practice and a side-hustle that you’re working to keep the lights on.
Rent as little space as possible and implement a floor plan that allows for easy patient flow in a limited area. Purchase as much gently-used chiropractic equipment and furniture as your budget allows. Scour listings in your local Chiropractic Association’s Journal, online, and in local shops for the very best deals. An upgradeable, modular computer system can help you manage technology overhead and remain compliant with documentation and coding requirements.
Rather than start a practice from scratch, more and more new grads are looking for mature practices with which they can partner and eventually purchase. My “Sweat Equity Buy Out” (SEBO) program is a great way for an undercapitalized new grad to partner with a senior owner interested in an exit strategy. See Chiropractic Economics issue (X) for more information.
Whether you eventually purchased the practice that you associate in, or move on to your next associate position, look at your associateship as a learning opportunity. With the wisdom of a senior owning doctor your learning curve will be significantly easier, take less time and involve fewer costly mistakes. This “Tandem Practice” model provides advantages for both the associate and the owner. New grads are typically more technologically savvy and can help senior doctor implement electronic records management and other software programs. Senior docs provide a sounding board when challenging patient cases present themselves.
There are as many associate contracts as potential associate positions. Most involve the payment of a base salary with some sort of a bonus structure. Most also typically include some sort of a restrictive covenant limiting the associate’s ability to practice within a certain distance of the existing practice. Whichever form of compensation you choose, be sure to have everything in writing prior to beginning the position. This includes salary, bonus, insurances, time off, and restrictive covenant. Like the American poet, Robert Frost said, “Good fences make good neighbors”. Likewise, good contracts make good associate experiences. Be sure to consult with an attorney or practice management coach prior to entering into any legal agreements.
Once you’ve decided that you will purchase all or part of an existing practice, the next step is to obtain a practice valuation. A rule of thumb when valuing a practice is to take the average monthly collections for the past 12 months and multiply that by 6 to 10. For example, a practice that generates an average $35,000 in gross income per month has a market value of between $210,000 and $350,000. This value does not include the accounts receivable and can vary based upon the longevity of the practice, percentage of cash versus insurance, and any un-depreciated practice equipment.
Many senior chiropractors are interested in remaining employed by the practice once they complete the sale. This “Retirement in Practice” helps smooth the transition to the new ownership. It also provides the new purchaser with support during vacation or seminar time and helps to maintain the continuity of care current for patients. The senior doc has the ability to transition gradually out of their career and into their next phase of life.
Purchasing a practice in which you have worked as an associate for a series of years makes obtaining outside financing for the purchase of that practice much easier. Banks are much more willing to provide funding for the purchase of an existing business, particularly one in which you have an established track record.
Whether you start up a practice on your own, associate, or purchase an existing practice, having a solid grasp on the fundamentals of running a business and managing a practice is essential. Seek out coaches and mentors to help guide you along the way. Be sure that the individuals you look to for advice are familiar with practicing chiropractic in today’s dynamic environment.
Dr. Mark Sanna is a member of the Chiropractic Summit and a board member of the Foundation for Chiropractic Progress. He is the president and CEO of Breakthrough Coaching (www.mybreakthrough.com 1-800-723-8423).