Top Strategies for a Winning Clinic Acquisition
PERSPECTIVE
Crystal Misenheimer
Buying a clinic is one of the biggest decisions you’ll ever make. The clinic you buy may decide where you live, or where you raise a family. The purchase will make a massive impact on your financial future as the trajectory of a profitable clinic can change your life for years to come. And all of this is amplified by the uncertainty introduced by the COVID pandemic and subsequent economic ramifications.
It’s worth spending the time to choose wisely. Based on our years of experience in the chiropractic market, here are a few guidelines for the best sale experience in today’s marketplace.
Take Advantage of Current Buying Opportunities
COVID-19 has changed every aspect of modern business, and in times of uncertainty, the instinct is often to freeze—hunker down, wait things out, and play it safe. But uncertain times offer great opportunities. To quote Warren Buffett: “Be fearful when others are greedy. Be greedy when others are fearful.”
Right now there are many clinics that have been minimally impacted by the crisis and expect a full recovery. Strong clinics will come out of this downturn even stronger as other doctors in the area who are weaker or ready to retire may close up shop, allowing stronger clinics to easily gain more market share. This is particularly likely in small and medium-sized towns.
And the timing for an acquisition couldn’t be better financially, as we are experiencing the best lending environment we’ve ever seen. Interest rates have gone down 1.5% in the last two months. And for a limited time, as part of the CARES Act stimulus package, the SBA is granting six months of loan forgiveness on new acquisitions, saving buyers tens of thousands of dollars.
Buy Based on Your Strengths (and Weaknesses) The best acquisitions will set you up for success while helping you develop. Look for growth opportunities in your areas of strength as well as established frameworks to support areas of weakness. Buying a clinic is an opportunity, and it should be one that aligns with your skill set.
For example, let’s say you’re great at building an audience over social media, but you haven’t managed a team of employees before. A well-suited clinic might be one that doesn’t have a strong web presence but does have established employees and internal procedures.
You’ll have support where you need it while expanding in the areas where you’re confident. Clinics have their own personalities — find one that suits yours.
Buy the Best Clinic You Can
Don’t mistake business sales for real estate sales. In real estate, buying beneath your means is a sign of fiscal responsibility.
Purchasing a business is different. Buying at the top of your budget will land you a clinic with stronger income, which will change your financial trajectory for the better.
Buying the best clinic almost always works out better than buying a fixer-upper or a low-income, part-time clinic. That’s especially true the younger you are, and the less experience you have rehabbing clinics.
Leave clinic rehab to experts, or make it a part of your expansion strategy once you have experience running a clinic. In the meantime, get money flowing into your bank. You may pay more up front, but you’ll be better off longterm.
Make a Great First Impression
When you talk to a seller or visit a clinic, act like you’re on a job interview. You know the drill: Dress to impress. Be well-groomed. Be polite. Ask thoughtful questions. Don’t assume that you’re the only one interviewing.
The seller will be passing on their beloved patients to the new owner of their clinic, which involves a great deal of trust. The more the seller trusts you, the more likely they are to work with you on the sale.
Likeability is an important factor. Show the seller that you care about the things they do — things like consistent, quality care and protecting the legacy of the clinic. The more established the doctor, the more important this will be.
Buyers have options, but desirable clinics will also draw multiple suitors. Making a positive impression is a key element that can set you apart from other buyers making offers.
Get Prequalified
Don’t give sellers any reason not to take you seriously. Getting prequalified through a bank or the seller’s broker will signal to the seller that you’re committed and have the resources to follow through.
This makes a sale more likely, and it gives you more negotiating power. Sellers will be looking for a smooth sales process, and they’ll be more likely to work with someone they know a bank will fund. Prequalification is one way you can boost your chances up front.
Be Organized
Make no mistake: buying a practice involves a lot of work. You’ll be managing an immense amount of paperwork and a boatload of details, particularly during the lending process.
SBA loans, which are the primary funding device for clinic sales, involve a lot of bureaucracy. It takes about 100 hours of active work to close one of these loans. That number rises even more if the loan needs to be closed on a timetable (generally 90 days from a Letter of Intent).
We recommend that all of our buyers work with a trustworthy loan broker to oversee the process and keep the mountain of paperwork under control. Doing so ensures that your loan gets funded the first time, which raises the odds of a successful sale.
Choose Your Bank (and Your Words) Carefully
If you choose not to use a loan broker, picking the right bank may be the biggest hurdle between you and a successful sale.
Banks without a track record in SBA funding may double or triple the time to closing. They might even structure deals that aren’t feasible for a seller, like requiring an owner carry note of 25% or more (highly unusual for sales under $2 million).
If they do, the sale is sure to drag on, and it may not happen at all. Make sure you work with a bank that has experience funding deals like yours.
Right now there are additional challenges to obtaining acquisition funding as many banks have put their business acquisition lending on hold due to overwhelm with the PPP program. However, if you work with an experienced team with the right resources, funding is still available. For example, we still have a network of nationwide lenders ready to fund chiropractic sales.
Finally, be mindful of how you speak to the bank, too. Once you’re dealing with the bank, everything you say can and will be used against you. Consider the information you should provide to give yourself the best odds of securing a loan. Plan ahead and come in with a strategy to prove you’re a competent business professional worthy of a sizeable business loan.
Keep Your Nerves in Check
Even with all the paperwork and red tape, buying a clinic is an emotional experience. Stress levels are high, and it’s easy to lose perspective.
If emotions go unchecked, they can threaten the sale. One hostile conversation can eliminate goodwill between buyer and seller, which may lead to a drawn-out sale on less than optimal terms.
Don’t let your nerves get the best of you, and don’t take out your frustrations on the seller. Keep communications respectful and professional. It’s understandable to be nervous, but don’t let your feelings hurt your chance of a successful acquisition.
Instead, deal with nerves by doing your homework, coming prepared, and making a good impression. If you shop carefully and set yourself up for success from the start, you can rest easy knowing that you walked away with the best possible acquisition for you.
A smart practice purchase can easily set you up for a long and prosperous career, so take the time to plan accordingly and invest in the professionals who are available to help you create a winning acquisition strategy.
Crystal Misenheimer is the co-founder of Progressive Practice Sales. Their team offers smart, modern solutions to help chiropractors sell and acquire clinics, saving them time, money and effort along the way. She can be contacted at 423.225.0021, [email protected], or through progressivepracticesales.com
