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My name is Dr Randi Ross and I am the CEO of Premier Practice Consulting, and today I want to talk to you about something that not everybody’s really aware of. There is this trend happening within chiropractic, And it’s really something that you should, one, know about and two, be following.

And I’m going to explain to you why this is so important and why it’s really become, becoming a critical part of our profession as healthcare providers and actually healthcare across the board. So the future buyers of chiropractic practices, are really becoming more and more prevalent that they are investors.

And again, you might know some people that are selling and or buying. So you might be a little bit aware of this, but a lot of people, it’s flying under the radar because for the most part, it’s something relatively new. Now, some of you might say, Oh, there’ve been investors buying chiropractic for years, maybe decades.

That’s true, but it’s really been more prevalent in other sectors of healthcare. Dentistry is a big one. PT, most healthcare practices today within, medicine, very few of them are independent kind of freestanding offices. It just doesn’t exist anymore for the way our healthcare system has evolved over the last 20, 30 years.

Understanding that this is a trend that’s not going away, it is here to stay, and just to start becoming aware of what this might mean for you in the future of your practice, and there’s different kinds of investors that are currently buying. There is the doc that, hey, I just would like to own two or three practices.

We used to use the word really satellite offices years ago, that we would like to, that they’d like to own a couple of practices in a general area, usually within maybe an hour or two of each other. And then there is the doctor, the chiropractor, that is in a position where they are opening and or buying a number of clinics, usually in a given region, but that’s actually not even an absolute must these days.

So they might be like here in Florida, buying 20, 30 clinics throughout the state might have someone in the Midwest. That’s focusing on that area. But also might be seeing opportunities in other parts of the country where something fits their model that’s available. And they’ll go ahead and they will jump in there.

And then there are, I use kind of a broad word here to explain this next category. which is really what I want you to understand and become aware of. And that’s the corporate buyer or the venture capitalist group or the private equity. You can use a whole bunch of different terms that, that I guide them under this one umbrella because they’re very different than the chiropractor who’s buying a few clinics in a region or even the chiropractor that’s buying up 10, 20, 30, 40.

maybe plus clinics either in a particular state or in a particular region or even maybe through multiple states, in our country. So what really makes them different is number one, they’re not chiropractors. They’re not even healthcare providers. They’re not licensed physicians in any type of way in any state.

Sometimes they might have someone within their group of specialists that could be a chiropractor, but actually what I’m seeing is That’s really not the case. These are strictly investors that see a business opportunity. I have my own little theory on this. That the reason why all of a sudden it’s so much in the forefront and as someone who sells lots of practices a year, are really starting to have that engagement and those sales take place with these types of buyers.

I think COVID might have had something to do with it where people really saw that even in a massive, every hundred year pandemic, healthcare was somewhat unaffected. I know some of you had, more of a dip or even maybe you were in a state that forced you to do things or even close.

But for the most part, they really saw that health care was not affected. So investors and venture capital people and, these people that just have tons of money and they get investors to pull into that money. They look for ways to grow their money. That’s really all it’s about. And I think they found that healthcare is a great sector.

They probably knew that already, but all of a sudden chiropractic is on their radar. as an opportunity. So what you need to understand is there are a few things that you have to really be clear on. That an owner operator buyer is very different than an investor. So an owner operator is, I come in, I buy your clinic.

If someone like myself was to represent you, it takes 12 to 24 months to sell most clinics, some a little bit less. Some a little bit more and the owner goes, the buyer goes in, they’re the new owner, they take your place, so to speak, you slide out as a caregiver, they slide in and it’s a little bit business as usual.

So that’s what we refer to as an owner operator purchase. Those are becoming less and less. So the difference really is an owner operator, you will need a standard set of information. Nothing I’m going to say is going to surprise you. They’re going to look at tax returns. They’re going to look at profit and loss.

If they’re going through an SBA lender, some of those documents will need to be more numerous and more specific. They’re going to, as an owner operator chiropractor, they’re going to look at stats. They’re going to look at what style of chiropractic do you do? What type of techniques you do, because if I’m a, upper cervical person, chances are, I wouldn’t be looking at a diversified practice.

If I’m an activator practitioner, I probably wouldn’t look at a diversified practice because it would be hard to transition those patients to what I’m used to doing. So they’re looking at things like that. And, Maybe in a little bit more detail, what percentage cash bases insurance if you have a lot of personal injury or a lot of Medicare.

That’s more their wheelhouse of what they’re looking for as an owner operator. A bank doesn’t, pretty much doesn’t care about things like payer profile and where your patients are coming from for the most part. That’s going to be, something that an owner operator really digs into.

Because that’s what they know. So they’re going to want to buy where their comfort level is. When we start talking about investors, the information and the way you need to structure what you’re offering really takes a big turn. First of all, your financials need to be very crystal clear. And for those of you out there that don’t already have that, Understand really for the most part I can say in any sale it’s critical, but when we start to deal with investors, it is even more they’re going to care less about your style of chiropractic, the techniques you use, and their big focus is going to be the financials. They’re going to dig down to something called their EBITDA. That’s what, if you don’t know what that is, I’m not going to go over it here. You can go ahead and look it up.

And a lot of people don’t even know what that is. A lot of people don’t understand what their true net is and have a way to break that out. You pull out a P& L statement and there’s a lot of things built in there that your accountant calls for as a business expense, but it’s not what I refer to as a pass through expense.

A pass through expense is what, Buy, buy your practice or I’m investor A and I’m going to come in and buy your practice. What are the expenses that I’m getting sure that it will take to run the practice as it currently exists? And I know we talk about this a lot, but when we talk about the investor purchaser, It’s even more critical because they have all different departments that are going to really dive deep into these financials.

Find tooth comb, ask you detailed questions about every line item, and you really should be prepared with those answers. And I tell people this all the time. If you pull up your P& L and you don’t know what certain things are, if I ask you, just for example, here’s the thing, no two accountants do things the same.

So if I pulled up your P& L and say, hey, you have, 60, 000 a year for, and it just says insurance. What is that insurance? Is that healthcare for you and your family? Is it your disability policy? Is it life insurance for you? Is it health benefits for the staff? If you don’t understand that, and you don’t know how to break that down, you should really have a conversation with your accountant.

You should know all your financials. And to investors, they are going to dig really deep into all of your financials, probably deeper than even a banker would. Some people think Oh, this is great. We’re not dealing with a bank. This is going to be so much more simple. And I can tell you they pretty much mirror a bank and at times and under certain elements of the purchase, they dive even deeper than a bank does.

And again, it depends upon the investor. Is it a, a Chiro buying, they’re going to look at things a little bit differently. Then just a venture capitalist group that are looking strictly for an investment. So your financials, key. Keep those records on a regular basis. Understand your tax returns.

I don’t say you have to understand all 40 or 60 pages, but you should have a good feel for it. Your P& L, you should know every line item and know how to explain that if asked a question. Other things like stats. Monthly overhead pass through, things like that. What the equipment, real value of equipment, not what you paid for it, not what you think it’s worth.

You really should be keeping a toll and at all times, at least once a year where you update, what is my equipment worth? Sometimes you have to call the dealers that sell you equipment and say, what is the value of this? It’s like a car. Once those wheels roll out of that showroom, boom, instant depreciation.

So you can’t take the value of your equipment that just brings something up. Some people try and say I’ll take it off my tax return. Whatever my accountant, calls for it. No, that’s, this is. Oh, if you had to sell the equipment, what is the value? It’s not resale. So understanding the value of your equipment and your assets, very important.

Something else we talk about all the time, and I’m just going to beat this horse to death, is that you have to aesthetically keep your practice up to par. You can’t have a practice. That’s 30 years old, that you haven’t changed the carpet in decades. You haven’t painted the walls. You have the same Formica countertop and the same chairs you’ve had for 20 years.

Unless there’s some like antique high end thing, you need to keep things up to date. People don’t want to buy old and outdated, especially investors. The other thing to keep in mind that’s very different with investors than with an owner operator, and sometimes even a chirop buying a lot of clinics, is normally a transition is a short period of time, a month or two or something like that.

Some people stay on in a different model. That’s an exception to the rule. But with investors, they are looking for you to be part of their company, in a way to explain it. So they’re looking for someone that’s looking to stay on, probably minimum of two years, really they like five years, and some of them even ten years.

If you’re thinking At some point, we used to say, if you’re thinking two to three years out from retirement, you should get started. But now the model is shifting and you have to be aware of that because if you’re pushing 70 and you don’t want to work for another five or 10 years, you really have to rethink, before you get to that age bracket.

Maybe this is something that I should definitely inquire about, pursue. Is my practice a candidate for this? If I’m willing to give a company or an organization five years. And what that looks like is different for everyone. There’s no two opportunities that are the same. Obviously you stay on for the most part as providing care.

What the other requirements that you have are very different. So we really have to all do a mind shift of, where we see ourselves down the road as to what our exit strategy looks like. And that’s what we talk about the exit strategy, making sure your practice is on an upswing, not a downswing.

Very few people buy downswing, but for investors, We have to think much differently because you will stay on, become a part of that company, and there’s a lot of logistics that go with that. We actually invest a portion of the practice back into the company and down the road, hopefully there’s a big payoff for that investment.

But just to understand that, We have to really start thinking much differently. We have to be prepared. Another really great way to position your practice to get the most money you can from a group of investors is to have associates. Obviously, your practice has to be large enough to support associates, but that is one of the things that these groups look for.

They look for those practices that have two, three, four associates. The larger The, higher volume, higher profit practices. And they’ll buy up a whole bunch in an area and they really maximize their exposure in different given regions. And they really capitalize on capturing the patient base.

So that’s why this is important to be aware of, that you could have this opportunity. And you could be a part of this new trend. You just have to understand it’s not business as usual. And you really need to, again, be positioning your practice for, listen, if you’re in practice 10 years and you’re thinking, I want to do this another 10 years, you might want to start having that conversation.

If you’re 50 and thinking, I’d like to be out by the time I’m 55 Let’s have that conversation and see if your practice is positioned for this. This is the wave of the future. This is not me just spewing on camera here for you. It is absolutely, I can tell you five years ago, the only investor buyers for the most part, there’s always been a few, groups around were some of these doctors that are looking to buy up lots of practices, whereas now, Most of the investors we deal with, like I said in the early part of this conversation, are not even any kind of healthcare providers.

Some of you might have heard the word roll up and that’s where they buy x number of practices. Every group is different. It could be 25, could be 30, could be 100, could be 500. I don’t know every company model. And once they get that, they do what they call roll them up. And they sell them to an even bigger company.

And that’s what we are going to see in healthcare. That is the trend. There is no way to stop that. So you’re going to get to the point, we’ll get to the point as chiropractors, which most of us are still independent. down the road where we’re either going to have to buy into this model or there’s going to be very few freestanding independent chiropractors as we know today.

There’ll always be some, but for the most part, the market of capturing patient bases is going to be by these different groups. So I’m here to inform you, This is the wave of the future of our profession. Please, learn about this. It’s very important. I don’t care if you’re in practice two years or 22 years.

You need to know about this. You need to understand it. You can always reach out to me. We can have a conversation about your particular practice, if it fits the model, and if it doesn’t, we can tell you different ways that you can start making those adjustments so that you are positioned for one of these acquisitions.

I hope everybody takes a little something away from this, that this is something we can’t bury our heads in the sand anymore, because this is the wave of the future, and I really want everyone to Walk away from this conversation and take this to heart and start recognizing that we need to do, we all need to do things differently.

We need to do them better so that we’re not pushed to the side because someone else is on board with this and able to provide the care that we all provide. That’s it for me for today. Dr. Randi Ross, CEO of Premier Practice Consultants. You can always reach out to me. I will talk to anyone.