Question: I have friends who are dentists and medical doctors sell their clinics for millions. Why is my chiropractic clinic valued for so much less?
Because those dentists and medical doctors probably joined a group of practices sold together as one company, whereas you are likely trying to sell your solo practice to another chiropractor.
The key factor limiting the valuations of chiropractic clinics is that most clinics are bought by other chiropractors.
The bigger practice sales in the tens or hundreds of millions of dollars can be referred to as a "Wall Street sales," which is when a company goes public or when a professional investor, like a private equity or a large company, acquires it.
Main Street vs. Wall Street
Main Street businesses are often priced relatively low at "one times earnings" – meaning the business is valued at about one year's worth of the owner's income. If the chiropractor earns $200,000 of personal income in a practice with $500,000 in gross collections, then "one times earnings" means the practice is worth about $200,000.
Depending on a variety of factors such as equipment value, urgency to sell, down payments, and transition clauses for the selling chiropractor, the practice may sell for more or less than that amount. Unfortunately, the national average for chiropractic clinics is actually below one times earnings, according to Vertical IQ, so a clinic often sells for less than a chiropractor's annual income from the practice.
Wall Street sales are valued very differently from a Main Street sale, and there are only a handful of chiropractic businesses that are even large enough to qualify for a Wall Street sale. The threshold to qualify for a private Wall Street sale is usually minimum revenues of several million dollars, and the minimum revenue to take a company public on Wall Street is $45 million, along with other caveats.
These larger chiropractic companies, with multiple chiropractors and locations, can obtain multiples at five, 10 or even 20 times earnings, thereby putting far more money into the pockets of the participating chiropractors! Wall Street investors look at a company's future growth and profitability, and fast-growing, profitable companies attract high dollar valuations.
Is a Roll-Up Right for You?
Today, across the country, there are some entrepreneurs and chiropractors who are bringing multiple successful chiropractic clinics under single brands to boost the value of all their practices. Merging a couple dozen chiropractic clinics into one company is commonly called a "roll-up" and has been successful in industries such as dentistry and medicine, where multiple clinics came together under one brand, which were then sold at premium valuations. We are already seeing groups of these clinics being valued in the tens of millions and even the hundreds of millions of dollars!
TOP 7 WAYS TO INCREASE THE VALUE OF YOUR PRACTICE |
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7 |
Change Name From Smith Chiropractic to Main Street Chiropractic - adds 5% of value |
6 |
Add an Associate Chiropractor - adds 10-20% of value |
5 |
Increase your Business - adds 20-30% of value from each revenue dollar |
4 |
Add a Second Revenue Stream - adds 25-40% of value |
3 |
Improve your Profi tability - adds 35-50% of value from each additional profi t dollar |
2 |
Own Your Building - adds 50-100% of value |
1 |
Join a Roll-Up - can multiply the value of your practice by as much as 500-2,000%! |
| SOURCE: Informal survey of private investment bankers with insight into valuing a standard chiropractic clinic deal, 2021. | |
Roll-ups may involve some changes in the office name and procedures, but there are also some groups that allow chiropractors to continue to practice with minimal interruption in the same style they have been doing for years, earn the same income as when on their own, and maintain much of the control and decision-making. Not every roll-up involves handing over the keys to the kingdom. There are many different business models of roll-ups, each with their own set of criteria, rules and opportunities.
Maximize Your Value
Since most chiropractors are relying on the value of their clinic for their retirement, thinking about how to maximize the value of your clinic is critically important. As a health care professional, chiropractors deserve to capture the value of their service and the value of the clinical business they've built. The sooner you start thinking and learning about roll-ups in chiropractic, the higher the value you can build into your clinic.
Mark Mandell, DC, MBA is a third-generation chiropractor and the president of The Vitality Depot, a chiropractic supply company. In addition to his DC degree, he has an MBA in management and a BS in consumer economics Dr. Mandell can be reached at 866-941-8867 or by e-mail at
for more information.