111: Chirorpactic Practice Value

Chiropractic Practice Value

 

Today we're gonna talk about what makes your practice increase in value over time. Welcome to the KC CHIROpulse Podcast. I'm Dr. Michael Perusich, and I'm joined by my co-host, Dr. Troy Fox. Troy, today we're gonna dive into this whole idea of what are the things that actually make the value of your practice go up.

 

Or down. And by the way, everybody we're sponsored by the Barlow Brain and Body Institute. We'll give you some more information about them in a minute. But they're helping doctors learn functional neurology without all the complicated stuff.

Value. I really want to dive into this topic on value because this is just such a great topic.

I think it's a topic that all doctors think about because they think, I've worked in this practice all these years, what kind of value do I have? At some point when I decide to sell this practice, I decide to hand this off to the next generation or, you know, a new Chiropractic doctor coming out of school. And so I think we all think about that, so Sure.

You and I look at it from a very knowledgeable standpoint from the fact that we've seen this happen over and over again. And we understand that sometimes, there's emotional value to a practice that maybe not, maybe it's not worth as much as you think it is. And so we're gonna talk a little bit about some of those important things.

And, this was predicated by a couple of questions that we've had even over the last few weeks, and we constantly get those. Docs wanting to know what is this Chiropractic practice worth? What is that worth? If I buy this practice or if I get ready to sell my practice, what is this or that worth? Yeah, really what constitutes value?

And after years and years of analyzing practices, there's one thing that we've noticed. There's this traditional bell curve in practice.  on what your practice is worth. And you know, think about it, you start a practice out, you're, you know, you're in maybe let, let's say your early thirties, you're, you go into practice and who are you attracting?

Well, we tend to attract like-minded people, so we're probably attracting people in our twenties, thirties, and forties.  for the most part. You're still gonna get a few Medicare patients and those kinds of things probably, but , there's this bell curve that happens. So you start out going up the curve, increasing your patients.

You've got great capacity. You're full of vim and vigor. You know, you're young, you're healthy. And then you reach this pinnacle where you start to wanna slow down just a little bit, start having a family of your own. You want to go to the soccer games, you want to do those kinds of things, and your practice peaks well, all this time.

You're also getting older, so who do we attract? Like-minded people. So now we're attracting patients in their fifties, sixties, and seventies. , we start to slow down and we hit the backside of the curve and the value of our practice goes down. So there is typically a tipping point. Now, there are things that you can do to push that tipping point way far into the future and not let it collapse on you.

Like the traditional curve.  But one thing that we hear a lot.  is, you know, I've had this practice for 30 or 40 years and I've got, I've got all these resources. I've got this backroom full of equipment. What's it worth? . Well, does it work? You know, it's only worth something if it works. Why is it in the back room?

Are you not using it because it broke? Or we'll hear, well, I've got this whole huge file room and it's just chalk full of x-rays and, and old files and, and so forth. That's gotta bring some value? No. It brings some tonnage to the practice, but it really doesn't bring value. So we have to start thinking a little bit more like a true entrepreneur when we're talking about value.

And so what are the confines and structures of value? Well, they're the things that literally are driving the clinic, the revenue side, the risk reward side of the practice, which is probably a concept a lot of people haven't heard of. Those are the things that build you. 

Troy, you have a cash practice.

Yes,  And, I looked specifically for a cash practice because I already knew what would hold value long term. And I also knew from a standpoint of buying a practice when I looked at the value of the practice as well, we all worry about how much. , is the practice gonna drop off when a new doctor comes into it?

Right. And cash practices don't seem to do that. And quite frankly, ours grew the minute, the minute that we walked in the door. Now the fact that we retained the doctor that owned the practice, um, as well, doesn't hurt that process any at all. I mean, we were in a very unique situation, but, and you guys were like-minded.

You had similar philosophies about practice, which helped. Something you and I talked about off camera, and that's a, that's a thing that, that I always tell docs when you are on the, when you're on the exit strategy plan and you're looking for a doctor to take your place and you're looking for a seamless integration, that creates a situation where you can make some money by selling your practice, and they can still have a fantastic practice.

Without worrying that the practice is just gonna implode on 'em as soon as they take over. That's by finding somebody that has very, very similar interests to you, and you have to sit down and really hash those out and be very honest with each other before you start practice. And in my case, that's exactly what happened.

It was perfect. Yeah. Your practice is a great example of a practice that over time is going to maintain its value very well. So I wanna, I wanna talk about this concept that I just brought up a second ago about risk versus reward. So back in my investment banking days, we talked about risk versus reward a lot.

When we'd analyze a chiropractic practice, the risks are, are you a practice that's highly likely to get audited? Well, who gets audited? Insurance-based practices? Are you a practice that's likely to be affected by a downturn in reimbursement? For example, a high Medicare practice might be, uh, might fall into that.

You have to carry the accounts receivable for long periods of time, like a PI based practice. Those are high risk practices. just that have a lot of employees, high risk practice cuz you're at risk of having typically more turnover and, and more HR issues than those kinds of things.

Low risk  would be a practice like yours that is all cash high retention. When you value, and this is one of the things that we do, not only do we help doctors create exit strategies, but we help value practices as well. One of the things we look at, everybody in the profession gets hung up on new patients.

When I value a practice, we don't, we don't care about new patients as much as we care about. . Retention. Retention of patients. And the interesting thing about a cash practice, and I, I know we harp on this a lot and people are like, oh my gosh. So I always talk about cash practices, but the truth of the matter is this, there are two things that we see.

One retention is really good in cash practices, very, they've got a little bit of skin in the game. Um, they're, they're not really relying on their insurance to pay it. And then when insurance doesn't pay anymore, they go, I'm done. You can actually educate as to what chiropractic is and why they should continue care and what wellness care is, and that's important.

Here's the other thing that I see. We see a, we talked about it initially, the bell curve of practice and the older you get, you tend to, you tend to draw that age of patients in. I don't see that in a cash practice. In a cash practice, we draw people of all ages from, from pregnant mothers, infants, you know, all through all stages of life.

And in a normal day, I'm gonna see, I'm gonna see folks from, uh, like I said, from pregnant mothers to young children all the way up to, you know, somebody that's, that's elderly all in one day, right? And. That's a normal day. It's, I, I don't really see my practice aging with me. And it didn't. And the other, the other doctors, it's because of your retention.

Yeah. And the other doctor's not that much younger than me. She's a little bit younger, but she had the same situation. And so we see that more in cash practices where it's more diverse. Right. Yeah. Because people are looking for a reasonable price option. They don't care how old you are.  and you have a low risk of reimbursement being affected.

Mm-hmm. , you know, on the cash side of your practice, you have total control over your income on the insurance side of a practice. You don't. And yeah, that's one of those things that, when that, uh, risk is really high, it really ticks down your value a lot.  too. So, and that's, that's a whole nother podcast because we get, we also get questions all the time, well, I can't lower my cost.

That's too cheap for an adjustment. Well, if you're running a cash practice with low overhead, here's what we look at. We look at that gap between what it costs to what it costs to practice.  and, and what you're generating, what is that gap, right? And you have that gap with an insurance practice, but it takes a lot more to get there.

So those are some of the things that we look at as well. We also look at that gap. Are you, uh, what's your profitability when you're getting ready to sell this practice? Are you, are you barely skimming by or are you, are you running a very efficient practice? That's right. And that's a huge one. Mm-hmm. , you know, not too long ago we had a call from somebody who.

Was wondering about the value of their practice and um, one of the comments was, well, I see 80 new patients a month. That's gotta really just drive the value of my practice up. You know, here's the funny thing about that. If your retention's not good, your new patient numbers don't matter. Mm-hmm  because a new doctor coming in, buying a practice and coming in, cuz remember, the only way to get the value outta your practice really is to sell.

Mm-hmm. . So a new doctor coming in, who's gonna buy the practice? Can they maintain that 80 new patient level? Probably not very easily, especially if they're a young doctor coming outta school. Mm-hmm. , they just don't have the same capacity. Right. And so you've gotta think about that. A, a new doctor buying a practice who comes into a high retention practice where the patients aren't going to leave, is a much more successful place to start if you're gonna buy a practice.

Mm-hmm. . So you have to, you have to look at both sides of the street there. Yeah. That's for sure. And, and really when we look at that as well, yes, there could be some upside potential if you've got that many new patients flowing into your practice. I, I get where you're coming from. You've gotta be able to retain those, like you said.

And so there is some upside to that when we look at that. Mm-hmm. . But there's also the downside, if we look at it and we see that most of 'em are pouring out the back door within the first few visits, which means a lot of work for you with, without very much return on that investment. . Right. That's exactly right.

And that's, that's what, that's what makes it really tough to create greater value with a high new patient flow, because that means your practice should be growing exponentially if you're seeing 80 new patients a month. 

Right. You should be basically a waiting list practice within just a very short period of time.

If that's the case and you're moving patients into a retention model where those patients are getting wellness. Right. And the scalability has to be taken into consideration as well. Cuz it can be tough seeing that many and that's, at that point you gotta push back a little bit. Right? And that's what we've had to do, in our cash practice, which is interesting is we, when we initially.

added a second doctor to reduce that wait time because the doctor that was in there was very smart about not overloading herself and not saying, well, I'll just see more and more new patients. She said, no, I can't see you for four or five days, or maybe even a week. And then it took two weeks.

Right. And then so when I came into the practice, initially, we had a void that we were able to fill. Funny thing is, we're right back there again.  and that happens as a result of knowing what your boundaries are as well. I don't think that there's any benefit to seeing as many patients a day as you can possibly see while running around like Sonic the Hedgehog.

I think that there's great benefit, especially in a cash practice, by determining what is my. , you stick to that limit and you don't worry about the fact that you have to tell a patient, you know, it may be a couple of days. So those are, those are the kind of practices that gain value very quickly, very, very quickly.

Mm-hmm. , you know, and I think the whole cash practice, the benefits of cash practice are a great topic for another.  podcast coming up. But, uh, if, if you really wanna build the value of your practice, you've gotta build some of these things that we talked about today into your business model.

Speaking of a great business model, I wanna thank Dr. Andrew Barlow from the Barlow Brain and Body Institute for sponsoring our podcast. If you have been thinking about adding brain-based therapies to your practice, go check out barlow brain body.com. They're doing some great things. It's brain-based therapies, but they teach you functional neurology without all the crazy, difficult stuff to learn and remember.

So again check out Barlow brain and body.com. We want to thank them for being our sponsor. So think about your practice and how you're building value, not just your monthly revenue. Think about how you're building profitability and value in your practice.  and if you don't have one, get a coach that can help you understand how to make that happen.

And you know, with that in mind, these are the kind of things that we do at Kats Consultants. So go check us out, cats consultants.com. And if you wanna submit a topic for a pod upcoming podcast, be sure to shoot Troy an email [email protected]. We'd be happy to get your idea on the air. So go check us out, check out our path to profit and our path to prosper programs.

And, if you want to schedule a breakthrough call with us, we'd love to talk to you. Troy, anything else to add? I think that's it. I think this is an exciting topic for most chiropractors and sometimes a little bit daunting, so if you need a little help, holler at us. Absolutely. I mean, this is what we do.

So other than that, good luck on raising the ceiling on your practice because I think it's a very important thing to do as, as, and not only as we near retirement age.  all throughout our practice. That should be our goal is to create a longevity model that's gonna work well for the next individual that comes in and takes us.

Yep. Absolutely. Over and, and gives loving care to your patients. Absolutely. Well said. All right, everybody. Thanks for listening to the KC CHIROpulse Podcast, brought to you by Kats Consultants. From Dr. Troy and I… We'll see you next time.

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