Empowering Women in Chiropractic -“Top Deal Killers in Healthcare Practice Sales” Part 1

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Well, hello everyone. Welcome. I'd like to thank ChiroSecure for allowing me to spend a few minutes with you hosting these events and sharing what I feel is some pretty important information that every practice owner should know. I am Dr. Randi Ross, CEO of Premier Practice Consultants, and today we're gonna go ahead and share with you something that everybody thinks they know, but I often find they really are missing some critical pieces of information.

So today we're gonna talk about what I refer to as the top deal killers in healthcare practice sales. And this is so important to know because it's not just about, "I'm ready to sell my practice," or you might be thinking, "Why does this even matter to me?" I'm not thinking of selling my practice. I'm o- only in practice two years or five years or 10 years.

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I have a long shelf life still left on my career." What's important to understand is all these elements that we're gonna go ahead and discuss that I refer to as potential deal killers, they're actually things you should be tracking for the life of your practice. And we're gonna go through why these things are important, and we're gonna go through how they potentially kill a deal.

And just one thing I really want to note here, often when people say I'm not ready to sell, I'm only in practice five years," whatever it might be, understand one thing, your exit from your practice isn't always something that you choose. Sometimes it actually finds you. So we always if you follow me here on these ChiroSecure events, you'll hear me preaching from the rooftops, always be market ready in case an opportunity or some type of short- shortcoming finds you and you need to exit your practice and move on.

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So let's go ahead and get started. So the first, and I don't know if these are necessarily in order of importance, but this is probably the one that I find is one of the biggest mistakes, but it also seems to be very challenging for practice owners, and that's poor financial reporting or unorganized financial documents or often the inability to provide proper, what I refer to as hard financials about your business to a potential buyer or investor, or even if it gets to the point when a bank is reviewing the details of your particular clinic that someone is asking them to fund.

Something really important to note, when a buyer is going to a bank, there's almost less importance on the buyer's strength. It's not no importance, don't misunderstand me, but they could be very strong. If your business is weak and you can't provide proper financial information, they will not fund that acquisition.

So when we talk about poor financial reporting or tracking, whatever word you wanna use, there are some very basic documents that everyone should have updated and available at all times. Notice I said at all times. One is obviously tax returns, and those you should have available going back three years.

The other thing I always advise when it comes to tax returns is unless there's a really specific reason for you to go on extension, and the reason isn't that you just don't feel like providing your accountant the information they need, I always advise do not go on extension. Now, are there certain exceptions to that depending upon how your corporate structure is devised?

Of course, that goes without saying. So tax returns, three years. Also, make sure that you have a version of them that is, that doesn't need a password protection, because that can be a little bit frustrating for people even myself when I need to get into something that, we need passwords and the passwords don't always work.

So that's just a little side note. If you can get a version from your accountant that's not password protected, store it. Now, some accountants will have all of these in an encrypted portal that you can access at any time and download. Don't rely on that as I can get it when I need it." You should have a copy of that in your system, w- whatever your organizational process is.

A few other documents that are critical are what we refer to as P&Ls or profit and loss. Something important to note about a P&L, it is not the P&L that exists within your tax return. Very often accountants will say, "You have a P&L. It's in your tax return." That's not the document we need or a buyer or a bank needs.

Most P&Ls are one to two pages. It pulls out the information in a little different way than it's presented on your tax return. It's a little more detailed. It's also easier for us to go through your profit and loss and discuss certain things like add backs. So add backs are those things that your accountant can can account for it being an expense within your business, but it's really an expense that leaves with you, so it becomes an add back as profit for the business.

When I have a one or a two-page P&L myself or a bank or an investor can look through that and see the details in that and it gives more information. The, and three years of P&Ls, and P&Ls should also be done every quarter. So as you complete Q1, you should have a profit and loss statement for Q1 through Q2, three, and four.

That's very important. That's updated. If you're into September of any particular year and you don't have any P&L, again, a little bit more challenging. Your accountant's gonna need more information. You might not have everything readily available. Stay up to date with your business. Treat it like an a- the asset that it is.

You should be sending monthly or quarterly information to your accountant so that they can provide, at the very least, quarterly updated profit and loss. Same thing for what we refer to as a balance sheet. A lot of people don't do balance sheets. They don't really see the need for them. Their accountant tells them that they don't need them.

You should at least do them yearly. That is pretty much the minimum that someone would ask for, and it does report a lot of information about the finances of the business. So those are probably three of the most important documents that anyone would ask for, and not having these readily available or that they don't match, your tax return and your P&L it might not be an exact dollar amount because of certain things, the way they manipulate the data, but it should be very close.

If there's a huge discrepancy, again, now we're talking about poor financial reporting, because that's gonna be something that anyone is gonna dig deep into. You're gonna need a lot of explanation. So you, as the owner of this business, your biggest asset, should be looking at these things, i- annually, semi-annually, and making sure that everything looks right.

I'm not asking you to understand every single element of your tax return. That's probably unrealistic. But the basic math of it and the numbers should jive, and you should know how to explain your P&L. That is something that you should know as a business owner. You should know what every line item is, and if there's a, what I call a group category on your P&L that says something like insurance what does that mean?

Which insurances are in there? Is that for you and your family that's gonna really be an add back and is gonna leave with you, or is that for staff? Do you provide health insurance and other types of benefits? Understanding the breakdown of those kind of, what I call general categories on your P&L is really important.

This is a very-- Let me tell you why this is so important. W- we lose more deals and offers and buyers to people being unprepared to provide basic documents. So if I have a buyer for your clinic and they ask me for three years' tax returns, three years' profit and loss, three years' balance sheets, they want three years of stats.

The other thing is, if you're a tenant, we need to see the lease. You should have a monthly breakdown itemized overhead list, mostly pass through, meaning whatever's personal that you're writing off is not really a business expense. These types of things, and als- I'm sorry, and an equipment list itemized of current value.

These are the basics that anyone that's looking at your practice is gonna want to see. If I'm representing your practice for sale and I have a serious buyer that's been vetted, comes along and they say, "Can I see the financials?" And it takes you two, three, four, five weeks, maybe it's tax season and now you're asking your accountant for things and they're saying, "I'm sorry, I can't do that till after tax season."

Guess what? We lost that buyer. That's a huge deal killer. It makes your business look unorganized and it makes you look inefficient. Huge red flag. So you just lost a potential buyer simply because you can't keep proper financial tracking for your business, your practice, to be able to provide someone.

These documents should be available at any time. They should be current. You should have a pretty detailed understanding of them, 'cause people are gonna ask questions. So I can tell you even right now at this point in time, we have a very large deal that hinges on the investors walking away because it's now been four weeks since basic documents have been requested.

This is probably, if I have to rank the top deal killers that I'm gonna discuss with you here, this is most likely the biggest one. So heed my warning on this. It's not a difficult thing to do, and when you analyze all these things, you're probably gonna find things you can do better in your business.

Okay? Owner dependence is the second thing we're gonna talk about. If you have a very, some people use the word personality-driven practice, for some people that can be a bit of a challenge. Many chiropractic clinics are a little bit personality-driven because if you are the sole provider of care, often that will be people are responding to you.

The best way to manage that is anything that can be offloaded from you to someone else in the clinic, if you have associates or if you have, office managers or if you have assistants that help provide care, any way that it can be about the clinic, the team, and not feeling like 100% about you, the owner, like you're gonna walk and the practice is gonna fall apart, which that really doesn't happen, people think that is something that's really helpful to your clinic at any given time.

And that's important too. We go back to, always being market ready. But if you had to step out of the clinic for a month or a few weeks and you're gonna have a coverage doctor come in, the more continuity of the other elements and the other people in the clinic that stay the same, whether it's on a temporary or a more permanent basis, like in an acquisition, that's gonna definitely be helpful.

So just be a little conscious of that. And again, if you have associates offloading some care and other responsibilities that are engaging with patients. The ideal situation if you have an associate is for people not to be specific to any particular care provider. In other words it's kinda whoever's available.

Those are the most efficient practices that run, because if you're there, great, they can get care from you. If you're, on a summer vacation for three, four weeks, there's someone else there, they're already programmed to be cared for by whoever is available. So that's addressing the owner dependence part of all this.

We're gonna talk about compliance risks, and y- this is something that a lot of people really aren't aware of. You know the basics, things like HIPAA and things like that. And a lot of people think that the extent of HIPAA compliance is you sign a, an authorization when they come in as part of their initial intake paperwork.

And in some places it goes beyond that, and you should really get with your state association or your board to understand HIPAA compliances. I know everybody thinks if I'm doing that's all that matters," who's gonna ever come after me?" But that's a really bad way to run a business.

If there are laws or certain guidelines that you have to follow, you should know them, and you should do that to the best of your ability. That's just one example. But you also have certain licensing. Different states have different levels of licensing, and you really should understand that.

I know a lot of people that I engage with that are not properly licensed, and I'm not talking about, your chiropractic license that allows you to provide care in whatever particular state you're licensed in. Very often states and/or sometimes even cities or towns have very specific licensing guidelines for what category you fall into.

Do you provide just chiropractic adjustments or are you like a lot of other clinics now? Maybe you have a nurse practitioner in there and they're doing pellets or other kinds of injections or whatever, the scope of what you're offering in the clinic. That creates a whole nother level.

The li-- it's not just a license that the nurse practitioner has to have or someone else that's overseeing them. There are often in certain states, cities, and towns, other types of license requirements or different categories that you fall into as a result of that, that often requires you to be able to have services that relate to that.

So make sure you understand this. Don't assume things, and don't think, "I don't really need that. Nobody's coming after me." 'Cause the worst thing that happens is for some reason you get flagged, you get a target on your back, and once they do that's a horrible rabbit hole to fall down. It's gonna cost you money in legal fees.

It could even result in all or a portion of your office being shut down. Actually know this firsthand, we have this going on in a clinic that was purchased, extended services. This one little town that they're in requires a whole nother level of licenses. They just didn't know 'cause the clinic that they bought didn't provide those things and it wasn't needed.

So understand your laws, understand, different licensing requirements, and don't just assume that, "I have a chiropractic license, I don't need anything else. Oh, I'll apply to the town for a business license." Understand these things before you do them and stay up to date, because sometimes these things change, and you don't wanna be that person that says when I opened my office, I didn't need that."

The town's not gonna care about that, they're gonna only care about, what's required of you now and what you haven't done. And like I said, some places will require you to shut down until that's corrected. The other type of compliance that's super important, in my opinion, is billing. Obviously for those of you that have cash practices, this might be less important to you, really being billing compliant and not doing things that create those red flags or that target on your back is so important.

So whether you do in-house billing or whether you farm that out to a company, make sure that you're reviewing different guidelines for the different providers that you're billing for the care you're providing. Don't just assume that whoever you're working with knows these things. Again, this is like worst thing that happens is you didn't do something right, you're gonna say, "Oh, I didn't know I needed to do that," and now you're in some kind of audit.

That's pretty much a nightmare for anyone to be in it. It can happen even when you're doing everything right, but definitely if you, if someone finds you're doing something wrong in a billing category, that's gonna definitely create a lot of unnecessary stress often expenses. Insurance companies look to claw back money when they see something suspicious.

So just make sure all of the different levels of compliance in your office is up to date and you're doing everything proper and current. And make sure you stay involved with your state associations because they're gonna be the ones that are gonna let you know when there's changes that you should be aware of and you need to adapt to or possibly even do something totally different.

That concludes part one in our series of top deal killers in healthcare practice sales. Make sure to stay tuned for part two. I'm Dr. Randi Ross of Premier Practice Consultants. If you wanna know more about the services we offer, even if you just wanna chat about something that came up and you have some questions, go ahead and visit our website, premierpracticeconsultants.com.

You can find us on Facebook. You can pretty much find us on any social platform. Reach out. Happy to spend some time with you. I'd like to thank ChiroSecure for always giving me the opportunity to share some information with you that a lot of people are either a little misinformed or just really have never thought of how important these elements are.

So thank you again to ChiroSecure for letting me be here.

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