Buying vs. Starting - It’s a Trade-off

I talked with a new grad who is interested in buying a very successful chiropractic practice. She would have to pay over $350,000 for this practice, but it is exactly the type of practice she wants and she would be able to step in and get immediate income from it.

On the other hand, she could start her own practice for less than $100,000.

Consider the monthly payments for each. The purchase payments, if it could be financed over 20 years, would be about $3000 a month. The startup loan payments would be a little more than $1000 a month.

What are the determining factors?

1. “Going concern.” Banks and the SBA are more likely to lend money on an existing business, since it has a proven ability to generate cash flow to pay off the debt.

2. Inexperience. On the other hand, a bank is hesitant to loan to someone who has no experience running a business. How do you convince them you’ll be able to keep the business running efficiently in order to keep the payments going? Two features that might help: (a) Your ability to keep the selling doctor in the practice for long enough for you to learn the business well, and (b) Your ability to find good advisors to help you manage. With this size of practice, you might need to hire a really good business manager.

3. Risk Tolerance. That’s YOUR risk tolerance, not the bank’s. If you won’t be able to sleep at night knowing you have such a huge loan, start your own practice.

4. Work Tolerance. If you are starting from scratch, there are probably 10,000 decisions you’ll have to make, in a very short time. If this terrifies you, go for the purchase.

If you decide to go for the chiropractic practice startup option, you can now get more help with our new STARTUP SUCCESSPLAN WORKBOOK which is included with your purchase of Planning for Practice Success. TheWorkbook leads you through all the decisions you need to make to start a practice.

For more information, go to the DCPracticeSuccess website.