Generating Real Wealth and Scale as a Clinic Owner
For over a decade, we've been advising and investing in sports injury and multidisciplinary clinics. From top-performing clinics to a struggling practice we acquired for just $13,000, we've seen what it takes to transform these "owner-operated" businesses into true companies. There are two crucial elements that separate the successful clinics from the rest: the use of a clinic as a real estate acquisition engine, and the inclusion of trusted staff in the growth journey. To book, the math can greatly work in the owner’s favor making use of a hiring partner to help with growth.
When it comes to systems and processes, it's essential to have these in place, but this article isn't about that (we recommend checking out what Rick Lau and Call Hero does for process and phone excellence if you want to build cadence). Instead, we'll focus on strategic investments in your time. As an owner, you're limited by the number of hours in a day, so it's essential to spend them wisely. Some owners prefer to see patients, others prefer to form community partnerships, and some simply want to avoid working 60 hours a week. But if you want to build a real company, there are two steps that can be monumentally impactful.
The first step is finding an equity partner and anchor leader for the clinic. This could be a therapist who owns 10-20% of the practice or a manager who doubles as a therapist and has a profit share and stock options that equal a 10% equity payout when you sell. This not only ensures that you have trusted people running the business, but it also creates a pathway for growth. In one of our clinics in Oakville, we have a superstar therapist who we plan to help open her own clinic and purchase the building with a small deposit, a BDC loan, and our support.
The second step is using the clinic as a real estate acquisition engine. If your clinic takes up at least 25% of the square footage, you may be eligible for a BDC (government of Canada crown corp and entrepreneur’s bank) loan that covers 85-90% of the equity value with 10%-15% down (they will actually do over 100% financing in certain instances with money going toward capital improvements). The bank considers the rent as part of the clinic's normalized earnings, so if your clinic makes $400,000 and profits $80,000, and the rent is $40,000, the bank sees $120,000 in earnings. By occupying only 25% of the space, the remaining 75% can be rented out, generating additional income. A $40,000 rent for 25% of the building could mean a total rent collection of $160,000, which, assuming 4% of the property's value, puts the building at $4 million (very rough #s here). This kind of wealth generation can be shared with trusted employees, creating true careers and shared success. You don’t need to max out leverage either, this works really well with a $1MM piece of property on a $400,000 business that makes $120,000 before considering rent. If this sounds familiar, this is exactly how McDonalds made their fortune—by using a simple and repeatable retail business (restaurants) to pay for leveraged real estate assets. Food for thought: if a 20% increase in revenue can have an over 40% increase in cash flow for a clinic, what does that mean for my ability to harness inexpensive financing from a government bank to then borrow and buy more real estate? In practice, borrowing 10-1 for each $1 invested when you increase the amount you can borrow by 40% can mean owning 400% more in real estate, paid for by your business. In Canada we are lucky to have a company like BDC around for friendly capital without the usual strings of private credit lenders and where the mandate is not just to earn returns, but to stimulate the Canadian economy over the longterm.
The other key strategy for freeing up your time and scaling your business is finding a partner who can help. This is where we recommend WellnessIP.ca, our advisory service for clinics looking to grow better. Our core service is hiring great therapists and managers, allowing you to focus on the bigger picture. By drinking our own champagne, we've seen the benefits firsthand, with average payback in two months or less and cash ROI over 5x generally and total impact ROI including business value improvement at over 30x in some cases, while being a strategic linch pin that enables real growth and the feeling of owning a scalable business you’re in better control over.
In conclusion, building a successful multidisciplinary clinic takes more than just systems and processes. It also takes strategic investments in time and the inclusion of trusted staff in the growth journey. By using the clinic as a real estate acquisition engine and finding a partner to help scale, you can create a real company that operates without the owner working 24/7. Contact us at info@wellnessip.ca to get a discussion going. On rare occasion we look to help finance aspiring owner operators buy their first clinic.
