Starting a Low-Overhead Practice
PRACTICE
MANAGEMENT
Peter G. Fernandez
Today it’s four to five times harder to start a practice than in years past. Here’s why: the majority of people have HMO or PPO insurance, and these insurance companies have closed their doctor panels. Therefore, new practitioners can’t get into the insurance panels and have to survive on patients who don’t have insurance— cash patients. Thus, a new DC would be wise to start an extremely low-overhead practice.
Overhead Facts
The doctor creates his or her overhead—every single dollar of it—and 80% of high overhead is caused by the expenses a DC obligates him or herself to prior to opening the practice. Many new doctors have an “ego-driven compulsive disorder” of “buy, buy, buy” that dooms their practices (i.e., “I wanna,” “I gotta have,” “I deserve,” etc.).
“The doctor creates his or her overhead—every single dollar of it—and 80% of high overhead is caused by the expenses a DC obligates him or herself to prior to opening the practice. J Ï
Here’s a fact: new DCs who think they can out-earn their debts will go bankrupt or fail. The best way not to go bankrupt is not to incur the debt to begin with. This article will show the reader how to open a low-overhead practice without sacrificing a professional image.
The Two Ways to Start a Practice
Independent Contractor
Becoming an independent contractor is the new DC’s best choice. A doctor is an independent contractor when a he or she leases space in someone else’s practice or business. A DC can lease space with chiropractors, MDs, attorneys, podiatrists, dentists, and other business people. The doctor needs to be very careful when negotiating aspects of the independent contractor lease agreement, including the cost of the lease; the days he or she can use the space; the equipment that will or won’t be provided; the CA services that will or won’t be provided; the computer use that will or won’t be provided; and the amount of signage that will be allotted to him or her. Therefore, due to the complexity of these negotiation points, a new DC would be wise to utilize the guidance of a start-up consultant.
“Solo” Practice
The average new DC’s office lease is $2,500 per month. A start-up consultant can teach a doctor how to negotiate a lower office lease payment. As a start-up consultant, I typically save a beginning DC $500 to $1,000 a month in office lease payments.
Think “Tiny”
Smaller is better, and 600 sq. ft. is all that a beginning DC needs. Don’t be envious of doctors with bigger offices because those doctors have higher overheads. Only spend $400 to $500 a month for an office. A doctor shouldn’t pay for square footage he or she doesn’t need. Stay away from higher income areas because the monthly lease payments will be much more expensive, and try to lease an office space that needs no remodeling because remodeling is costly.
A Consultation Room Is Not Necessary
This room is only used half an hour a day and will cost the doctor an additional $12,000 a year.
An X-ray Room Is Not Necessary
This room is only used half an hour a day and costs $9,000 to build. The monthly operating costs for an X-ray machine aie $550 a month, which includes lease payments, supplies, maintenance, and additional electricity.
Start-Up Equipment
X-ray Machine
A high-frequency X-ray machine will cost $25,000 or more. A digital Xray will cost $50,000 or more. An Xray machine is not a good investment. Think of how many patients you’ll have to X-ray to earn your investment back. Instead, a new DC should refer patients to an imaging center.
Adjusting Tables
Expensive adjusting tables are one of the major causes of high overhead. Start a practice with new stationary adjusting tables for $500 to $600, or an adjusting table with drops for $1,300 to $1,400. Don’t purchase hi-lows because they are too expensive.
Equipment Lease
When starting a practice, only purchase or lease “needs.” Buy “wants” out of net profit. However, make sure to purchase or lease “needs” that don’t sacrifice the visual professionalism of your office.
The average beginning DC pays $600 a month for equipment leases. The less a doctor spends for equipment, the lower his or her overhead will be. The purchasing or leasing of equipment
■ "The doctor creates his or her overhead—every single dollar of it—and 80% of high overhead is caused by the expenses a DC obligates him or herself to prior to opening the practice. J J
either allows the new DC to be successful or “sinks” him or her with high overhead.
CA Salaries
A CA Is Necessary Hire part-time CAs and pay them by the hour—not with a salary. Outsource all insurance activity. The average beginning
DC spends $200 a month for C A training. Instead, use Internet CA training, which is free.
Never Practice Without a CA
When a doctor practices without a CA, he or she will look like a novice. People don’t go to novice doctors for health care.
Insurances
Malpractice insurance is absolutely necessary because one out of 20 doctors will be sued for malpractice in their first year. Another necessary insurance is workers’ compensation, which is state-mandated for each employee.
Consulting Fees
Consulting fees are one of the primary causes of high overhead for a new practitioner. The average beginning DC spends $1,100 per month for consulting services.
Use Internet consulting because it reduces new-practice consulting expenses by 80 to 90%. Internet practice starting programs are only $99 a month versus $1,100 a month. Internet consulting eliminates the loss of new patients and patient visits when a doctor wants to attend a new practice-building seminal’. The doctor doesn’t have to travel anywhere since these semináis aie on the Internet. This way the doctor can get his or her start-up seminái s while staying at home, and the doctor will have more time with his or her family.
The Necessity of Hiring a Start-Up Consultant
A start-up consultant will help a doctor save money for office leases, interior design, decorating, contractor expenses, sign design, build-out expenses, and equipment, as well as help a new DC avoid making costly mistakes. Without a start-up consultant, a new DC will make too many mistakes, and mistakes cost money. The reason most beginning DCs fail is because of the mistakes they made prior to opening their practices. A start-up consultant is the beginning DC’s very best friend.
Office Supplies
The average beginning DC spends $1,500 a month on office supplies. To counter this, have strict inventory control, don’t overstock, purchase one-size-fits-all cervical collars and lumbar supports, and don’t buy in bulk (i.e., buy 12, get one free). Only order one to two months’ worth of supplies of anything, and never stock items that are rarely used, such as carpal tunnel supports and tennis elbow supports.
Accounting
The average beginning DC pays $400 per month for accounting. To counter this, the doctor should do his or her own bookkeeping by using an in-office bookkeeping computer program. Then, the DC should only have his or her accountant do the “end-of-the-year” taxes. By following this advice, a beginning doctor will reduce accounting expenses by approximately $1,500 the first year.
Advertising
The average beginning DC spends $2,000 or more per month on advertising. Therefore, he or she should only use proven, inexpensive, yet effective advertising. He or she should get professionally made websites and Internet advertising; and place his or her name and address in the Yellow Pages, but don’t place a display ad. In addition, the doctor shouldn’t send out opening announcements or have a grand opening because they aie not cost effective.
Seminars
The average beginning DC spends $7,200 per year for semináis. The only semináis a doctor needs to attend during the first two years of practice are license renewal semináis and newpractice building semináis. Eliminate postgraduate and technique seminái s— take them later.
Attend New-Practice Building Seminars Online
Internet seminái s will save a new DC 80 to 90% of seminal'
Vacations
Anew DC shouldn’t take a vacation during the first three years in practice. This is the time to build a practice, not to take time off.
The Cost of a One-Week Vacation Income Loss = $ 5,000 Office Overhead = $ 1,500 New Patient Income Loss = $ 5,000 (5 @ $1,000) Total Loss of Income = $11,500
An addition to this loss is the cost of the doctor’s vacation (hotel and food expenses, etc.). One vacation per year can use up tlie profits of the doctor’s first years in practice.
Doctors, by following the advice of this article, you’ll reduce the overhead of starting your practice by 50% or more. Good luck to you!
Dr. Peter G. Fernandez, the “start-up” coach, is the world's authority on starting a practice. He has written 20 books and more than 200 articles on starting and building a practice, and has consulted in the opening of more than 3,000 new practices. This experience has resulted in what doctors really need to know when starting a practice. If you have any questions, please contact Dr Fernandez at The Practice Starters® Program, 10733 57th Avenue North, Seminole, Florida, 33772; by phone 1-800-882-4476; bye-mail: [email protected]; or visit www.PracticeStarters. com.
