27th Jun 2008
“I was undercapitalized” OR “All I need is a table and a phone”
This new DC opened in November and closed in April. A record? Probably not.
If you’re asking “What does ‘undercapitalized’ mean?” let me explain.
I will be talking to her on Monday but here’s what I am guessing, based on what I see a lot these days:
1. She had grandiose ideas of what she wanted in her practice, so when she did her planning, she included all of the “nice to have” stuff as well as the “need to have” stuff. And she was able to get a loan for all this stuff, so she bought it.
2. She didn’t save enough money for “Working Capital” - the money you need to keep paying the bills until the patients start coming in.
3. I know she did some marketing (a direct mail campaign, for one thing), but the patients didn’t come in fast enough.
In other words, she didn’t have enough “capital” (CASH ON HAND) to keep her going while she brought in new patients.
So what is the “take home” message?
When you get your new practice loan, DSATM - Don’t Spend all the Money! Buy only what you absolutely need, and save as much as possible to pay bills. You can always buy stuff later, when the money is coming in. A little restraint now can mean the difference between a successful first year and closing your office.
I’m meeting with the DC on Monday; I’ll let you know what I find out.
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