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I just saw a great article by a business funding expert, discussing the reasons why business plans fail.

Some of these failings I have been talking about with classes for many years.  In particular:

* Value Inflation - Many DC grads have an over-inflated idea of their value to society.  Just because you think chiropractic is wonderful, doesn’t mean others will too.  You must PROVE your value by providing care that relieves pan and through outstanding customer service.  Don’t toot your own horn until you have something to toot about.

* “We have no competition.”  Yes, you do; it’s every other chiropractor in your community, in addition to orthopedic doctors, physical therapists, and osteopaths.  This statement shows an ignorance about the basics of business that turns off banks and lenders.  Until you can prove to prospective patients that your practice is valuable to them (see item 1), you are just like any other chiropractor.  People who don’t know chiropractic don’t know the difference between NUCCA and Gonstead.

 *Trying to be all things to all people.  I know when you start out, you want to take everyone.  But you need to more specifically define your market.  What kind of patients are you really looking for?  What do they look like?  What kind of care do they want that you can provide?  Limiting your market actually brings you MORE people rather than fewer.  Trust me on this; I’ve seen it work many times.  If you don’t define your market very tightly, no one will know they are supposed to come to your office.

* Unrealistic financials.  I see lots of business plans with very high income projections and minimal expenses.  Back way off on the income projections.  Even if you think you can start out with an income of $10,000 plus a month, the bank won’t believe you.  And be sure to put all possible expenses in your cash flow listing.  Put a large amount in Miscellaneous (at least $500 to $1000 a month).  Remember Murray’s rule:  Over-estimate expenses and under-estimate income.  And you’ll be about half right.

* Forgetting Cash.  Speaking of cash, understand the difference between cash and profits.  Just because you bill it, doesn’t mean it wil be collected.  You must manage collections to bring in the money you need to pay your bills.  If you bill $10,000 a month and you only collect $5000, you may not have enough to pay expenses.  This is the place where I lecture on keeping down expenses (but I’ll save that for another blog post).

In conclusion, read the About.com article carefully and follw what he says.  If you follow the ideas in this article, it could mean the difference between getting your loan accepted or not. 

A new (2008) book titled The One Minute Entrepreneur by Ken Blanchard, Don Hutson, and Ethan Willis  (Doubleday) includes a link to a website for the book.  On the website is a test you can take to see if you have what it takes to be an entrepreneur.  The link is www.estrengths.com.

Now, when I took the test, I found the questions pretty silly.  For example (answers are on a scale of “never” to “always”:

11. I marshall additional resources when overwhelmed with work rather than turn it away.

15. Competition does not disturb me because it helps me understand what I need to do better.

See what I mean?  How would you answer these questions?  “Never?”  Particularly if you have never been in a business before, seems to me you would have no idea how you would perform in these situations.  I suggest you take it to get an idea of what characteristics would be necessary for success in practice. In other words, don’t take it too seriously.

Let me know what you think of the test and how you did.

I hope you have heard about the E-Myth - why businesses fail and what to do about it.

The C-Myth is the chiropractic myth.  It is the myth that all you have to do is be a great chiropractor with a cool technique and you will make a million dollars.

To be a successful chiropractor, any way you slice it, you MUST have 3 things:

1.  A great technique that gives pain relief to people.

2.  Business knowledge to keep your practice running smoothly.

3.  People skills/ability to communicate with others.

You have the technique;  you know how to adjust people.  Check that one off.

And you can get or hire the business skills.  Check that one off.

So do  you have the people skills?  You can’t hire that skill.  Get busy figuring out how to talk to people and get them to know you, like you, and trust you.  You have to have all three of these things, and the sooner you get them, the sooner you’ll have a successful practice.  And you’ll avoid the C-Myth.

The contract says, “Associate Agreement.”  What does this mean?

I’ve probably talked about this before, but I saw a discussion on a chiropractic discussion board recently about this subject, so I thought I  would talk about it again.

First, understand that “associate” is not a legal employment term.  That is, the IRS and the states do not recognize this term.  They want to know if the person is an (a) employee or (b) independent contractor.  You can call it what you want, but these are the only two terms that have any meaning.

Second, the IRS assumes that someone is an employee unless there is compelling evidence that they are not (i.e., that the relationship is independent contractor).  This means the worker must (1) have income tax withheld from his/her pay and (2) the worker and employer must share in their contributions to FICA/Medicare. 

The IRS has criteria for determing if a worker is an employee or independent contractor, based on three factors: financial control, behavioral control, and nature of the relationship.  Read IRS Tax Topic 762 for more information. 

Now, I’m not telling you not to sign a contract.  I don’t give legal or accounting advice.  I’m just telling you that you need to be aware of what the doctor thinks it is and what that means to you.  If the doctor is considering you an independent contractor, you will have to pay your own FICA/Medicare (”self-employment taxes”) and you won’t have any withholding to use to pay your federal, state, local income tax. 

If you have questions about this, or you have a contract you want me to take a look at, I would be happy to do that.  Remember, no legal or financial advice. 

I’m on my soapbox here, so feel free to disagree.  I see a lot of grads coming out of school with high expectations and even higher  startup costs, because of the technique they have chosen.  These techniques require you to spend tons of money on x-ray and other specialized equipment and tables.  And startup is the time when you need to keep your expenses low.

Now, I’m fully in favor of using the latest technological stuff, and I agree that using evidence from x-rays helps the profession and brings an additional element to your practice. But… you’re paying a premium for this stuff. 

What if you could start out with $50,000, including used equipment and furniture and something left over for working capital, rather than $150,000?  Starting smaller would

• Give you a better chance of getting a loan, even if you don’t have a lot of collateral, and
• Would relieve you of a high monthly overhead.

Think of it this way:  Wouldn’t you rather have a practice with $4,000 a month overhead than $9,000 a month overhead?  (By ‘overhead’ I mean all the money you must pay for fixed expenses, like rent and your payments on loans and on financing for equipment.)  This lower overhead requirement would mean you would be able to pay your bills with fewer patients each month.  You could save the difference and put it towards that fancy new equipment you want.  AND you would be able to sleep at night, your marriage and family would still be there. 

Do you REALLY need all that fancy equipment and x-ray?  I thought chiropractors worked with their hands.  Just a thought….

“With the economic situation right now, is this a bad time to start or buy a chiropractic practice?” If you are graduating from chiropractic school right now, you’re probably wondering if you are graduating at the wrong time. Sure, gas prices are high and going higher, and people in some areas of the country are having trouble paying for their homes. But health care is a pretty “recession-proof” business. People will always need health care, and if people understand the value of chiropractic care, they will keep coming back. Sure, you may lose a few people who have to drive a long distance to get to your office, but you may pick up others who don’t.

This might be a good time to consider buying an existing practice rather than starting a new practice. Why? You will have a built-in patient base and employees who know how to run the practice. You may also have an easier time getting a loan for an existing practice, since it has a track record that a bank can rely on.

Building relationships with patients is a key to a great patient base.  Read this Lifehack article on building relationships , which contains the 11 rules for self-promotion. 

It is a great time to be a chiropractor!  Not only are you in the position to lead patients to better health, but you can make a profit doing so.
Forbes Magazine has named chiropractors and other “alternative” health care providers as one of the 10 most profitable types of business.  Chiropractic (and the other related professions) came in as #5 with a 17.5 percent average pretax margin. 

Here is the article:  The Most Profitable Businesses to Start

It is not surprising to me that chiropractors are listed as more profitable than dentists.  As you look at the top businesses on the list, you’ll notice that most are professional firms (accountants and lawyers top the list) and many are in the health care field (doctor’s offices, dentists, medical services).  Having the professional background and business expertise to run a successful chiropractice practice is a path to success.