StudentDC Interactive

This is a sad story I saw about a new DC in Wichita, Kansas .  Reading between the lines, it sounds like he got in too far with a lease commitment, then he couldn’t get patients in the door fast enough (or he couldn’t get them to pay) to meet his commitments.  If he had borrowed a little more and spent a little les on startup, he might have had enough money to pay his bills while he was building his patient base.

This is a classic example of “lack of capital.”  It can happen any time, but is most common in the beginning.  How do you overcome it?  A wise chiropractor told me “DSATM - Don’t Spend All the Money.”  In other words, dole out your loan proceeds very carefully, not spending on all your “wants” but focusing on the minimal needs you have in startup and the requirments to pay back your loans and make required payments (like the lease, utilities, etc.).  Then you’ll (hopefully) have enough money to pay your bills while you work to build up a good patient base.

This young doctor sounds optimistic.  I would encourage him to try again.  What do you think?

The answer to that question is:  You can’t!  I know you are very eager/anxious to get going.  You have lots of student loan debt to repay, and you’ve found a great location, and you are chomping at the bit.  But you can’t commit to anything until you have your license IN YOUR HANDS! 

I talked to a couple the other day who wanted to commit to a lease.  They are graduating in October.  Give a month or so to process their license (assuming they have already passed all their boards) and they will be lucky if they can get their licenses by December 1.  I suggested they put a contingency in their lease that said they didn’t have to make a final commitment until they have their licenses.  This probably means the property owner won’t start build-out until then. 

It is far better to be patient for a few months while waiting for your license than to take a chance and have to start paying rent and paying back bank loans without a license to practice and no way to generate income to pay these bills. 

Be patient.  I promise it will all happen in due time.

There is a little-known section of the IRS Code that gives small businesses a break on equipment purchases. It’s called Section 179. Here is how it works:

If you buy equipment for your practice, up to $500,000 this year, you could deduct a portion of the cost, up to $125,000 on your taxes. Here is more detail on what equipment can qualify, from Crest Capital:

“Tangible Goods financed by Equipment Loans or by most types of Equipment Leases (Non-Tax or Capital Leases) qualify for this deduction. Examples of Non-Tax (Capital) Leases include a $1 Purchase Lease, an Equipment Finance Agreement (EFA), and a 10% Purchase Upon Termination (PUT) Lease.”

The “catch,” if there is one, is that the total cost of the equipment you want to expense can’t be more than your total taxable income. To see how this deduction might affect your new practice, click on this link for a deduction calculator:

http://www.crestcapital.com/tax_deduction_calculator

For more information on this and other tax questions for your small business, check out my favorite tax link: www.taxgirl.com.

And of course check with your tax advisor. This is one of those things you can’t make a New Year’s resolution about. You just need to do it now.

I talked the other day with a new grad who was struggling to figure out where to locate his practice.  He is in a large city in the Midwest, and he was looking at two locations:

1.  One location is on a side street off the “main drag” but still within the area he wanted.  It has limited visibility from the street.  The rent is about $15 a square foot.

2.  The second location is in a highly visible area in the area of a major retail mall.  The office has a large sign on the street, of which he would have a small section.  The rent is over $25 a square foot, including CAM (common area maintenance).

In addition, the first office is 1200 square feet, while the second office is 1700 square feet.  He and his wife will be working together, so he figured the 1700 square feet would be good.

To figure the monthly rent:  Multiply the price per square foot by the number of square feet to get the annual rent, then divide by 12.  So monthly rent on the first office would be  $1500 a month, while the rent on the second would be $3541.

So which would be best for this new DC?  Consider the cost of advertising at the first location, since it’s not so easily visible.  Marketers tell us there is a trade-off between rent and advertising, and this is a classic case of this situation.

Which office should this new DC rent?  Reply by commenting.  Sure, I have an opinion, but that’s all it is.  I would like to hear from you.