StudentDC Interactive

I mentioned Google Sketchup a while back.  If you are not comfortable using their software, maybe you will find these tools from OfficeFinder.com more helpful. Here is what they have on their site:

• A planning checklist to use when you are looking for office space
• An office space calculator.  This one wasn’t quite as useful as I thought it would be.  It’s more for a typical office, not a chiropractic office.  Still, it’s free so you might want to give it a try.
• A lease-vs-buy discussion
• A good article on measuring office floor area, including the difference between usable space, rentable space, and common areas.  Note their chart on conversion factors.

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. 

The term “pig in a poke” comes from the old days, when someone would buy from someone else, and not see what he or she was getting.  The item being bought was not shown to the buyer before the money was paid.  Would you buy a pig in a poke?

I wouldn’t.  I would want to see what I’m getting before I shell out my hard-earned money.  But too many young chiropractors do just that.  They buy a practice, or they sign up with a practice management company, or they become an associate before getting all the facts.  Due diligence is the process of getting all the facts.  It is a complete 360 degree analysis of a business opportunity, with disclosure of all material (important) facts.

For example, if you were doing due diligence on a practice purchase, you would want to know if there were any outstanding debts that the practice had not paid.  There are lots of other items to check in a practice purchase.  A comprehensive list is included in my e-book Buying a Practice (scroll down the page to find this booklet).

If you’re looking at a practice management company, check them out at the Better Business Bureau or Ripoff.com, or go to the office of the Attorney General in your state and see if the company has complaints against it.

In any case, doing your due diligence can mean the difference between a bad transaction and one that works out well.  Get what you’re paying for - do your due diligence.

A new grad just sent me information on this great tool and I wanted to share it with you.  It’s called Google Sketchup and it’s free (unless you want to upgrade).  You can use it to create a 2-D or 3-D model of your practice.  As he said, you can be as creative as you want.

He said he created a 3-D plan for his office and he’s going to do more when he has time. 

I’m a little afraid to try it - I get addicted to this stuff and I forget my work.  But for you, it would be for real. 

I’ll let you know more as I try it.  Let me know what you think of it.

There are many situations that may cause a new practice or an existing practice to have trouble paying its bills:

• Like many practices in the Midwest this spring, your business may have been hit by a storm or been flooded out
• You may have had a personal tragedy that caused you to neglect your practice
• You may have been a victim of theft or embezzlement
• You may have been served with a malpractice lawsuit or other legal action

In any of these situations, as well as the difficulties of practice startup, you may find yourself in the position of not being able to pay your business bills. 

SCORE (the Service Corps of Retired Executives - an SBA partner) has a new booklet that might help you with these bills.  Their brochure is titled Pay Business Debts You Can’t Afford. It’s worth a look.

The booklet takes you through the steps in debt restructuring, from categorizing creditors setting a monthly budget, sending out hardship letters and working with each creditor, and implementing your monthly budget.

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.

A tip I received from a student:
He suggested not using your personal name for your practice name. While we all want to see our “name up in lights,” this may not be the best idea for a practice name in some circumstances.

If you grew up in the town and you were a rowdy teenager, you might not want everyone in town associating your practice with your past exploits in high school. On the other hand, if you were a model citizen, it might be great for you to tell everyone you’re back in town as a professional.

The biggest reason for not using your own name for your practice is in case you want to sell the practice. It’s much easier to sell “Perfection Chiropractic” than to sell “Cosgrove Chiropractic.”

Choosing your practice name is one of the most difficult and important decisions you’ll make when you start out. See StudentDC for more tips for choosing a practice name.

As I look at business plans, I notice that some grads try to tell the bank what terms they want for their loan - what kind of loan, how the loan package will be structured, even the term of the loan and the interest rate. I saw a business plan today that tried to tell the bank when a line of credit would be converted to a term loan. I’m not sure I understand the logic behind that. Another one stated that the borrower would pay back the loan over 10 years.

Good luck with that.

It’s about what the bank feels comfortable with and the kind of terms they usually give. For example, some banks might give you a line of credit for the whole loan, while some break it up into a term loan for startup, with a credit line. And some aren’t comfortable with credit lines; they want you to take the whole loan as a term loan (easier for the bank, and you have to pay interest on the whole amount.

Go with the flow, talk with several banks, and let them tell you. You can certainly negotiate with the bank, and try to get terms that are most favorable to you. But you aren’t really in a position to dictate, given that many banks won’t even talk with you. Just tell them how much you need and for what. Then take it from there.

It’s more important to get enough money.

 A tip I received from a student:

He suggested not using your personal name for your practice name.  While we all want to see our “names up in lights,” this may not be the best idea in some circumstances.  If you grew up in the town and you were a rowdy teenager, you might not want everyone in town associating  your practice with your past exploits in  high school.  On the other hand, if you were a model citizen, it might be great for you to tell everyone you’re back in town as a professional.
The biggest reason for not using your own name for your practice is in case you want to sell the practice.  It’s much easier to sell “Perfection Chiropractic” than to sell “Cosgrove Chiropractic.”  The student is looking at buying a practice, but he feels it will be difficult to make the transition from the old practice name, which is the owner’s name, to the name he wants.  One way to transition is to hyphenate the names.  For example, Cosgrove Chiropractic could transition to Cosgrove-Sutlow Chiropractic, then a year or so later the “Cosgrove” could be dropped.   

Choosing your practice name is one of the most difficult and important decisions you’ll make when you start out.  See this article in StudentDC for more tips for choosing a practice name

A grad emailed me the other day and said she is having difficulty getting bank financing and she wondered if she should finance her startup with credit cards.  My answer would be, “Only as a last resort and keep it to a minimum.”  Here is what I’d suggest:

• Get vendor financing for big items like tables and x-ray equipment.  This financing is more expensive than a loan, but it will keep your credit card balance lower.
• Try to get a 0% introductory rate card with the lowest post-introductory rate.  Make sure the 0% also applies to ATM withdrawals.  Then WATCH to see when the intro rate stops and try to pay off the card before this happens.  Pay this card off FIRST if possible.
• Go minimal, and I mean MINIMAL.  Buy only what you absolutely need.  Don’t get carried away with sales.  Have someone go with you when you are buying, if you have trouble with this.  You must keep your credit card balance as low as possible. 
• Look for used equipment and furniture.  If possible, use your credit card for this stuff.  You may have to use the ATM if it’s a direct purchase from an individual; that’s why you need the 0% on the ATM withdrawals too.
• After you start, use the card for working capital.  Work out a bill payment schedule.  Pay the rent and utilities first.  And be sure to pay the minimum on the credit card each month.
• Live simply.  Take out as little as possible for living expenses.  You did it for three plus years while you were in school; you can do it for a little longer.
• Show positive cash flow as soon as possible.  Work to get to a position where you are consistently bringing in more in income than you are paying, every single month. 

After six months or a year, re-work your cash flow statement and take it to the bank to show them that you are consistently bringing in more money than you’re spending.  See if you can get them to give you a loan before your 0% introductory rate stops. 

If you can discipline yourself in the short term with this method, you’ll be in great shape in the long term, because you won’t have a huge amount of bank debt to pay back, and you can take your profits and plow them back into new furniture and other neat stuff as you go. 

Entrepreneur Magazine has a good article with some additional advice on this subject.  Here is the link:  http://www.entrepreneur.com/money/financing/financingcolumnistdavidnewton/article41520.html