StudentDC Interactive

“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.

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.

I was talking with a grad today who was considering an associate contract. He said, “If the doctor won’t bend on this issue (it happened to be on a non-compete), that’s a deal breaker for me.”
I’m always pleased when I hear grads talk about “deal breakers” because it shows that they have thought through the process (whether it’s an associate contract or a practice purchase or something else) and that they know what is acceptable and what isn’t…for them.

Too many young DC’s are afraid to set limits and they are too timid to say, “This is unacceptable to me.” You get what you put up with, so if you don’t set limits on your agreements, you will get walked on, taken advantage of, treated badly.

Decide what your “deal breakers” are and stick to them. Let me know what you think a “deal breaker” is for you.

Sure. I know of several people who started out of their homes or by going to people’s homes with a portable table. This is an excellent way to build a patient base before you commit to paying rent.

Here are some things to consider:
1. Working from Home. If you have a house you want to use as an office, you will need to check with the city where you live, to see what their zoning requirements are. They may have restrictions on how much of the home you can use, and parking restrictions. Many cities require you to poll the neighbors to see if someone objects, and then you must show up at a city council meeting to present your case. If no one objects, and you have met all the restrictions, you may be able to work from home. If you are in an apartment, you will also have to get permission from the landlord.
2. Traveling Office. If you want to work by going to people’s homes, all you need is a telephone and a portable table. This is a good way to get started in a small town, where you can build a patient base quickly. Be careful about going into homes of people you don’t know, especially in the city. You may want to schedule a brief first visit to talk to the family before you decide you want to continue going to this home. You may still need a license from the city, in addition to your chiropractic license, so check their requirements.

I was asked if putting your student loans into deferment or forbearance would have a negative effect on your credit rating.  As usual, I have to say “it depends.”  In this case, it seems to depend upon the lender, and the credit rating service. 

First, you will need to understand the difference between deferment and forbearance.

Deferment is a time when you can suspend payments on student loans.  This is the more common situation, and you can get a deferment for such reasons as being in school, graduate studies, and economic hardship.

Forbearance is another way to get your loan payments suspended, and it is usually reserved for situations when deferment cannot be granted.  Here is a good website which explains both situations in more detail:  http://studentloan.citibank.com/slcsite/repay/defer/1a6b.asp 

Be aware that, in both cases,  interest will continue to accrue on your loan, and it will need to be paid at some point.  So the amount of your loan will continue to increase, even if you are not making payments for a time.

If the credit bureau (Experian, Equifax, or TransUnion) sees that you are not making monthly payments on a loan, they may consider this a negative.  You would have to write the credit bureau and explain.  If you otherwise have good credit, it probably won’t affect it much.  If your credit score (FICO) is low, it would be another thing that would lower your score even more. 

Here is a good article from eHow with some suggestions:   http://www.ehow.com/how_2002591_avoid-loan-deferment.html

Here is an online workshop from SCORE that walks you through questions relating to starting your practice.  Here are some thoughts on what I saw as I took the workshop:

1.  You will have to log in before you can access the workshop.

2.  Skip the home business example.

3.  Use the retail business example and modify it for a chiropractic practice.

4.  Note that the working capital example asks you first to estimate PERSONAL expenses, then you will be asked to estimate BUSINESS expenses.  Don’t confuse the two.  The personal expenses are what you will need to live on while you’re starting your practice. 

5.  The workshop takes you through startup expenses first, then working capital.  Read the information working capital; this is an important concept for startups.

Here is the website:  SCORE Online Workshop

If you are in the process of starting a new practice, or you have recently started a practice, I would love to talk with you.  We will be featuring new DC’s over the next year, to provide information to students and others just starting out.  Sharing stories is also a powerful incentive; others would benefit from hearing of your successes and your mistakes.  Email me at  jean@dcpracticesuccess.com or just comment on this blog if you are interested.  Give me a phone number and email address and I’ll get back to you right away.

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 with a DC yesterday who was let go from his associate position. Like any other job, it can come to an end that quickly. He is working on options, one of which would be to go into business for himself but very cheaply, by providing services to people from their homes. Here are some considerations we discussed:

1. He’ll have to get his own provider status with Medicare (855I as a sole proprietor).

2. He will have to take cash or checks, since it’s difficult to carry around a POS (point of sale) machine to run credit and debit cards.  I suggested he get an invoice form from a local office supply store (duplicate), so he could keep track of patient receipts and bills.

3. He will have to check with the city to see if he needs a business license. We talked about his ability to work from his home, but he is in a development with protective covenants and they probably won’t let him. He also would have to get a zoning variance to work from home. I’ll talk more about this later, if you’re interested.

4. He needs to keep track of his mileage, since he’s using his car primarily to see patients. He should keep a notebook in his car and note mileage at the beginning and the end of each day. If he wants to be really exact, he could subtract personal miles, but I wouldn’t worry too much about this.

5.  He’s going to get a portable table to take with him.

6.  He needs to keep track of all expenses for his startup, so he can use these to file his taxes.

What else does he need?  What would you do if you were in this situation?  (By the way, he doesn’t have a non-compete to deal with, so he can go anywhere.)

I received a question from someone who said the bank asked her: What percentage of new grads start into their own practices after graduation? To answer her question, I checked the recent Chiropractic Economics new practitioner profile, based on a survey. There is a lot of useful information in this survey. For example:

• 44.6 percent of the new grads started their own practices, 47.9 percent associated, and only 7.5 percent bought a practice.
• The average age of new DC’s is 29.
• Almost half of associateships (49.1 percent) last fewer than 3 years.
• Most new grads (53.9 percent) spent less than $25,000 to start their practices.
• Slightly less than one-third of new DC’s received help from a management consultant.

The profile also showed changes in the profile from grads in prior years (back to 1950). There were some interesting changes here.

I have to say this question from a bank is a new one; just when I think I’ve heard all the questions, someone comes up with a new one. But I’m sure this wasn’t a “deal breaker” kind of question. Even so, it’s good to be able to show that you have knowledge of the trends in chiropractic, to enhance your credibility with the banker.

If you get a question from a bank that you aren’t sure how to answer, post a comment on this site or email me directly at jean@dcpracticesuccess.com.