StudentDC Interactive

Q:  Can I set up an LLC without an attorney? 

A:  Certainly.  Just go to the website of the Secretary of State for your state, find out the requirements, send in the forms and a check and you’re set.  Well, not quite.

You still must spend the time putting together an Operating Agreement.  This document is like a Partnership Agreement, and it spells out who is doing what with who and what happens if someone leaves the LLC or wants to be bought out.  On and on.  It is very important to get an attorney involved with this writing process. You can put together a draft and work out the issues, but have an attorney look at the document and listen to his/her advice.  If you have a single-member LLC, it may not be as important, but a multi-member LLC must have a signed operating agreement.  Don’t wait until you get “settled.”  Do it now. 

I’m not an attorney; my purpose is to help you get started with your practice.  Let me know if you have questions about this subject, or check out StudentDC.com  for more information about LLC’s. 

One of the first things a banker will want to do when you come in to talk about a startup loan is to check your credit.

You need to check your credit first to make sure everything is correct and that old negatives have been removed.  But credit reports are very confusing.  Here is a great video from  that takes you step-by-step through a credit report.

Read more about checking and repairing your credit on the StudentDC website.

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?

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 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

You know I’ve seen a lot of contracts.  But this wins a prize - for unfairness:

1. It’s a 12 month contract.  If the associate (employee) leave, he/she must pay $2500 a month for every month that’s left on the 12 months.  Bad?  Keep reading….

2.  If the employer fires the employee, the employee STILL must pay the $2500 a month for the rest of the contract.  YIKES!  But that’s not all….

3.  The employer can change the amount paid to the employee at any time.  REALLY bad?  Not enough….

4.  The employer also has a non-solicit and a non-compete, so you can’t work anywhere else in the state after you leave.

So, think about this:

Your employer tells you that you’re getting a pay cut.  But you can’t quit because you’ll have to pay off your “breach of contract (see 1 above).  And you can’t work anywhere else because you’ll get sued breaching the non-compete.  See what I mean? 

So…why would you sign such a contract?  

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….

If you are preparing your resume (some chiropractors call it a “CV”), here is a great video on the blog “Interview Chatter” by Darlene McDaniel.  This video gives you tips on creating a resume and cover letter and how to use them to get a position as an associate.

My suggestions:

1.  Don’t EVER send out a resume without a cover letter.  If you are emailing the resume, the body of your email can be the “cover letter” with the resume as an attachment.  But don’t waste the email; make it a sales document.

2.  Remember “You are the product.”  You must sell yourself; there are lots of young DC’s out there who are your competition, so don’t be afraid to market yourself.  There is certainly a fine line between arrogance and confidence, but too many people err on the side of caution and don’t promote. 

3.  Keep at it.  Send out resumes to doctors in your area and then follow up with phone calls.  Ask, “Did you receive my resume? Do you have any interest in hiring an associate?   If not, do you know another doctor who might be interested?”

Good luck with this process.  Let me know how your search goes. 

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

I talked to a recent grad who said he had met with 4 banks.  All told him, “Your student loan debt is too high.”  That’s interesting.  I’d like to know if these banks would say the same thing to a medical school or dental school grad.  I am sure they wouldn’t.  Banks recognize that a health care provider is a low risk because they have spent the time learning their practice.   But… here is the difference:

THEY DON’T KNOW CHIROPRACTIC.  They don’t know these important figures about chiropractor income and compensation:

• Mean collections for chiropractic offices:  $294,909
• Mean net practice annual income: $134,832
• Mean DC annual salary: $94,116
• Total annual DC compensation: $118,709

These are very respectable figures, and they probably would surprise a skeptical banker.

***ALWAYS REMEMBER WHAT A BANKER IS CONCERNED ABOUT - GETTING THE LOAN PAID BACK. ***

Your job is to convince the banker that you can pay back the loan.  Use these figures and others from the  Chiropractic Economics Salary and Expense Survey to make your case.  Print out a copy and take it along when you make a presentation to a bank.