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You’re headed off to the bank with fantastic business plan in hand, but you have no cash, no co-signer, no collateral.  Don’t be surprised if the bank turns you down. Banks want to loan money via “secured” loans – loans that have something of value behind them that the bank can take if you don’t pay.  That “something of value” has to be something that the bank can quickly turn into cash without much loss.  Obviously, cash is best.  Next would be something like a building that you or your co-signer owns that the bank can expect to get money out of.  In these times of decreasing home values, don’t be surprised if the bank says the equity in the home has to be much greater than the loan value.  The equipment that you bought has value, but it depreciates (loses value over time), so the bank will take a loss if you have to sell it.  That’s why they often ignore all that great stuff you just bought.

Why is the bank so picky about this?  Businesses go bankrupt, including chiropractic businesses.  And banks want to be “first in line” to get their money back.  So they want a solid assurance that they can get that money back, easily and quickly.  In these tough financial times, banks are even more skittish than usual, because business bankruptcies and mortgage foreclosures are more common.  The bank will fail (like Washington Mutual) if they continue to make high-risk loans.

Just one more point:  If you want a line of credit for working capital, in the past a bank might give you this money unsecured, but these days they want security, for the reason I discussed above.  It’s often said that “banks loan money to people who don’t need it.”  This is what they mean.  Be prepared to pledge assets, or find a co-signer who will do so.

A New Zealand chiropractor lost just about everything in a fire in his office.  He has found a temporary office and he’s in the process of re-building. 

What if this happened to your new practice?  You must have property/casualty/liability insurance set up when you start your practice.  And it must include “business interruption” insurance to provide you with funds while your practice is shut down.  I guarantee you that your bank will require you to have insurance on any building you buy or on the contents of your office if you are renting.  Get the most you can.  You never know….

In my last post, I talked about the importance of  making sure you have all the insurance coverage you need.  One type of insurance that I didn’t mention is disability coverage.

When I talk with new DC’s about insurance, I usually put disability coverage on the list.  I usually get a blank stare and I can see that they don’t really register its importance.  But even if you are “well adjusted” you could be in an accident or have a disabling illness.  I know disability insurance is an additional expense you think you can live  without, but don’t wait until you need it – it will be too late.

Three companies specifically provide disability insurance for chiropractors.  Investigate the features and costs for each and get disability insurance as soon as possible.

ChiroSecure

Chiropractic Benefit Services

NCMIC

Also, be sure to read this informative article from a recent issue of Chiropractic Economics about disability insurance.

Sure, you know you need malpractice, but what else?  Many businesses neglect getting these insurances until it’s too late:

• Business interruption insurance, to help pay your bills and provide temporary facilities if your business is destroyed because of a disaster, like fire
• Key person life insurance to protect your family and your business if something happens to you (some banks require this anyway)
• Employment practices insurance to cover you if an employee sues you for harassment or wrongful dismissal
• If you have an office in your home, you will need separate property/casualty/liability insurance on your business equipment and the section of your home devoted to business (in other words, it’s not covered by your homeowner’s policy)

The National Association of Insurance Commissioners (the national organization of insurers that works with state insurance commissioners) has an informative website called InsureU for Business (http://www.insureuonline.org/smallbusiness/ )  that gives you information on different types of business insurance.  Before you start your practice, spend some time in this site learning about types of insurance, what it is used for, and the varieties of coverage.

I hear lots of students say they want a “wellness” practice.  I’m never sure what that means.  Does it mean you want to treat people who are well?  You certainly can do that, but you won’t get any insurance or Medicare money for this, so these people must be “cash” patients.

Does it mean you want to promote wellness among patients and staff?  If so, I applaud you.  If you want to encourage “wellness thinking” among staff, how will you do that?  There are lots of opportunities in your practice to help people think “wellness” instead of “sickness” or “dis-ease.”  Remember, we move toward what we think about .

For example, change your time off policy to have “wellness days” instead of “sick days.”  In a prior job, I heard it called “taking a mental health day.”  The principle is that you don’t need to be sick to take a day off; sometimes you just need to stay at home, or go do some errands that have been piling up, or spend time with your family.  And sometimes people really are sick and need to be at home to “get well.”  A benefit of instituting Wellness Days is that employees can just call in and say they’re taking a wellness day; they don’t need to lie and say they’re sick.  And you don’t need to differentiate between sick days or personal days; they’re all wellness days.

Of course, you must limit the number of Wellness Days you provide; you should have no more than you would have provided for staff sick days and personal days combined.  It makes the time off calculations easier.  More important, it sends a message to your staff that you care about their wellness.

To continue this discussion, what other kinds of things could you do in your office to encourage wellness among staff?  How about encouraging patient wellness?  What would a Wellness Day for patients look like?

A readaer asked me about this one a few days ago.  Here is how I responded:

Setting up a website is definitely a good idea; having a site is becoming more and more the preferred way to attract potential patients to your site – even higher in importance than getting a Yellow Pages ad.  But the website business has gotten much more complicated in the past few years, with the addition of stuff like search engine optimization, flash special effects, and fancy widgets.  I did my own website a few years ago, but I would not attempt to tackle it now.

Here is another important reason why you should hire someone to set up your practice website:  Even if you have the expertise, do you really want to spend the time doing this when you could be doing other things – like talking to prospective patients or doing adjustments?  Setting up a website is a huge “time sucker-upper” and I would suggest you not get sucked into that task.

You can set up a fairly simple site for not much money, with all the information a prospective patient needs – who you are, where to find you, all about chiropractic, your services, the ability to contact you by email, even new patient forms.  If you want to do the “max” (and spend much more money) you can create an interactive “member” site where people can go to interact with you and have lots of information about chiropractic.  It’s up to you, your purpose for your site, and how much money you want to spend.

There are many web designers out there.  Here are some suggestions for getting your site done, depending on your budget and your preferences:

1.  I have been working for several years with a company called VirtualImpax.  The owner, Kathy Hendershot-Hurd, is a marketing guru, book author, and website setter-upper. She has helped many people set up great-looking sites with high ranking in search engines.   She has a service called easychiropracticwebsites.comto help chiropractors set up simple but effective websites.   You can see her main website at VirtualImpax.com and you can email her at kathy[at]virtualimpax.com.

2.  I ran a search on Chiropractic Economics online to see what came up for “website design.”  There were lots of vendors on the list.  (http://www.chiroeco.com/buyersguide/Search/MarketingResults.php  .

3. I also know that Bill Esteb over at Patient Media has a partner website service called PerfectPatients.  They have lots of chiropractic content, if you’re looking for a site with more services.

When you get your site set up, send the link to me at jean@dcpracticesuccess.com – I collect chiropractic websites and I would love to see yours.

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 sat down a week or so ago with a new DC who was looking at an associate contract.  My question to him: “If you had to live on just the base, could you do it?”  Here is what we did:

Monthly Base                          $2500

Income Tax                              $  375

FICA                                           $192

Student Loan payments          $800

Available                                    $1133

So, can you live on $1133 a month?  What if you had a family?  And your spouse couldn’t work?  This doesn’t seem possible, does it?

But, you say, “I’m going to make lots on incentives/bonuses each month.”  But what if:

(a) The doctor made you work for him while he went on vacation and you couldn’t get your own patients in?

(b) The doctor did everything in her power to keep you from getting the incentive, even if you are seeing new patients and bringing in money (this happens more often than you can imagine)

(c) You have to take time off for a family emergency or you are just not able to bring in new patients one month.

Scary thought, isn’t it?  This young doctor was in the Seattle area, where the cost of living is even higher.  Unless his wife works, it doesn’t seem like this is a good deal for him.  What do you think?

If you have been to the bank and you were turned down, don’t despair.  There is another possibility for getting some of the “stuff” you need for startup.  The alternative is “trade credit.”  In a nutshell, trade credit is using vendors and suppliers to finance your purchase of their products.

For example, you will need office furniture for your startup, so you could head to Staples or Office Max and see if they will give you a credit card.  Or, better, go to your local office supply plaee.  You might be able to get credit from them without having to get a credit card.

Talk to chiropractic vendors, like table manufacturers and x-ray machine companies.  See what kind of credit they will give you for startup.

Yes, you may pay more in interest, but you will be establishing BUSINESS credit, which is separate from personal credit.  You could also open a credit card for your business, but be cautious about putting a lot of purchases on it until you are sure you can pay it back.

What I’m really saying is to consider other sources of credit before you go to a bank.  Once you have built up a reputation for paying your business bills, you can talk with a bank more confidently, and they feel more comfortable about giving you a loan when they see that you already have a business going and that you are a responsible business person.

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.