Chapter 2All professional transactions that are undertaken for compensation should be accounted for and paid to the partnership. The criteria for services offered without compensation (eg, colleagues, family members) should be established by mutual consent of each partner.
Getting Started
From R. C. Schafer, DC, PhD, FICC's best-selling book:
“Developing A Chiropractic Practice”
The following materials are provided as a service to our profession. There is no charge for individuals to copy and file these materials. However, they cannot be sold or used in any group or commercial venture without written permission from ACAPress.
All of Dr. Schafer's books are now available on CDs, with all proceeds being donated
to support chiropractic research. Please review the complete list of available books.This chapter explores the various career opportunities open to the recent graduate. The advantages and disadvantages of salaried positions, associateships, shared space arrangements, group relationships, partnerships, corporations, and private practice are described. If entering private practice is desired, guidelines are offered for purchasing a practice, selecting an area in which to practice, renting and leasing considerations, establishing a professional environment, assessing equipment needs, coping with financing problems, and getting a new practice off to a good start.
IntroductionThe fundamentals of the science of chiropractic are learned in college.
The art of chiropractic is learned in the field; it must be practiced.
Once you select one of the career alternatives open to you, a choice is made that becomes increasingly difficult to alter as the years go by. Thus, your initial choice should be taken with care to avoid being held somewhat hostage by a variety of commitments a number of years from now such as by financial concerns, family roots, local professional reputation, and difficulties adapting to change --to name a few factors.
The Importance of Personal Goals
The skills you have achieved were not achieved easily during the preparatory portion of your career. There was much to learn, and there is still much to learn. There is a difference between learning how to captain a ship theoretically and actually doing it.
Shortly after graduation, a typical chiropractic student's major goals shift abruptly from those involving obtaining credentials to those of a field practitioner. You will soon realize that the hallmark of an effective manager is to be able to expertly plan a course of action that will get you to where you want to be in the shortest possible time.
What to Believe Is Your Responsibility
A thought that a new graduate should keep in mind is to take much of what he or she hears from many established practitioners with a "grain of salt." If you seek someone to make a decision for you that you should make for yourself, you can always find someone to do it. Each individual is unique, with different goals, experience, personality, and genes. Others can only tell you what they would do under like circumstances.
A few established practitioners may discourage you if they feel you might open an office next door, but they will always know an "excellent" location many miles away. Others may tell you that the only way to be successful is to use a certain technique, system, structured procedure, and so forth. Although their stories of "seeing the light" may be fascinating, what may have been true for them may not be true for you.
Some practitioners complain of rising taxes, equipment and repair costs, accounts receivable, and third-party hindrances. They will often fail to relate that they love every day of practice, and their problems are self-made because they are doing things just the way they want to. Some grumble all the way to the bank, on their yacht or plane, or during their vacations abroad.
Your only safeguard against being led down a false path is to learn to think for yourself. This means to hold all beliefs as theories until you can prove the truth by your own experience. Granted, it is difficult and sometimes emotionally traumatic when reality forces us to give up some of our cherished beliefs and faith in the opinions of others.
Planning Ahead
There are few things more frustrating than to spend considerable money and time in establishing a practice only to learn a few years later that you have selected the wrong form of practice, or community, city, or climate. While priorities are certain to change as we grow older, this chapter will offer numerous guidelines that will help in avoiding common pitfalls.
Once a specific direction of a chiropractic career has been selected, the details about your choice should be carefully researched. Every opportunity has certain requirements, and you have certain things to offer any opportunity. Most every location has its benefits and disadvantages. But these are not permanent criteria. Developing trends should not be overlooked because population shifts, advancing technology, economic factors, and governmental influences are having great and will have greater impact on the health professions. Early safeguards must be planned against premature obsolescence.
General Practice vs Specialization
Specialization in a number of areas within chiropractic has become popular in recent years. Sports injuries, acupuncture, roentgenology, and disability evaluation are a few specialized areas that are being embraced by some practitioners.
With the possible exception of roentgenology, most areas of specialization are not sought until after several years of general practice when the practice is noted to take a certain direction and emphasis. With some exceptions, postgraduate work in the areas of diagnosis, mental health, neurology, nutrition, orthopedics, physiotherapeutics, and technic are designed to strengthen general practice skills rather than to prepare one for specialization.
Types of Practice RelationshipsThe three common types of legal structure seen in chiropractic practice are individual ownerships (sole proprietorships), partnerships, and corporations. Each has its variations, and each has its advantages and disadvantages. And no one can offer highly specific directions as to the better arrangement because each individual's situation is different. A doctor who may have an excellent potential in solo practice may find a type of group practice most dissatisfying, and vice versa.
The initial choice you make will probably be decided on such intrinsic factors as your personal likes and dislikes, your values and degree of self-confidence, where your skills and talents would fit best, your short-range and long-term goals, and such extrinsic factors as your immediate financial situation and what opportunities are available or can be created.
Each form of practice carries certain rights, rules, and responsibilities in terms of management, division of profits, taxation, and liabilities. Even with legal counsel, what may be an ideal situation for one doctor or group of doctors may be a potential disaster for another.
Buck points out that doctors in partnerships tend to have higher incomes than those in shared-space arrangements who, in turn, tend to have higher incomes than those in solo practice. This can probably be attributed to the shared expenses and the silent but obvious competitive spirit among closely associated professionals. Yet, as Lalla implies, group practice is similar to a marriage, and some people prefer to remain single.
Associateships
The term "associate" is a vague term that means different things to different people. A practitioner may be "associated" with a proprietorship, partnership, group, or corporation.
There are three basic types of associateships common in chiropractic. One type involves strictly a salaried position, another concerns a contractual arrangement, and the third is solely a facility-sharing arrangement.
To obtain an association with an established practice offers the new graduate two distinct and important advantages.
It offers a period of practical experience before entering private practice. You will find that doctor-patient relations in practice are quite different than that experienced in a college clinic. It also offers those with insufficient capital an immediate opportunity into practice.
Before you take any position, however, it is important to investigate the age and history of the enterprise, the backgrounds and financial stability of the principals involved, and the participants' professional credentials. Other points to consider are how noninvolved colleagues and community leaders view the group and what the staff responsibilities and benefits are. It is also helpful to determine the organization's business and professional trends, the overall clinical approach, and the plans for the future. The fit of the organization's goals with your personal goals, the adequacy of diagnostic and therapeutic facilities, the professional turnover rate and reason why the position is open, and the growth opportunities are other points to evaluate. Whether it is right or wrong, people tend to judge us by the caliber of people we associate with. These thought-stimulators are only a few of the questions that should be answered prior to accepting any position.
Salaried Positions
Salaried positions can be the door to greater opportunities for the recent graduate. They are, in most instances, strictly employer-employee relationships. Typically, one doctor works for another doctor or a clinic, assisting the employer with specific patients, and initially performing any procedure or service that may be helpful to the employer (eg, entering work-ups, house calls, etc). Additional responsibilities come with experience and training.Advantages and Disadvantages. The advantages of a salaried position are that no capital is necessary, income is guaranteed, and business worries are absent. Paid vacations, insurance plans, and retirement benefits are customary. The disadvantages are those of any salaried position. The employee must care for patients in the manner closely directed by the employer. There is usually little flexibility in diagnostic or therapeutic services or initiative for growth, although a bonus arrangement may be available. Case management and office procedures are usually firmly structured. The employer knows what works for him or her and wants help in achieving goals or an opportunity to "taper off" in later years. A checklist is shown in Figure 2.1.
Salaried arrangements are usually of short duration for several reasons. In many situations, the duration is too short to reach the original goals of either employee or employer. For example, once the salaried associate becomes fairly comfortable in handling a wide variety of cases, there is a strong tendency to feel underpaid and resent the role of "understudy" --ignoring the fact that the art of practice development involves much more than a short experience can justify. To watch someone else and to help someone else are not the same as doing it yourself without supervision and having full responsibility. Knowing when and when not, where and where not, why in one case but not in a closely similar case, are just as important as knowing what and how.
Shared Space in Group Practice
In this type of relationship, a doctor simply shares the office facilities with one or more established practitioners. He or she begins to establish a new practice within the environment of established practitioners. There are few commitments between the participating doctors other than to share overhead costs. A brief checklist is shown in Figure 2.2.Advantages. The basic advantages of this arrangement are numerous. For example, one receptionist, laboratory, x-ray and film processing setup, and business office can serve the needs of several doctors --thus the costs of these facilities are divided among several practitioners. Property taxes, utility costs, routine supply costs, building repairs, etc, can be shared. All that the entering doctor may need to furnish and equip are his or her exclusive examining and treatment rooms. Consultative service is close at hand, and there is minimal involvement in the business side of practice.
Disadvantages. The initial disadvantages are essentially the same as, but to a lesser degree, than those in establishing a practice on a solo basis; eg, becoming known in the community, obtaining financing, developing income sufficient to meet expenses, etc. In any group practice, there is always the danger of personality conflicts; differences over new shared-equipment purchases, remodeling expenses, etc; and a tendency for senior members to dominate policy decisions of the group.
ASSOCIATE/LEASE AGREEMENTS
A preliminary checklist is shown in Figure 2.3. When space is shared with others, a formal agreement is customary to protect the interests of all involved.
Some major points that such an agreement should include are as follows:
The legal and binding relationship between parties.
How the agreement may be terminated or severed by the parties involved.
The nonexclusive property and services included for the lease fee.
The established rules and regulations of the enterprise (eg, professional decorum, office hours, on-call emergency duty, sickness absences, absences for postgraduate education, vacation time, etc).
Specific restrictions upon the lessee (eg, personal signs, interference with other practitioners, unethical conduct, standards of behavior, major alterations, off-site competitive practice, subleasing, etc).
Specific liabilities of the lessee (eg, property damage, civil or criminal actions, failure to comply with the establishment's rules and regulations, breach of contract, failure to comply with state and local laws, etc).
Specific liabilities of the lessor (eg, nonperformance in paying utilities, property rent or mortgage, property taxes, building repairs; failure to comply with state and local laws and codes; public liability; etc).
Administrative obligations of the lessor (eg, account records, collections, billings, advertising, nonexclusive personnel, etc). Either the group establishes fee policies or fees are set by the individual practitioners involved.
Ownership of equipment, furnishings, etc, provided by the lessor and lessee.
Who is responsible for providing expendable supplies (eg, professional stationery, wipes and head-rest paper, first-aid supplies, etc).
Who is responsible for long-distance telephone calls, special services, etc.
Method by which patients are assigned to each lessee. The receptionist usually assigns the occasional unreferred "drop in" patient to the various doctors on a rotating basis as their appointment schedules permit.
Security deposit of the lessee.
How disputes between lessee and lessor shall be arbitrated.
Contracted Associateships
The major purpose of any contract is to protect the parties involved in the event problems arise. Thus, a contract should specify how any anticipated problems may be resolved.
It is always good policy to have an attorney go over any legal agreement with you before signing so that you completely understand the commitments to be made. Most "preprinted" contracts are so general that they will require a few changes to meet individual needs.
In a contract relationship, there is a legal agreement between the practitioner and a health-care facility (eg, a chiropractic clinic). Under typical arrangements, the new associate usually agrees to provide services for patients of the facility for a set percentageof income personally generated. This may or may not include a guaranteed base figure. Details vary in regard to direct and indirect costs and responsibilities, future growth, and so forth, on the part of both the practitioner and the facility, but they should always be spelled out so that there are no false expectations or assumptions that could be the root of later friction.Associate Agreements. Associate agreements are similar to partnership agreements (discussed in the next section) with a few important exceptions. Much depends upon how the practice is operated. In one form, for example, several doctors may treat patients interchangeably. This requires firmly structured patient orientation, examination, and therapeutic procedures. In another form, certain patients are assigned to certain doctors. In this form, there can be some flexibility but not sharp divergency in patient orientation, examination, and therapeutic procedures. In some large clinics, specialization is seen where specific doctors devote their entire time to certain clinical procedures such as roentgenography, laboratory analyses, physical examinations and disability evaluations, adjustive therapy, acupuncture, etc.
(1) a periodic draw (limited advance) against potential earnings,Incentives. Under such circumstances, there is usually no intention that the associate will someday take over the practice. Thus, some sort of incentive program is usually incorporated within the agreement. This usually takes the form of a progressively increasing percentage of gross income personally generated and received. For example, a negotiated bonus arrangement might be as shown in Figure 2.4.
(2) a percentage of gross income personally generated (eg, 30-40%),
(3) a guaranteed base income with a percentage of gross income personally generated (eg, 20-30%).
Many associate plans (as well as partnerships and corporations) may offer an associate who has proved to be highly worthy after 2-3 years of service various types of increasing motivation to hold the relationship secure. These benefits sometimes include a handsome pension plan, use of an automobile, prepaid membership in a country club, various types of insurance, etc. As these benefits accrue, it becomes increasingly difficult for the doctor to leave.
Partnerships
A partnership is a joint voluntary association among two or more individuals who have a percentage of the shares of a business and agree to share the profits and losses of the partnership, but not necessarily on an equal basis. When partnerships fail, it is usually because the partners come to realize that they do not have the same drive, enthusiasm, and goals, or a harmonious personality mix fails to mature.
A partnership can be structured in one of three common ways: a general partnership, an equal partnership, or a limited partnership. The individuals involved in a general partnership are required to have one general partner who must be legally responsible for all liabilities against the entire partnership enterprise. The general partner can commit the partnership via contracts, and the liability of the general partner is not limited to his or her investment in the business or practice.
In an equal partnership, each partner can act as an agent for the other and legally bind the other through his or her acts (including negligence). The equal partners are not limited in liability to their investment in the partnership.
There is at least one general partner and one or more partners with limited liability in a limited partnership. This limited liability is usually restricted to that invested in the firm. Limited partners are typically investors (eg, relatives, silent partners) who may voice their suggestions but take no part in management decisions or operation of the enterprise if they wish to avoid unlimited liability.Advantages. The prime advantages of partnerships are the use of joint funds to increase capital, divided expenses, pooled labor, combined expertise, the ease of organizational formation, and employee motivation to earn partnership status. The individuals involved are taxed but not the partnership.
Disadvantages. The major disadvantages of any partnership are the constant necessity for joint decisions because of divided authority, the "frozen" investment involved, the lack of continuity in the event of death or disablement of a general partner, and the unlimited liability of general or equal partners. A common problem is for one partner to fail to fulfill his or her commitments, and this is often most difficult to prove.
Partnerships are the least common form of legal structure. Ironically, most attorneys will strongly advise against establishing a partnership as compared to alternative forms of legal ownership, yet a partnership is the most common form of joint ownership within the legal profession.
SENIOR/JUNIOR PARTNERSHIPS
In the typical clinical partnership, an older established practitioner (senior partner) joins forces with a younger practitioner (junior partner) where the duties and responsibilities of each are not initially equal but of mutual benefit. This relationship frequently begins as an associate relationship that evolves to where a closer relationship is mutually desired. Figure 2.5 offers a basic checklist. Partnerships between two recent graduates are rarely successful unless they have substantial backing to weather the growth period where the practice can support two doctors.
One purpose is for an older practitioner to bring a younger doctor into the practice where the younger practitioner will receive an increasing share of the income and the older practitioner a decreasing percentage. This does not necessarily mean that the senior partner's income will diminish because the practice should grow substantially with two doctors involved.
Because of the potentiality involved, the younger partner is motivated to participate greater in increasing practice income, has more responsible duties, and increasingly shares in management decisions much more than would a salaried employee.
The senior partner offers the practice experience and counsel, an established practice with a base patient volume, and immediate security. The junior partner offers new enthusiasm to the practice, ideas of new phases of chiropractic science, and an opportunity for the workload to be divided.
No one doctor can satisfy all patients, thus the presence of two personalities offers the practice a variety appreciated by many patients. When one partner is attending a convention or seminar, the other partner can cover for him or her so that there is no loss in continuity of patient care.
If an additional professional becomes associated, it is usually on a salary plus bonus basis until the new doctor approximates the contribution of the partners. Then a partnership status is usually offered.
PARTNERSHIP AGREEMENTS
Any partnership agreement should include provisions that outline specific rights, duties, and responsibilities of each partner that are pertinent to smooth practice function. Specific clauses in such a contract are difficult to discuss because each must be decided on its merits relative to the individuals and situations involved. Certain guidelines, however, should be noted for the protection of all parties concerned. Following are 16 points to consider. While they emphasize the relationship of a two-party partnership, they would also be applicable to a multiparty partnership.It should be stated that each partner should devote his full time and attention to developing the partnership and not engage in other business enterprises without written consent of the other partner. The days and times that each partner should be present at the office should be specified. If Dr.-A plans to retire at the end of the partnership agreement, a decreasing time schedule should be included that would allow for a smooth turnover of duties and responsibilities to Dr.-B.Point 1:
Point 2:
Corporations
A corporation is a form of ownership where the organization is legally distinct from the owners (stockholders), Board of Directors, operating officers, and personnel. In most states, even a solo practitioner may incorporate.
Advantages. The major advantages of a corporation are limited individual liability (except malpractice), pension and profit sharing, corporate-paid insurance, and corporate ownership of vehicles and real estate.
Disadvantages. The major disadvantages of a corporation are the complex operating regulations involved, corporate taxation, and increased legal fees. In 1958, Subchapter "S" became part of the Internal Revenue Code. Its intent was to permit small enterprises that were essentially partnerships to enjoy the advantages of corporate status without being subject to the tax disadvantages of a regular corporation. However, various special provisions and restrictions have developed it into one of the most complex of all income tax laws, containing numerous traps and pitfalls for the unsophisticated.
Good Business Principles and Good Practice Management
In most businesses today, the "marketing concept" has replaced the traditional "sales concept" which involved a considerable degree of high-pressure persuasion. The marketing concept attempts to identify customer needs and provide products/services that will fulfill these needs. Several of these principles are applicable to health practice. When used in health care, they are usually given an "alias" in keeping with professional decorum.
BUSINESS/PRACTICE STRATEGIES
When a person considers initiating a new practice, certain basic business concepts are worthy of careful consideration. For example, every business that expects to be successful must:
(1) determine the needs and wants of potential customers,
(2) develop programs to meet these needs and wants, and
(3) gain a profit from the sales or services. If there is no profit, it is a charity and not a business. Practice goals are not far different. Patient needs must be determined, services and facilities must be provided to meet these needs, and a fair return must be expected on the direct and indirect investments made.
As a basis for thought, some parallel business management concepts should be defined. The basic marketing concept (variables) of good business comprises four methods which a firm uses to attract and keep loyal customers:
Isolating target markets. This means that limited resources are concen- trated on a selected portion of the total market, aimed where the potential is greatest. This process of market segmentation seeks out subgroups within the overall market.
Defining marketing objectives. Marketing objectives reflect overall company objectives and offer a means to define specific goals and to measure performance. Some examples are the volume of sales/services per time period, the profit on unit sales/services, and the number of new customers per time period.
Planning marketing strategies. Once the target markets have been isolated and the marketing objectives defined, marketing strategies consist of deciding how the products/services of each target area will be priced, distributed, and promoted. Marketing strategies are constantly being amended to include changing market needs, competitive actions, etc.
Marketing performance audits. Results should be evaluated against performance standards, and corrective action should be taken when and where necessary. Some common methods include break-even analyses, sales/costs trends, and inventory turnover rates.
Any reference to the term "marketing" is abhorred by health professionals. Yet, the above concepts (management philosophy) have their similarities in good practice management under such titles as:
(1) health manpower research,
(2) research of and planning for specialized health services,
(3) public and patient education,
(4) fee policies, and
(5) periodic practice evaluations. Sound business principles are vital to successful health practice, regardless of what label we give them.
HEALTH PROVIDER/CONSUMER VIEWPOINTS
A typical businessman (provider) looks at a salable product as a tangible object that is offered to a target market. The consumer, however, actually buys the intangible benefits and satisfactions that the product can provide. On the other hand, a doctor often looks at a potential service in terms of the training involved and the tangible equipment necessary to administer the service effectively. A patient seeks the intangible benefits and satisfactions that the health service can provide (eg, pain relief, joint mobility, increased vitality, etc).
In choosing between group practice and private practice, the first question to ponder is what it is that you can achieve in private practice that you cannot achieve elsewhere. Once this goal is determined, it provides the foundation for future management decisions and gives you a standard upon which you can judge progress.
Proprietorships: Going Solo
A practitioner entering individual practice generally establishes a sole proprietorship. In this form of ownership, there is no legal distinction between the practice and the doctor's private affairs. Thus, legally, the doctor and the practice are considered as one. Proprietorships are by far the most common and most simple form of legal structure in both the business world and the professions.
Attitude Qualifications
The decision to enter solo practice requires a cautious, perceptive, and prospective manner. Extensive investigation and self-analysis are called for. Anything worthy has its price, and everyone is not willing or capable to pay the price. To make a realistic assessment, the benefits and liabilities of entrepreneurship in solo practice must be understood and carefully considered.
Although an above-average degree of perseverance, drive, dedication, dynamic self-expression, and good timing are assets, it isn't necessary to be a supersalesman, athlete, toastmaster, or zealot to be successful in solo practice. It is important, however, to recognize weaknesses and try to overcome them. Private practice is a way of life that most doctors find highly rewarding, but it is not for everyone. Gaedeke/Tootelian feel that there has to be a little courageous prophet in every successful entrepreneur.
Starting a Practice from Scratch
In comparison to purchasing or joining an established practice, creating a new practice has several advantages. You can seek your own location, equipment, and furnishings. You are not bound by a practice's "tradition" or entrenched personnel or patient habits. Nor do you inherit the reputation of another. You can be as innovative as you like --for only you will pay the price of failure.
In establishing a new practice, the doctor assumes sometimes complicated tasks that cannot be taken lightly. To name a few, he or she must establish priority goals, comprehensively plan their achievement, obtain financing, select the general location and a specific site, obtain licenses, observe zoning laws, and comply with building codes and health standards. In addition, the doctor must set up administrative and clinical record systems, establish standards upon which progress can be judged, insure the practice, promote the practice, manage the business, run the practice, and safeguard his or her future. All these points will be discussed in this manual.
Just as the obese tend to have an appetite bigger than their caloric needs, some graduates tend to think that every piece of equipment or furnishings they would like to have someday must be at hand the first day their office is opened. Yet, there is a difference between one's wants and needs. A parallel is seen in marriage failures where the newlyweds try to start off at the same level as their parents' present level. This is unrealistic.
Advantages of Private Practice
Solo practice offers significant benefits in personal flexibility, social prestige, and directly earned profits. No other form of practice can offer the self-satisfaction and independence that solo practice can offer. This arrangement allows the doctor the highest degree of freedom in decision making.
There are few legal complications in establishing a proprietorship, the legal operating regulations are minor, the legal start-up costs are minimal, and the owner receives all the profits earned. While the owner's net income is taxed, the business is not.
Private practice tends to be more humanized and personalized than that of large group practices or clinics --in terms of both patient and assistant relations. This leads to greater patient and personnel loyalty.
Disadvantages of Private Practice
The disadvantages of a proprietorship are also numerous. Solo practice offers considerable degrees of insecurity, pressure, apparent crises, and long hours that some find intolerable. Until the private practice becomes firmly established, many secondary goals and leisure activities must be held in abeyance.
A good deal of business know-how must be possessed. Solo practitioners tend to underestimate their management weaknesses, for only their own records and objectivity will point out their shortcomings. Initial setup costs are high, expenses cannot be shared with others, and there is greater difficulty in raising capital. Management salaries are not tax deductible, immediate consultation is lacking, and employee growth is highly limited.
Within the first years of practice, it is unlikely that you will be able to afford a business manager, technicians, and other sophisticated personnel. Thus, these roles must be assumed in addition to patient care.
Practice growth has a finite limit by the clock. There are just so many hours in a day and just so many patients can be cared for adequately in each hour. In addition, most assets of the private practitioner are tied up in the practice. Even if they look good on paper, there is little liquidity for emergencies or special investment opportunities.
There is special difficulty in absorbing losses. A $10,000 loss (eg, theft, damage, poor collections) in a large group practice may be a hindrance to growth; but to a new private practitioner, it may be devastating. Liability in case of suit is unlimited (both practice and personal assets). The doctor's extended disability or a large malpractice suit may easily bankrupt the practice. Due to the lack of back-up, the life of the proprietorship is limited to the life, health, and vitality of the owner.
Group practices can enjoy the benefits of volume purchases and negotiable terms that are not available to small practices. By the same token, group practices can entice high-caliber assistants with retirement, health insurance, paid vacation, and other benefits that are most difficult for the solo practice to equal.
The Major Pitfalls
Most practice failures occur within the first 3 years of existence, but security is not achieved for many until about 10 years. While it is almost impossible to avoid all possible pitfalls that can arise in establishing and managing a solo practice, it is possible to be aware of them and minimize their effect. Several practice management consultants have called five common reasons for failure to our attention. They are briefly described below.
Lack of Management and Planning Experience. This fault is a common cause of failure, even among those with the highest professional credentials and clinical expertise. A basic and balanced knowledge of how to conceptualize, plan, supervise assistants, obtain and handle finances, budget, purchase, manage a time schedule, adapt to change, and ethically promote is essential. Each day you should know more than the day before because of yesterday's experience.
Lack of Starting Capital and Insufficient Liquidity. Another common fault is the lack of capital. Rare is the practice today that can start "on a shoestring and build." Estimates range from $35,000 to $50,000 to establish a new office, and this would be a "modest" office. Without adequate capital, interest on loans quickly slashes profit earnings and places the doctor in a constant struggle with creditors. Initially, operating expenses are out of proportion to patient volume, and third-party payors are often quite slow in reimbursement. If the vast majority of capital is put into real estate, equipment, and furnishings, there is little provision for operating expenses or emergencies.
Poor Credit Policies. While many established practices operate highly successfully on a "cash only" basis, it would be most difficult for a new practice to attempt such a policy. At the same time, it must be recognized that many patients you see that have been referred by "a friend" or found your location "more convenient" might be heavily indebted to other doctors. A degree of credit accounts can be handled profitably, but you must know how and when to extend credit, and how to keep collections maximum.
Poor Purchasing Management. Too much equipment or supplies is not usually a problem; it's too much of the wrong type of equipment and supplies. Young doctors appear especially naive to a good "sales pitch." Salesmen know this, so you should too. If a piece of equipment is only occasionally used, it will probably cost you money rather than earn you money.
Misdirected Health Advice. Most recent graduates have a tremendous amount of zeal and enthusiasm, and this is as it should be. However, trouble arises when any doctor attempts to abruptly alter the cherished beliefs, habits, and customs of patients. It is foolhardy for doctors to try to make patients into their own image. Drastically altering ethnic diets, antismoking and antiobesity sermons, and suggesting vigorous exercise regimens to the unmotivated do not build loyal patients or encourage them to expound your virtues to others. Good intentions and clinical expertise will never counteract the effects of poor human relations or failure to understand human nature.
An alternative to working for someone, associating with someone, or establishing a practice from scratch is to purchase an existing practice. Like other alternatives, buying a practice has its advantages and disadvantages that must be meticulously evaluated with caution.
Advantages. As weighed against creating a practice, an established practice has a known "track record." Analysis of office records will disclose income, overhead expenses, patient volume, types of cases treated, types of services offered, percentage of recall visits, cash/credit ratios, and a number of other helpful facts. Age, sex, and occupational trends will indicate whether a "balanced" practice volume exists. Purchasing an established practice also saves time and effort in finding a suitable location and minimizes redecorating and construction expenses.
The success of the practice will answer many questions as to location advantage and community reputation. The condition of the furnishings, age of equipment, needed repairs, and parking problems can be accurately judged by careful observation. However, observation and dialogue with the seller will not disclose certain vital facts such as population shifting, impending factory closings or zone changes, restrictions against a new owner, local economic conditions, lawsuits against the property, etc. These facts must be found from other sources.
Disadvantages. In purchasing a practice, there are divergent viewpoints involved. The typical doctor selling a practice has spent years and considerable effort and money in developing the practice and his or her reputation. This represents a large investment; and to that doctor, the investment means a great deal in terms of pride and potential income. The office records and environment may show that.
Through personal effort, know-how, drive, and enthusiasm, a following of patients has been developed that are loyal to the seller's personality and the services offered. Quite frequently, the seller includes his costs in developing this "good will" in the asking price. These patients are loyal to that doctor and have been conditioned to expect certain things. How they will adapt to your personality, style, and method of health care are unknown factors that no one can predict without a fair trial. However, if a good percentage of the practice can be retained, it is often far better than starting from nothing.
The selling doctor's reputation is not your reputation. Nor do any two doctors have the exact personality, touch, likes and dislikes, or professional philosophy. All that you can buy that can be accurately prejudged are the used equipment, facilities, furnishings, and a mailing list. The office location and established business and clinical procedures may be assets or liabilities during changing times.
First Things First
The first thing to do is to decide the general area you wish to develop a practice, live your life, and possibly raise a family. If this is not your first priority, you may find an ideal practice at a reasonable price in a classified ad, only later to find that it is not located in an area that meets your personal goals in terms of climate, community, growth, etc.
Prospecting. When you have decided on an area that meets your expectations in lifestyle, area DCs and chiropractic suppliers will be your best sources of information of where a practice for sale might be located, now or in the near future. They will also know of practitioners who are approaching retirement. For the best information, make an appointment with several area DCs who are located near but not exactly within the area you like. See if you can visit with them and attend the district meetings. Then make a list of all possibilities, give each a priority number according to the information you have, and make contact with potential sellers or those who might be interested in an associate.
Seeking Other Leads. In developing your list, you can consider yourself fortunate if real estate agencies, practice brokers, management consultants, college placement bureaus, or state chiropractic association officers can be of much help. It also seems that classified ads in chiropractic journals and newsletters always describe available practices that are at least 100 miles away from where you wish to locate. If the location is ideal, the practice will likely be sold by the time you read the ad. Thus, your best source of information will be the chiropractic "grapevine" of the district.
Evaluating a Possible Purchase
The obvious things that should be determined are:
(1) whether the practice being considered is located in an area that is harmonious with your personal goals, and
(2) if the seller's clinical techniques are compatible with yours. Radical and abrupt departure from the habits and expectations of the practice's patients could be a disaster.
The second things that should be learned in judging the rationale of the asking price are:
(1) the reason given for selling the practice and its apparent validity,
(2) the practice's profit and loss statements and balance sheets for the past year,
(3) an itemization of what is included in the sales price,
(4) the seller's local credit rating,
(5) the appraised value of the tangible assets,
(6) if the earning power of the practice would likely improve under better management, and
(7) how much of the asking price has been padded for the practice's "good will."
There are many reasons why a doctor may desire to sell a practice. Reasons such as retirement and illness can be judged fairly accurately. Most other reasons should be taken as theory. Be aware that the reason given for selling and the real reason for selling are not always the same. If the seller has something to hide, it will usually be disclosed by hesitancy in revealing office records to a sincerely interested potential purchaser.
A practice being sold often shows signs of facility deterioration. There are two basic reasons for this. First, the seller is not looking towards the future. The emphasis has undoubtedly been on maintaining a practice and not building a practice. Second, people tend to become comfortable among familiar surroundings and fail to see them as others do. Thus, although purchasing a practice may offer a "turn-key" opportunity, anticipate some repair, remodeling, redecorating, and equipment costs.
ANALYZE AND SEEK IMPROVEMENT OF THE PROFIT AND LOSS STATEMENT
A careful analysis of the practice's last 12 monthly profit and loss statements may show where better management can possibly reduce expenses and improve the profit picture. Other factors such as a temporary drop in patient volume and increased public relations costs should be expected and allowed for. A side-by-side comparison of your projected profit and loss statement with the seller's statements are especially helpful in evaluating the purchase.
In developing your projected profit and loss statement, seek every avenue where expenses may be cut without reducing services and where income may be increased by providing services not previously offered. Several examples are offered below.
Fee Policy. The seller's fee policy may not be in keeping with community standards. A new schedule can be made on new patients, but it is usually not wise to increase the fees of established patients until a firm rapport has been established.
Credit and Contribution Policies. A previous "cash only" practice can be liberalized by offering selective credit. On the other hand, if credit policies have been lax and collections poor, tighter credit restrictions will reduce losses. What are the ratios of accounts receivable by date (eg, 30 days, 60 days, over 90 days)? The seller may have been overly generous in debt forgiveness and deductible contributions to charitable organizations. This figure can likely be reduced.
Practice Services. In-office or subcontracted urinalyses, hematologic services, electrocardiograms, etc, might be considered as added services if a deficiency is noted in the seller's records. If periodic physicals and preschool examinations were not being utilized on a formal recall basis, such a system will enhance the practice. Inclusion of modalities, traction, acupuncture, kinesiology, nutritional counsel, and an isolated intensive-case area may expand the scope of the practice, if this is harmonious with your clinical philosophy. If a comprehensive consultation-examination-report system is not being utilized, its implementation will likely improve case management and patient motivation. Would a "family plan" enhance the practice?
Patient Ratios. The national average is about seven established-patient visits for every entering-patient visit; a 7:1 ratio. If the practice's ratio is quite different than this, it may indicate lack of practice promotion, inadequacy in establishing and maintaining referral centers, or an inadequate recall system. What is the ratio between cash accounts and charge accounts? What is the ratio between health insurance, worker's compensation, Medicare, Medicaid, and public welfare cases? These ratios will help to project cash flow. Is there good balance between the quantity of acute and chronic cases, age groups of patients, etc, where targeted education would enhance the practice? These are typical questions where answers can be sought.
Appointment Control. Is a modern, efficient appointment-control system being utilized? Is there a high number of missed appointments that can be reduced by improving preappointment communications and rescheduling procedures?
Contracted Services and Payroll. Check the costs of contracted services (eg, janitorial, routine accounting) that you can do yourself or have done more economically. Check total payroll costs against community standards, and consider the possibility of the practice being overstaffed or personnel being overpaid.
Equipment. Are there pieces of equipment included with the overall sale that you will not need and can be sold? If several pieces of equipment are being short-term financed, you can check to see if your bank will refinance the "paper" to reduce your monthly overhead. The seller's equipment may have been fully depreciated. If equipment is itemized within the sales contract, it can be redepreciated by several alternative methods that will be a tax advantage to the buyer.
Community and Public Relations. Ask the seller about his activities in public speaking, civic organizations, good posture clinics, industrial relations, and media action projects. If there has been laxity in any one of these areas, you will be able to increase personal exposure and enhance the practice. Check the practice's advertising budget; it may be too high or too low. What steps have been taken to improve seasonal fluctuations in patient volume? Mailings made 4-6 weeks prior to a predictable low-volume period will offer a control (eg, need for preschool checkups, summer safety, winter hazards). Are health tracts being inserted in every patient statement? Are the office's exterior, shingle, furnishings, color selections, and cleanliness of the office conducive to a professional atmosphere and a modern health-care facility?
Insurance. Seek counsel of a reliable independent insurance agent and see if the practice's insurance portfolio can be maintained at lower premiums by changing companies or improving the coverage at the same rates.
APPRAISE AND NEGOTIATE
If you arrive at a point where you are seriously considering purchasing a practice, it will be well worth the investment to have a real estate appraiser, a clinical equipment dealer, and a used furniture dealer appraise the buildings, equipment and furnishings. Always hire your own appraisers, rather than accepting those suggested by the seller. Figures from uninvolved personalities offer important data for negotiation. The total difference between the appraised values offered and the asking price will determine the seller's real asking price for "good will." This figure, almost always negotiable, is the surcharge you must be willing to pay rather than starting a practice from scratch.
Thus, in addition to a comparative analysis of the seller's profit and loss statements, an itemization of what is included in the sales price will also offer you important data to determine if the asking price is realistic. This itemization should include at least the following points:
(1) real estate,
(2) clinical equipment,
(3) furnishings,
(4) supplies inventory, and
(5) the value the seller places on the practice's good will and reputation. Figure 2.7 shows a sample worksheet.
Armed with your profit and loss statement analysis and your analysis of the sale's itemization, you are in a good position to negotiate the final sales price and its terms. See Figure 2.8. Some anxious seller's will carry the note at an interest rate lower than that of current bank rates or be willing to enter into a lease-purchase agreement. The latter method is more advantageous to the buyer, for it reduces the need for a large down payment. If the seller will not agree to this, another important factor to consider prior to purchasing is the financing of the purchase. This will be discussed later in this chapter.
COMPUTING THE VALUE OF THE PRACTICE'S GOOD WILL
The seller's good will and reputation have a distinct initial value, and a dollar figure can be placed on it. This value is usually greatly inflated by the seller, thus the buyer should be prepared to deflate its value even if he or she recognizes its potential. It's part of the seller-buyer game. If the seller is highly respected within the community, his choice of successor will also be respected to a certain degree. Also, the practice's patients have acquired a habit of coming to that location for chiropractic care. If the buyer's analysis of the seller's profit and loss statement and office procedures shows that this good will can be multiplied by gradually including new procedures and systems, the initial good will may mean more to the buyer than the seller realizes.
There is no highly accurate way of determining the dollar value of a practice's good will as much depends upon the personality mix of the buyer and the established patients of the practice. A great deal also depends upon how patient the buyer is willing to be with established patient habits and expectations. Slowly adding a new piece of diagnostic equipment or a modality will exhibit the new doctor's "modern approach", but drastic and abrupt changes usually frighten people away.
Formulae. To attempt to arrive at a dollar value for a practice's good will, three common formulae are in vogue. These methods never go beyond the most recent 12 months of the practice. Although the seller may wish to go far beyond that to a time when he was younger or in better health, you are purchasing the practice as it exists, not as it once was. To compute otherwise is just wishful thinking. You can apply all three of these methods, and then use the lowest figure to negotiate with the seller.
Total the number of office visits during the last 12 months of the practice, then multiply this total by $3 each.
For example, if the practice averaged 30 visits a day, 4 days a week (17/month) the formula would be:
30 X 17 X 12 months X $3 = $15,300.
Take last year's net income and divide by 4 to obtain a quarterly net income average. Take this figure and add 50%. For example, if the practice's net income last year was $40,000, the formula would be:
$42,000/4 = $10,500 + 50% ($5,250) = $15,750.
Take last year's gross income and divide by 4 to obtain a quarterly gross income average. Take this figure and add 10%. For example, if the practice's gross income last year was $60,000, the formula would be:
$60,000/4 = $15,000 + 10% ($1,500) = $16,500.Tax Considerations. It should be kept in mind that the purchase of good will is not a tax-deductible item. Thus, there should be no mention of this in the sales contract. Some feel that the value of good will can be included in the value of the tangible properties or the noncompetition agreement, both of which are tax deductible. As tax regulations frequently change, check with a reputable tax accountant.
Purchasing from a Widow. If you are considering buying a practice from the widow of a deceased practitioner or from a completely disabled doctor, there should be no or very little provision for good will because the doctor cannot be directly involved in the necessary transition period.
CHECKING THE SALES CONTRACT
No document, however seemingly innocent, should be signed unless it is first reviewed by your attorney. However, you can determine if the sales contract contains the basic information necessary. The major points to check for are:
A detailed description of just what is being sold, what items on the premises are not included in the sale, the purchase price and its itemization by categories, the agreed upon method of payment, and an amortized schedule of payments. Such schedules are usually written with a 10-year payout, but try to negotiate the longest period possible at the lowest interest rate.
A statement detailing any contracts, liabilities, or assets to be assumed by the buyer. It is usually poor policy to "buy" another doctor's accounts receivable, even if discounted. It has been Fernandez's experience that personal accounts discounted to 20--25% of their stated value and assigned insurance accounts discounted to 70--80% are reasonable. Regardless, there are so many legal complications involved in collecting another doctor's accounts that it would be best to avoid it.
A statement of how adjustments are to be handled at the time of closing for such items as prepaid taxes and insurance.
A statement warranting that the seller's disclosed liabilities and financial data are accurate.
The seller's covenant of noncompetition with a penalty clause, if this is legal in the state of purchase.
The seller's agreement to work with the buyer in the practice for so many days (eg, 60--120) so that a smooth transition can take place. This statement should specify the seller's compensation for this service.
If the seller is holding the note, it is customary that the buyer obtain a term life insurance policy in the amount of the purchase price that lists the seller as the beneficiary. This protects the seller in the event the buyer should die prior to fulfillment of the contract.
The specified time, place, and procedures of closing the sale.
GRADUAL PURCHASE
If the seller is not interested in selling at this time but plans to retire in several years, the partnership, associateship, or shared space plan described previously may be of interest to both parties. This would allow the seller to enjoy a good income for several years and still allow the buyer to build and purchase the practice over a number of years.
LEASED SPACE
If a doctor is selling a practice that is located within leased space, the seller's lease agreement may not be legally assignable. However, property owners want their buildings occupied, and they are usually open to working things out by signing a new lease with the buyer.
The Transition Process
While the buyer and seller will have a contract concerning the practice turnover, the practice's patients do not. They may have traveled long distances because of the seller's reputation and the results they received. Thus, many patients will have to be highly motivated to stay with the practice.
A thriving practice may be managed by another and rapidly deteriorate. A mediocre practice may be managed by another and be tripled within a short period. Much of what happens depends upon the new doctor's abilities and the cooperation between buyer and seller during the transition process.
Patients Entering the Practice. During the transition period, the seller should conduct new patient consultations if the patient has entered the practice to see the seller. After the consultation, the patient can easily be referred to the "new associate" in respect to his ability to handle the type of case presented in an effective manner. The seller should introduce the buyer to the patient, explain the main points of the case, and ask him to visit with the patient to see what can be done. With the patient's consent, the buyer could then conduct his usual history, examination, review of findings, and recommendations. In this way, all new patients will end up being the buyer's patients.
Established Patients of the Practice. The seller's established patients are a different story, and transition must be handled with tact by both doctors involved. No patient must be left with the feeling of being "pushed off" on another doctor. It is the responsibility of the seller to create a positive image of the "new associate's" ability. The seller's pending retirement or move should not be hidden.
If the established patient is a chronic case, under maintenance care, or is presenting an acute disorder, the seller can introduce the patient to the buyer to see if the patient's progress can be improved or speeded via the new doctor's training. If the referral is made tactfully after the new doctor's qualifications are established, the patient will happily give his or her permission.
First Impressions. Extreme care must be taken that the new doctor makes a favorable first impression or it may be the last visit of that patient with that doctor. During the initial visits between the new doctor and the practice's established patients, only a few innovations should be made to the seller's clinical procedures. Keep in mind that these people were patients of the seller because they liked what they received. Changes should be made gradually, and always with careful, tactful explanation of what, when, where, and why, and the patient's unpressured prior consent.
Communication by the Seller. For established patients of the practice who do not visit the office during the transition process, the seller should introduce the new doctor by way of one or more letters. While each letter should be different, the content of each should explain why the seller is leaving practice, the concern the seller has for continuing quality health care of the patient, and the virtues of the buyer. As an introduction, one of the new doctor's professional cards should be included with the mailing.
Communication by the Buyer. The seller's letter or series of letters can be followed by a letter from the buyer stating how happy he is to be located in the community and for the appreciation of the seller's respect and recommendation. The buyer should mention his plans to continue the established quality of health care plus incorporate some new procedures that modern research has disclosed to be beneficial, and the appreciation of being so warmly received in the community. It is helpful to include some seasonal health tips on a separate sheet to show your interest in preventive care. A publicity release (with photo) should be sent to local newspapers.
The Office Assistant(s). The buyer's good rapport with the office's CAs will do much in retaining patients to the practice. A good relationship can be established by several private interviews. In most instances, even a chiropractic assistant of questionable talents may know more about the business side of the practice than the seller. She can be a great asset and source of detailed information during the transition period and thereafter. Except in unusual circumstances, personnel changes should not be contemplated until after at least 6 months, regardless of the seller's recommendation. A change in well-established personnel may offer "uncertain" patients an excuse to also make a change.
These methods are professional, ethical, guard against the seller being charged with abandonment, and afford a smooth transition for the buyer. How to get quickly known within the community will be discussed further throughout this manual, but the subject will especially be covered in Chapter Eight.
A successful practice in an environment that is not personally rewarding will not lead to a happy life. Likewise, an excellent place to live that will not support your practice will not produce the financial returns necessary to support the lifestyle you probably envision.
Choosing an office site is like selecting a new wardrobe. It is difficult for a person to do it for another. Thus, we will mention general assets and liabilities to help you arrive at your decision. Each reader should list the factors discussed and give them a personal priority number.
Basic Criteria
The parameters for selecting a location to establish a practice and those used in analyzing purchasing a practice are relatively the same (Fig. 2.9). However, in the latter instance, you are limited to the areas in which a practice is for sale.
Good plans cannot be made unless there is a systematic collection, recording, and analysis of adequate, accurate, and current facts. Your investigation should allow you to select an area of the country with the climate of your choice, and then be able to reduce the area to a few states and then a particular state that has the most ideal licensing laws for your type of practice. Once you have obtained a state license to practice, you can select the county, the city, and finally the neighborhood that best harmonizes with both your personal and professional goals.
Everyone has a "gut" feeling of where a good neighborhood to practice might be, and this feeling is usually supported by friends and relatives. Unfortunately, many potential patients may not agree.
As changing locations is an expensive and discouraging situation, careful objective assessment --and this takes a great deal of self-honesty-- must override subjective wishful thinking.
Fundamental Assessments. The basis of assessment might include population size and density, general income level, unemployment percentage, and climate and scenery. After a state has been selected, the state Chamber of Commerce and local Chambers will usually offer helpful literature upon request. But keep in mind that such literature is asset oriented and not liability oriented. Other basic facts should also be obtained: Are community facilities growing, plateaued, or failing? What about competition concentration, strengths, and weaknesses; rental, tax, and utility rates; social, cultural, recreational and leisure facilities; history of tornadoes and rising water; and ethnic compatibility.
Research. It is estimated that for several months, the beginning practitioner must devote about 30% of his or her time in just research and planning. In terms of time and energy, the cost is high, but the result will pay large dividends in avoiding costly mistakes. Some of this research is personal observation, some problem definition and strategy planning, some just listening to practitioners and viewing their offices, some involves library research, and some involves personal experimentation.
The more detailed and accurate your planning is, the less your risk is. If you realize the obvious --that a practice should be located where potential patients are-- the details will come naturally to such a line of reasoning.
There is no intent to overemphasize the importance of location. Ergerter points out that a certain location is often given for the cause of a practice's failure, but it is never given credit for the cause of a practice's success.
Professional Considerations
Your next consideration should be what type of practice you prefer: a salaried position, an associateship, a partnership, or a new or purchased practice. In the first three options, the site of the practice may have a secondary priority.
Another type of professional consideration is the area's "chiropractic consciousness" that has been established by your predecessors. You will unlikely be happy living in an area where most DCs staunchly disagree with your clinical approach and philosophy. Especially to the new graduate, cordial intraprofessional dialogue is an asset. It takes great courage and often an additional financial burden to "break new ground" in an area where thinking habits of colleagues and potential patients are firmly fixed.
Population Considerations
In locating a site for a potential practice, you should also consider the "health market." This refers to determining the number of people in the area who have health needs to satisfy and have the funds to pay for professional service. Age and occupation ratios, for example, will help to define submarkets.
The local library (or the Internet) should have the latest census figures. Except for the smaller towns, census breakdown according to per capita income, family size, sex, color, religion, occupational groups, and longevity rate may be available to offer an overview of the area.
The rule of thumb is that practices build faster in small towns because word travels quicker, but larger cities have the potential for larger practices because of the population concentration. However, some of the very largest practices in the nation are located within small towns. Thus, such general rules, and you will hear many, fail to consider personal initiative and skill.
From a national basis, the population center is tending to shift towards the south and west. The current job market is also a factor which forces people to seek employment in other areas. At the present time, the automobile and steel industries (fairly concentrated in the North Central and Northeastern states) and Midwest agriculture are suffering.
Life-Style
Some small towns were originally created by Catholic, Quaker, Lutheran, German, Italian, or other groups with common interests. Such religious/ethnic roots may still be an important aspect of the town's tradition and social customs. Compatibility involves not only the doctor's preferences and prejudices, but also those of the community. A language barrier may also present a problem.
Local Economy
For the greatest economic stability, it is best to seek an area that has multiple industries. A "one-industry" town may become a "ghost town" if the factory closes. A balanced mixture among industrial, technological, small manufacturing, retail, service, and agricultural-related business offers the best security.
How many new buildings are there? New construction indicates the faith that others have in the future of the area. What type of businesses do they house? Does the community exhibit growth and expansion or early signs of decay? A poor quality educational system, a precarious water supply, an overloaded sewage system, streets badly in need of repair, and inadequate library facilities are factors that might indicate a deteriorating local economy.
Competition
Each year, the Federation of Chiropractic Licensing Boards publishes the Official Directory of Chiropractic & Basic Science Examining Boards with Licensure & Practice Statistics. This booklet contains a listing of current resident DCs practicing in each state of the United States and each province of Canada. By dividing the number of resident DCs into the state census figure (eg, from a current almanac), you will arrive at the present number of DCs per 1,000 population. This fact, along with knowledge of increasing population trends, offers insight of those states that will be most in need of DCs in the near future.
If a local area's population is known, competition concentration can easily be judged by sticking pins in an area map. Addresses can be found in the local telephone book.
It is usually taught that a ratio of one DC for every 10,000 people within a 50-mile radius is a good criterion. Such ratios, however, are highly suspect. Keep in mind that competition concentration is a dual-edged sword. Granted, any community can theoretically support just so many DCs. However, the more DCs in an area, the greater number of people who have been exposed to the benefits of chiropractic health care. A balance of all factors must be determined.
The most important assessment of competition is the quantity of practices that will offer services quite similar to those you will propose. A large number of DCs in your area offering similar services may present a delay in establishing your individual reputation because your presence will not be unique. In contrast, if you propose to offer services that are completely unknown to the area, you will have to do a great deal of educating.
In the last analysis, the quality of your service will usually determine your success and not the quantity of colleagues in your area. This is not to ignore the fact that the chiropractic profession has experienced unprecedented expansion during the last decade or so. Brennan points out that DCs have been asked three times during the last 8 years for their perception of balance between the demand and supply of chiropractors.
In 1975, only 8% felt there were too many DCs in their area; in 1982, 18% felt this way. This 10% rise in only 7 years is significant that conditions are changing.
Metropolitan Areas
Downtown "business district" locations generally offer accessible transportation, fewer evening hours, a higher fee level, and fewer transient patients.
The major disadvantages are that many people are highly anxious to leave the metropolitan area immediately after working hours, space rates and expenses are relatively high if the suite offers a prestigious location, and there may be possible parking problems and costs. A lengthy residence-office traveling time can usually be anticipated, and a street with a great deal of heavy traffic may discourage the elderly and disabled.
Suburban Areas
In a metropolitan area where the vast majority of people work downtown but live in the suburbs, it is often best to locate between where the majority of people reside and do their customary shopping and where they work. A good clue is to notice where the allied professional (eg, medical, dental, optometric) offices are located. You will find that most are located on suburban main thoroughfares, between business and residential areas. Other points to consider are that a corner location is easy to remember and has double exposure to traffic. An office near a well-known landmark is especially easy to find. An office that does not have adequate bus service may be a deterrent to those who do not have their own transportation.
New suburbs usually have a concentration of young married couples with infant children. The typical family's standard of living is often based upon dual incomes, thus immediate quality health care for the family is vital. However, such families may be deeply in debt and collections may be difficult. Lalla states that the crux of most chiropractic practices fall within the 30-60 age group, and Fernandez feels that an area that has a high percentage of residents in the 45-55 age group is ideal because they have had an opportunity to become financially stable.
Medium-Size Cities
Medium-size cities often have many of the advantages of the larger cities and small towns without their disadvantages. They have relatively low space costs and expenses. It is easier to become known and involved in community affairs, and professional relationships tend to be closer than those in large cities. However, the number of ideal facilities is quite limited and one may be difficult to find. Thus, temporary facilities may have to be considered.
Small Towns
Space costs and expenses are especially low, integration of an "outsider" into the community is quite rapid unless the community is clannish, a doctor's reputation spreads rapidly by word-of-mouth, professional relations tend to be close via association within intracommunity organizations, and parking is rarely a problem. However, there are limited modern facilities, considerable mail-order purchasing and added shipping costs, probably poor service on technical equipment, and less opportunity for personal privacy. In addition, strict appointment schedules are difficult to control because of the lifestyle and the pool of potential patients and employees is limited.
Downtown Locations
Downtown locations are effective in the smaller towns because they are near the hub of community activity. In larger cities, however, space costs are high and the traffic is composed chiefly of white-collar workers, marketing people, attorneys, executives, those who work in the financing industry, etc. Statistics appear to indicate that the majority of chiropractic patients come from the blue-collar or associated groups.
Shopping Areas
Some shopping areas have ideal parking facilities and others do not. Store fronts in small shopping plazas or community centers have proved to be ideal locations for a number of professionals. Sites within large shopping malls or planned supermarts are almost always negotiable. However, they usually have exorbitant rental fees for the space required for a chiropractic office, and most require a percentage of gross receipts with a minimum guarantee rather than a fixed rate.
Store fronts with a good traffic flow offer an opportunity of placing a visual presentation about chiropractic health care in the window. Such a presentation should be of high quality and not exceed the length of a typical passing pedestrian's attention span (about 3 minutes). It is also best that the window not be draped with heavy curtains. Rather, the view should exhibit a comfortable, clean reception area.
Home-Office Combinations
A home-office combination is an excellent way to divide rent, utility, repair, insurance, telephone, and other costs. There are distinct tax advantages proportional to the office space utilized, 24-hour telephone coverage, and parking is not a common problem.
A duplex may offer an excellent home-office arrangement for your first office. Basement offices that have long stairways and a darkened atmosphere are not recommended, but an apartment below a residence that is set within the ground about 4 feet or less (allowing for larger windows and fewer stairs) may be ideal. Whatever the situation, separate office and home entrances should be present or made available.
The disadvantages of a home/office combination are that it may be difficult to shield cooking odors from the office area or have a play area for your children that would not distract from the professional atmosphere. You will also be somewhat "captured" for the drop-in patient at odd hours, and evening hours are generally longer in residential-sited practices. These last two factors may be an advantage while establishing a practice but may become annoying in later years. In addition, there is a distinct decrease in privacy and times for casualness.
It is preferable that an office be located near well-known landmarks and have accessibility to bus service. If other than a ground-floor location is selected, it should have adequate elevator service. Disabled patients will be unable to walk up and down long stairways.
Rental Costs
While it can be a mistake to pay too much for rent, it is also a mistake not to pay enough. Paying low rent for a site that is not attractive to patients is not a good investment. An office that has physical hurdles that must be overcome by disabled patients, is unable to be expanded economically for growth, or has poor parking facilities reflects poor planning based on low expectations. If a larger space is available for only slightly more rental, consider future expansion needs.
Leasing Considerations
Most landlords say they use a standard lease form, but rarely will you find any two agreements exactly alike. Thus, the provisions must be read carefully line by line and then given to an attorney for further evaluation. Some leases provide for a few or all utilities, personal property fire and casualty insurance, subleasing, private parking, drapes and carpeting, a budget for new-tenant space modifications, and others do not.
A short-term lease will not bind you into a long-term mistake, but you may find yourself displaced at the end of the initial contract unless you have a legally binding option on renewal. A long-term lease lets you predict space costs over an extended period and gives you a sense of location security, but it fixes you at that site if you wish to move to more desirable quarters as your practice grows.
The major things to check for are the terms, the space (including storage), the services provided, the redecorating costs, an option to renew, and utility rates. If possible, it is always advisable to include an escape clause in the event of death or disability, or at least a provision for subleasing.
Purchasing a Building
Occasionally an older home or building located on a major thoroughfare can be purchased outright or, preferably, can be acquired where rent may be applied to the purchase. Such a building may possibly be converted into a modern office or temporary office/home combination at modest cost. After appraisal, complete remodeling estimates (itemized) should be obtained prior to purchase. Possibly you will be able to take on some of the work by yourself, but major construction, electrical, and plumbing work should be done by a licensed individual who is experienced in the trade and knows the codes involved.
Who Should Do the Repairs? This question brings up two divergent philosophies: One holds that a doctor should never waste his time in doing minor painting, repairing, landscaping, gardening, carpentry, plumbing, etc, about his office or home. A doctor's time is worth much more per hour than that which can be hired and the result will be more professional. The belief is that the doctor should spend his time where his efforts will be most financially rewarding. On the other hand, some doctors like to do these things. They feel a sense of creativeness and accomplishment and use such outlets as recreation and an opportunity for diversion from routine responsibilities. This can also be highly rewarding. Thus, both viewpoints have their merit. The choice depends on the individual involved.
Your office will be your primary source of income and the place where you will spend a third of your professional life. Invest in it accordingly. It is an environment that can do much to add to or subtract from positive human relations. A clean, comfortable, attractive, well organized office can do much to communicate to the established and prospective patient, "We Care!"
Environmental First Impressions
Although a powerful positive personality can overcome minor negative first impressions, it is an unnecessary effort. For example, some doctors prefer to dress quite informal in the office by wearing a sport shirt. A clinic jacket over a conservative shirt and tie or blouse automatically portrays the uniform of a doctor. Without a uniform of some nature, you will look like a patient.
Freshly laundered attire, sparkling equipment, clean floors, neatly kept magazines, uncluttered desks, and like concerns for housekeeping communicate to the patient as much as your gestures, mannerisms, and tone of voice. Good taste does not go unnoticed. Just as clothes exhibit the personality of the wearer, the atmosphere of your office exhibits the personality of your practice and indirectly reflects many of your personal tastes and values.
Evaluating Space and Furnishings to Meet Your Needs
Your floor plan, space utilization, basic color schemes and accents, floor coverings, furniture, wall coverings and hangings, drapes, lighting fixtures and lamps, and accessories --all should be chosen to reflect the image you wish to present to the public. Each should have a tone and texture that will harmonize with your personality.
Some sites will require only modest remodeling while others will be almost impossible to adapt to meet your needs. Obviously, this must be determined before any commitment to lease or purchase is made. A dilemma may arise that requires careful thought --choosing between an ideal location requiring considerable remodeling or a less advantageous location requiring minor remodeling costs.
If a landlord pays for the remodeling costs, they will be added to your space costs, prorated over the length of your lease. If you must finance all remodeling costs, you must negotiate a lease of such length that these costs will be justified or else you might end up improving someone else's property. Negotiated agreements of this nature require good legal advice.
Floor Plans
A good floor plan is any arrangement that contributes to office efficiency and a smooth flow of patient care (ie, functional operation). The most efficient architectural designs for patient flow are circles, ovals, or triangles, yet most buildings are square, rectangular, or L-shaped. This will challenge your creativity. Whenever wasted space can be eliminated, overhead will reduce, and net profit will increase. Overhead directly affects the fees you must charge.
Thousands of ideal office layouts could be discussed, but they would undoubtedly not fit your particular needs or the space available. Thus, we shall restrict our discussion to the basic principles of good layout that can be applied in various situations. Nor shall we discuss specific room dimensions, for these will be dictated by the space available, your budget, and equipment needs.
Office Layout Planning
Once a prospective office site is seriously considered for lease or purchase, the first thing to do is to prepare two floor sketches on graph paper: one depicting the space as it is and the other as your office is imaged. Begin by drawing to scale (eg, inch = 1 ft) all room dimensions, window and door locations, electrical and telephone outlets, and plumbing. Indicate all loadbearing walls that cannot be moved. Then visualize on paper how the basic plan can be modified the least to meet your needs, provide good patient flow, and prevent a direct view from one room into the functional area of another. Patients expect and deserve privacy.
Hallways should be a minimum of 4 ft in width to accommodate two people passing each other without bumping. This will also afford easy passage of a wheelchair or equipment moving.
Rooms in which patients will not be fully clothed should be kept at a warmer temperature to avoid chill. This is especially important in chiropractic where a substantial number of patients will be geriatric cases with hypothermia problems.
Cut-outs drawn to scale of all anticipated furniture and major equipment can be shifted around your plan to see where they can be placed most efficiently. To avoid major reconstruction costs, several attempted plans are usually necessary but this trial-and-error method should arrive at a plan that can be taken to a contractor for a firm cost estimate. Three comparative quotations are a good policy.
Inasmuch as you will be spending the majority of your time in the consultation, examination, and treatment rooms, these rooms should be grouped. For assistant efficiency, the reception room, preparation room, and business office should be grouped. The typical patient (and record) flow involved should be carefully considered. For example:
New Patient (Chronic Case): entrance, reception room, consultation room, preparation room, examination room, x-ray, preparation room (redress), consult ation room, business office, exit.
New Patient (Acute Case): entrance, reception room, consultation room, preparation room, examination room, x-ray, preadjustment therapy, adjustment, postadjustment therapy, preparation room (rest and redress), business office, exit.
Follow-up Visits: entrance, reception room, preparation room, necessary therapy room(s), business office, exit.
Space Needs
Trying to compete initially point-for-point with well-established facilities can easily lead to bankruptcy. A minimal facility that has been furnished with attractive used furniture and equipment can be an excellent springboard for your career.
Your first office need not be elaborate or spacious. Start small with an eye on later expansion to accommodate an associate or partner. A relatively small office space that can be organized so that it is functional is better than a larger space that cannot be adapted to your needs without expensive reconstruction.
To reduce cleaning bills and allow more traffic space, keep as much equipment off the floor as possible. Recessed fixtures and storage cabinets will also increase functional floor space.
Some doctors spend most of their working hours standing while others prefer to sit when performing some tasks. This factor will influence space needs.
No room or hallway should give the impression of being crowded or prohibit freedom of movement. On the other hand, wasted space is leased or purchased, insured, taxed, heated, cooled, ventilated, lighted, and cleaned at the same rate as is productive space. Thus, the cost for wasted space can be substantial. In the well-organized office, there should be a place for everything and everything should be in its place. Lost time seeking an item is lost dollars. It is well to keep these facts in mind when thinking about the basic office areas.
The basic solo chiropractic office commonly consists of eight separated areas:
1. Reception room
2. Consultation room
3. One or more preparation rooms
4. Examination/treatment room(s)
5. Roentgenography room
6. Film-processing room
7. Business office
8. Toilet room.
Typical optional rooms consist of:
1. Laboratory
2. Specialized therapy rooms (eg, traction)
3. Intensive care room
4. Laundry
5. Children's area
6. Personnel lounge.
The typical solo office usually requires a minimum of 800--1000 sq ft. In several instances, some of the basic and optional rooms mentioned above can be developed by separating a large room with movable or temporary partitions.
Free Expert Advice
There is a great deal of good free advice available if you ask for it. For example, large paint stores usually have decorators that will help you in color selection. Major department stores have decorators available to help you with selecting drapes, wall coverings, carpets, furniture, and accessories. Garden shops and nurseries often have landscape architects that will advise you on proper plantings and their plotting. Your local library and book stores have an abundance of "how-to" manuals available that can help you avoid costly mistakes. In most cases, a wealth of information is available just for the asking.
Floor Coverings
It is best that floor coverings be selected first because there is usually a greater choice of wall paints and papers, furniture, lamps, and drapes. Monocolored rugs are the easiest to blend with, but multicolored coverings do not show footmarks as readily. A good compromise is a very small pattern. A commercial grade pile is the most economical to select in the long run for heavy traffic areas. Shags wear quickly, are difficult to clean, and always look matted. Tile is best in areas where liquids may be spilled.
Color Selection
It is generally held that warm colors produce a lively and friendly atmosphere. Wood tones and beiges tend to tranquilize. Cool colors and pinks tend to create quiet, soothing, restful feelings, while bright reds and sharp contrasts tend to be anxiety producing. White and gray are neutral colors, taking their effect from the accessories used. In a doctor's office, blues tend to be too cool and yellows tend to be too warm. Thus, many decorators appear prejudiced to tints, tones, and shades of brown, green, and rose.
The proper selection of colors depends essentially upon room size and window lighting. Warm tints tend to increase the apparent size of a room, while cool shades have the opposite effect. Northern exposures tend to be improved by warm tints (eg, red, orange, yellow) and southern exposures by cool shades of color (eg, blue, aqua, green).
Abundant use of chromium and white suggest modernness and cleanliness, but also coldness. Inasmuch as many clinical cabinets and equipment are available only in white, chromium, and stainless steel, balance can be achieved by the use of warm tones elsewhere in the room.
There are five common methods of harmonizing colors:
Complementary harmony --using colors that are opposite on a color wheel (eg, variations of blue and orange or yellow and violet). See Figure 2.10.
Split-complementary harmony --using a principal color with the two colors on either side of its opposite (eg, orange, blue-violet, blue-green; or green, red-violet, red-orange).
Triad harmony --using three colors spaced equidistant within the color wheel (eg, red, yellow, blue; or orange, green, violet).
Analogous harmony --using neighboring colors (eg, yellow-green, green, and blue-green; or yellow-orange, yellow, and yellow-green).
Monochromatic harmony --using tints and shades of the same color.
Textures and Patterns
Soft and deeply napped textures tend to absorb light and thus darken the background, while hard surfaces reflect light, produce glare, and brighten surroundings.
The professional atmosphere is usually best maintained by selecting subdued patterns that harmonize with the basic colors and accents selected. Good taste doesn't shock the senses. Bold, extraordinarily bright, and busy patterns tend to make a room appear cluttered. Against large walls, however, a pattern helps to break up the plainness of the wall. Most decorators will place plain furniture against a patterned wall and vice versa.
Good taste does not mean expensive. A drab wall can be made into a center of visual attention by an inexpensive mural or a gigantic photographic print of a relaxing scene.
Furnishings
It is best that each room have a center of interest, something that initially catches the eye, around which other furnishings can be appropriately arranged. A striking painting, a mural, a quality aquarium, or a small corner waterfall can be a center of conversation and add to the peaceful atmosphere of the reception room.
Care must be taken that furniture placement does not inhibit a smooth flow of traffic. It is usually best, with a few exceptions, that each piece has a specific function and not be essentially decorative. Most decorators suggest that furniture and walls should have some contrast (ie, dark furniture against lighter walls or vice versa).
Old furniture in dusty surroundings will not suggest that you are greatly interested in keeping up with the times. Nor does flimsy furniture suggest stability or avoid unnecessary accidents. Due to the large percentage of "low
back" cases in a chiropractor's office, reception and consultation room chairs should be sturdy, have armrests, and not be too low.
Try to select durable well-designed furniture that will not show wear within a short time, but avoid anything that may resemble kitchen chairs or overstuffed living room furniture. Upholstered furniture should be stain resistant. In addition, it is not good policy to select furnishings from a catalog unless floor models can be inspected.
Accessories
Such items as lamps, paintings, drawings, plaques, vases, planters, ash trays, and displayed literature are considered accessories. A careful selection of accessories can add to the warmth and completeness of a room. Rooms with a predominantly cool-color atmosphere are best accented by warm-colored objects and warm-color rooms by harmonizing cool-color accents.
While some statuettes may be appropriate, avoid stuffed animals. The latter are revulsive to many people. Nor is it good policy to hang any picture, chart, or sign on a wall that is not framed or professionally produced. If a notice is important enough to be displayed, it's important enough to be lettered with skill and framed. Interior doors should be appropriately marked with small professional signs (eg, bakelite, raised aluminum) indicating "Consultation," "X-Ray," "Therapy," "Exit," etc.
Lighting
Bright metals, abundant in a clinical setting, sharply reflect light and cause glare. Inasmuch as many illnesses are accompanied by photophobia, indirect room lighting will do much to reduce this glare. Indirect florescent fixtures with warm-white bulbs are usually recommended.
When an especially warm atmosphere is desired (eg, reception and consultation rooms), indirect lighting or table lamps are better than overhead ceiling fixtures. Excellent lighting is essential in examination and treatment rooms.
Ventilation and Sound Barriers
There are especially two unseen environmental factors that do not go unnoticed, and they are good air conditioning and soundproofing between rooms. Good deodorizer and ventilation systems are necessary to disguise and remove strong chemical smells.
Sound proofing walls is best accomplished by offset studding and special doors in new construction, but usually we must work with what is there. Helpful measures after construction are the use of items that will inhibit sound transmission such as decorative cork, heavy drapes, sound-absorbing ceiling tile, deep-pile rugs, and coarse textures. An "intercom" playing soft music at low volume is an excellent means of muffling conversations that could possibly enter a neighboring room.
Principles of Interior Decorating
In decorating your office, seek attractiveness and sturdiness. Plushness is neither necessary nor advisable unless all your patients are millionaires.
PICTURES AND PLAQUES
Many have a tendency to hang pictures and plaques too high. Most decorators feel that such items should be placed so that they are at the eye level of an average person when standing. In most instances, they should be placed in a straight line horizontally, either at the top or bottom.
LOW OR HIGH CEILINGS
Rooms with low ceilings can be improved visually by vertical stripes or fanning wall hangings upward, high ceilings by using horizontal stripes or fanning wall hangings downward. A white ceiling tends to make ceiling height appear higher, while shaded tones and dropped lighting fixtures give an illusion of a lower ceiling height.
PROBLEM ROOMS
Long Narrow Rooms. Corridor-type rooms can be made to appear in better proportion by floor coverings with designs (eg, stripes) running the narrow dimension. Cool shades, large mirrors, or vertical designs can be placed on the long walls. Warm tints, horizontal designs, and accent lighting help on narrow walls.
Small and Large Rooms. It has been mentioned that warm tints tend to increase the apparent size of a room, while cool shades have the opposite effect. Small rooms may also be made to appear larger by using recessed furnishings and painting the doors and wood trim wall color. Large rooms take well to contrasted colors and larger furniture set further from the walls.
Relatively Square Rooms. Box-shaped rooms can be made more interesting by painting the wall with the visual center of interest a different shade, tint, or color.
Exterior Considerations
The exterior of an office offers the public its first impression of the practice. Most of us like to make predictions, and then try to prove that our guesses are correct. Thus, many people will think that what they see outside an office they will meet inside, and in most instances they are right. Robinson points out that people assume, often from past experience, that an attractive office houses a successful doctor that is successful because of his technical skills. Levoy reminds us that people have confidence only in those they think are successful.
If considerable exterior painting or construction must be accomplished, it would not be inappropriate to have a sign indicating that the premises are being remodeled for a new chiropractic office. People have respect for improvements in their community, and their attention is drawn to change.
Visibility and Attractiveness. Your office should have good visibility to traffic. Obscuring trees and large shrubs can be pruned or removed. Exterior flood lights can be added. If your office has a lawn, be conscientious that it is kept mowed and maintained, and that shrubs and bushes are properly pruned. Avoid annual flowers if the beds cannot be maintained at least once weekly. During the winter, snow and ice must be removed frequently from walks, steps, and parking areas when such conditions become necessary.
Accessibility and Barrier-Free Architecture. Barrier-free architecture refers to both patient convenience and safety. Evaluate the accessibility of your proposed office in terms of the disabled. Must several steps be climbed? Are there railings on all stairways? Can a wheelchair ramp be added? Are there floor grids or thresholds that may catch a cane or crutch? Any entrance that will accommodate a wheelchair or crutch user will be a convenience for everyone. All rooms, hallways, and stairways should have nonslick surfaces.
Your Professional Shingle
Your professional sign should be large enough to be noticed by passing traffic, but not so large as to be considered in poor taste for a professional. A drive around town will often disclose that those offices with deteriorating exteriors and services of limited quality have the largest and most gaudy signs. A good guideline will be those signs of successful colleagues and allied health professionals.
Indirect lighting for night viewing is considered professional, neon lighting is not. Whether the sign is made of wood, plastic, or nonrust metal is not important, as long as it has been professionally constructed in good taste and harmonizes with the exterior of the building. The lettering should have good contrast with the background. Good taste is a difficult phrase to define, and probably community standards would be a better term to use here.
Parking
Space for a minimum of nine parked cars is usually adequate, considering six patients, one doctor, and two assistants. Total parking space need not be in the same location of the building, however. Patient parking should be near the entrance, but staff parking can be at the rear of the building if space is available. Ill or disabled patients will become quickly discouraged if they must walk a long distance to your office entrance.
The Reception Room
While the exterior of your office gives the patient the first impression of your personality, the reception area offers the second impression. Thus, the reception area can either enhance or subtract from the attractiveness of the building. It should be located near the front entrance.
The area should be air-conditioned, relaxing, friendly, well organized, and furnished in good taste, but not resemble a residential living room or a hospital waiting room. It need not be large if functioning on an appointment system. About eight comfortable chairs should be provided, without appearing crowded or cluttered. Obviously, the doctor who sees four patients an hour will need less space than the doctor who sees six patients an hour. More space and chairs will be necessary if functioning on a "open hours" system.
Basic Furnishings. The basic furnishings of a typical reception room are sturdy chairs with arm rests, one or more small tables, drapes and window coverings, wall hangings, plantings, necessary lamps, a coat rack for overcoats and umbrellas, a holder for professional cards, and adult and children's reading literature. Some doctors provide a small table with a freshly brewed pot of coffee or chilled fruit juice for early morning patients.
Avoid sofas or multicushioned benches. Strangers do not prefer to sit close to each other, and Levoy points out that patients shouldn't be seated in rows along opposite walls where they can stare at each other. Do not include a wall clock in the accessories, as it will only serve to irritate waiting patients when you are behind schedule.
Educational Materials. A literature rack displaying health-oriented folders and booklets is an asset in the reception room --not only for the education of the waiting patient but also for those who may accompany the patient. In recent years, videotaped programs have become available as a supplement for this purpose. However, both literature and tapes should be changed periodically or rotated so as not to bore the chronic patient who is making frequent visits to the office. For neatness, replace any literature that has become "dog-eared" -- but this fact will tell you what is being read. Magazines can be inserted within plastic covers.
The Consultation Room
In recent years, most medical doctors have eliminated the consultation room. Their thinking is that it wastes time. They prefer to see the patient in the examining room properly prepared, ask a few questions, do a cursory examination.
The consultation room is the patient's entrance into your practice, thus it should be located near the reception area. This room gives the entering patient the third impression of your personality before you say a word. Its atmosphere can also add or subtract from the impressions previously created. The scene should be one of a private study. It is here that you will probably interview patients, meet with service representatives without disturbing patient flow, and conduct private discussions with assistants.
The consultation room is the area most appropriate to display your diplomas, certificates, awards, reference books, etc. They are best placed behind where you sit so that they are in full view of the prospective patient. This is also the one room that you may appropriately exhibit a conversational symbol or two of your hobbies (eg, a grouping of rare stamps, a bowling trophy, etc). This will couple your credentials with your humanness.
The room need not be large, but it should be quiet, private, friendly, comfortable, and furnished in excellent taste. All incoming phone calls except emergencies should be intercepted during a consultation so that attention is not drawn away from the patient's problems.
A large uncluttered desk and a high-back swivel chair adds to good sitting posture and an authoritative atmosphere. If you are short in stature, raise the legs of the chair or place it on a low platform so that you will not have to talk up to patients. As spouses often accompany an entering patient on their first visit, two chairs should face the desk. However, if you desire a more cordial atmosphere, place the guest chairs diagonal to or at the side of the desk.
Basic Furnishings. The basic furnishings of a typical consultation room are a closed-front desk with file drawers, a credenza, the doctor's chair, guest chairs, bookcases, waste basket, framed diplomas and certificates, telephone, two recessed full-spine roentgenography view boxes, and educational charts (type that may be revealed only as needed). Avoid open shelving. Dictation equipment is optional, but it's an efficient accessory in developing reports and correspondence that are to be typed later.
The Preparation and Posttherapy Rooms
If multiple treatment rooms are provided, only one preparation (dressing) room with two or three privacy booths is necessary for female patients. Male patients can strip to the waist in the treatment room. However, if one main treatment room is utilized, it is best to have a preparation room for males so that the use of the treatment room will not be delayed.
Each entering female patient should be instructed by an assistant how to prepare for the examination and how the gown is worn. On subsequent visits, each female patient should be presented with a freshly laundered gown as she enters the preparation room.
Some doctors effectively utilize a number of small private dressing rooms that can be used interchangeably for male and female patients as necessary. One door enters from the reception room near the business office and another door exits to or near the examination/treatment room. The lighting should be indirect and subdued. If there are no windows in these rooms, they should be well air-conditioned by vented ceiling fans.
Preparation rooms should be located near the consultation room. A room as small as 5 ft x 7 ft is sufficient to contain a resting cot and necessary furnishings. Two such rooms are minimum to allow for one preadjustment patient and one postadjustment patient (Fig. 2.11). One patient can be preparing for examination or treatment while another patient is resting after therapy. A third and possibly larger room is helpful as an intensive care facility for patients who might need lengthy observation and care before dismissal.
Basic Furnishings. The basic furnishings of a typical preparation room are a resting cot, clothes hooks or hangers, a mirror, a small shelf with tissue holder, a waste basket, a clothes hamper for used gowns, a small literature rack, and some wall accessories.
The Examination and Treatment Rooms
Examination and treatment can be conducted in separate rooms or in the same room. However, a single room reduces traffic and eliminates the need to duplicate expensive equipment. In any event, for good patient flow, the examination room should be near the preparation room and the treatment room should be near the examination room.
Keep in mind that whenever a patient is moved from room to room, time is lost. A few minutes here and there multiplied by 30 patients can easily equal 1-2 hours of unproductive time a day. It is often better that the doctor and assistants move from room to room for they are familiar with the environment.
Basic Examination Room Furnishings. The basic furnishings of a typical examination room are an examination table (preferably one which stirrups may be attached), a stool, weight and height scale, a sterilizer, a cabinet to hold small instruments and supplies, paper towel dispenser, hooded waste basket, eye chart, and a counter to write upon. It is strongly advisable that each examination/treatment room contains a small lavatory so that your hands can be conveniently washed in view of the patient prior to examination and treatment.
Diagnostic Instruments. Basic diagnostic instruments include a stethoscope (dual head), sphygmomanometer, penlight, magnifying glass, opthalmoscope, otoscope-nasoscope, percussion hammer, pinwheel, thermometers (oral and rectal), flexible tape, plumbline, tuning forks, vaginal speculae, and anoscope.
The Doctor's Bag. Failure to provide necessary service to a bedridden patient of the practice can be the cause of a suit for abandonment. Most small diagnostic (and sometimes emergency therapy) instruments used in the office will also be required on housecalls. Initially, they may be the same instruments. Later, you will find it advantageous to have the bag packed with duplicates.
Diagnostic Supplies. Necessary supplies usually include tongue depressors, disposable gloves, finger cots, K-Y jelly, liquid soap, patient drapes, tissues and wipes, disposable towels, swabs, specimen containers, and smear plates.
Basic Treatment Room Furnishings. The basic furnishings of a typical treatment room are an adjusting table, a low table with a firm flat surface, a stool, a roentgenographic view box, a counter to write upon, a cabinet to hold supplies, a hooded waste basket, and whatever therapy and routine diagnostic equipment is desired.
Buy the best you can afford when you purchase your adjusting table, for it is the center of your practice. All other equipment is secondary in a chiropractic practice. However, the typical adjustment table (eg, Hy-Lo) is designed strictly for adjustments with the patient in the prone position. Extremity manipulation and spinal adjustments in the supine position are better conducted on a low, flat table. Most patients are fearful of even moving to the side position on a narrow adjustment table; and unless the doctor is exceptionally tall, the height of the adjustment table precludes the proper leverage necessary for many extremity techniques. It is beneficial if the head of the low table is inclined upward. If not, a small pillow should be available.
Many common supplies are listed in Figure 2.12.
Educational Tools. Although a picture may be worth a thousand words, avoid cluttering your walls with anatomical charts. These are excellent educational tools, but they frighten many patients. It is best to use charts fixed to windowshade-type rollers, which can be exposed only when necessary. Some doctors have a three-ring binder or flipchart available containing the illustrations desired. In contrast to x-ray films, skeletons are distasteful to many patients. If a model spine is used for educational purposes, mention that it is plastic.
X-Ray and Film-Processing Rooms
Roentgenography should be conducted in a separate room that has been properly shielded according to local health-code specifications. The room need not be large, but it must be sufficient to achieve ideal tube-film distances when the subject is either vertical or horizontal to the floor. It is best located near the examination room. Acquaint yourself thoroughly with all state and local safety and electrical codes.
Basic Furnishings. The basic furnishings of a typical x-ray room are the x-ray equipment and its basic accessories, lead shield for operator, a small stool, a view box, a small counter to record notes, a storage cabinet for supplies, and a means to file patient films. Typical supplies include sand bags/weights, a film-labeling system, a log book, and calipers. If space permits, such diagnostic equipment as thermography, photography, and postural grids may be contained within the roentgenographic area.
The Dark Room. The basic furnishings of a typical film-processing room are a sink with adequate plumbing, a developing tank, paddles and tank thermometer, a counter or small table, view box, chemical and film storage, paper towel holder, waste basket, and a line to hang drying films if an automatic dryer is not utilized. Regular and ruby (safelight) lighting and ventilation must be provided. Anticipate adequate storage space for film, chemicals, film hangers, cassettes, etc, and the later addition of automated equipment and controls.
The Business Office
To conserve space, your receptionist can be located at one end of a central business office. The combined reception/business office should be located off the reception room so that entering patients can be greeted and registered on one side, yet near the patient dismissal area so that fees can be collected. The exposed sides of the business office should have a counter that will allow a patient a level surface to write upon while standing. The purpose of this is that both entering and departing patients will be in view of office personnel.
The areas for entering-patient registration and departing-patient payment and reappointment should be separated as much as possible. Glass shields between the reception office and reception room and between the business office and the corridor leading from the preparation rooms will allow visibility and yet usually provide sufficient soundproofing between functional areas if the rooms are carpeted.
In contrast to the reception and consultation rooms, your administration office should maintain a business atmosphere. It should afford enough seclusion that office fees, accounts, and telephone conversations can be discussed in privacy.
There is a tendency for doctors to design the initial business office too small. Anticipate at least double expansion of personnel, filing space, and business equipment in 5 years. When the volume of insurance cases is large, many doctors separate the insurance department from the central reception/business office.
Basic Furnishings. The basic furnishings of a typical business office are a desk and chair per employee, plus a chair for a patient when financial matters must be discussed in length. Two or more file cabinets, shelving, a personnel coat closet, a telephone, a typewriter, and a cork bulletin board are standard. Other furnishings include a waste basket, cash box and petty cash drawer with locks, Visa/Mastercard encoder, clip boards, some type of computation instrument, fire extinguisher, gown storage compartment, and a relatively large storage cabinet in which to store business supplies, orthopedic appliances, and nutritional supplements.
Good used business office furniture and reconditioned equipment can be obtained in most any large or medium-size city at about a 50% savings, but be a wise comparative shopper and know what you are paying for. It is usually best to buy from a store that warrants and services what it sells.
When finances permit, it is helpful if an accounting peg-board system, small photocopying machine, paper cutter, office safe, interoffice communication and music system, postage meter, automatic telephone answering equipment (or service), dictation transcribing equipment, and computerized word-processing and billing equipment are available.
The list of sundry items and supplies that are customary appear to be almost endless. Common items are shown in Figure 2.13.
Toilet Room
The toilet room for patient use should contain the normal furnishings such as a small lavatory, toilet, facial tissue and hand towel dispensers, waste basket, paper cup holder, mirror, automatic deodorizer, and a means for good ventilation. Hand rails for the disabled and fixtures accessible to the handicapped should be provided. This room should be accessible from the reception room. If possible, a separate staff toilet room should be provided near the business office.
Storage
Inadequate storage space is the most common fault of most offices. In many instances, this fault could be eliminated by proper design of shelving and the use of rotating or pull-out trays. When floor space is not available, hanging cabinets and recessed drawers can be installed. Wall cabinets should be placed so that a person of average height can reach the top shelf without a stepstool. Sometimes dead-end hallways can be made into closets.
Janitorial chemicals, supplies, and equipment should be stored separately from clinical and business supplies and from heating-cooling equipment. In some states, this is mandatory. A utility sink and a closet to store mops, a vacuum cleaner, and cleaning rags should be provided. Utility items such as toilet paper and light bulbs can be stored in a cabinet.
Optional Rooms
Laboratory. The size of a laboratory will vary greatly depending upon the sophistication of the in-office procedures conducted and the necessary equipment. It can be elaborate or simple, depending upon your preference. However, it is a rare solo practice that can justify a well-equipped laboratory if a commercial laboratory is in the neighborhood.
Besides common furnishings and specialized analytical instruments, you will need a centrifuge, microscope, timer, sterilizer, refrigerator, and numerous supplies. Optimal cleanliness is a must, as it should be in all rooms. Anticipate growing storage and working area problems.
Physiotherapy. Certain therapy applications such as traction, muscle reeducation, hydrotherapy, casting, acupuncture, biofeedback, inhalation therapy, etc, that require considerable time are best conducted in rooms other than the central treatment room(s). Certain diagnostic equipment that is not used routinely such as an electrocardiograph, electromyograph, or spirometer can be placed in this room.
Emergency Care and Intensive Care Rooms. Emergency care and intensive care rooms allow the administration of first aid and prolonged observation without disrupting normal patient flow. If possible, this room should have a wide door and a ramped threshold that has access to the outside of the building in the event an emergency situation arises that would require ambulance service.
Laundry. Patient gowns should be laundered after each use. Thus, an in-office laundry is a cost-saving facility if adequate capital, space, soundproofing, and plumbing are available. Permanent press gowns are almost mandatory.
Children's Area. If pediatrics is an important part of your practice, a supervised room off the reception area for playthings is beneficial as your practice grows.
Personnel Lounge. Once the practice is well established, a separate lounge offers space where staff may take their coffee breaks, smoke, and eat lunch if desired. It is sometimes a good environment to hold informal staff meetings. Furnishings usually include a resting cot or lounge chair, magazine rack, table and chairs, small refrigerator, hot plate, and possibly a microwave oven. Sometimes a radio or TV is included.
When visiting offices prior to establishing your own practice, it is often rewarding to inquire about the various equipment you see. How much is it used?
Sometimes you may hear, "I only use it occasionally, but it's great for ...." This later phrase is often added solely to justify the purchase decision. However, if you have a distinct need for it, it may be available at a reasonable price.
Be a prudent shopper. Equipment costs vary considerably with both new and used equipment of equal value, yet inferior equipment at low rates is not economy. See what is being used by your colleagues, note their service history and usage complaints. A cheap piece of equipment of limited value that cannot be serviced quickly at a reasonable cost is not a bargain. On the other hand, equipment from a dealer that specializes in used equipment can often be negotiated at better terms than from a dealer that specializes in new equipment that is in demand.
Wives sometime say that the only difference between boys and men is that boys' toys are less expensive. Likewise, there are few professionals that are not tempted to overextend themselves when they see sparkling new equipment. Resist the temptation to overextend yourself. Poor budgeting can lead to financial instability and be a heavy burden for many years to come. It's better to go second class and survive than to go first class and fail. There are thousands of highly successful practitioners today that started with second-hand equipment and furniture. There is nothing undignified about staying within your means and nothing dignified about overburdening yourself or going bankrupt.
Credit for equipment purchases should be used wisely and only for priority items. A good rule of thumb is to "never buy a luxury item on credit." Needs must be differentiated from desires. If an item is not mandatory for a successful practice, it's best to wait until you can pay cash and save the interest costs unless the item assures a rapid profit return on the investment.
Minimize Unnecessary Costs by a Space-Return Analysis
One way to avoid purchasing the wrong items or quantity of supplies is to use what in the business world is called a "production square-foot cost basis." All space has its cost. Every square foot of your office space that is fee producing is allotted a percentage of all anticipated office costs such as rent, utilities, insurance, salaries, draw, office expenses, dues, etc.
For example, consider an office that comprises 900 sq ft. Only examining, therapy, and laboratory rooms, and storage space to hold salable supplies (eg, vitamins, supports), are fee-producing areas. Parking space, the reception area, the consultation room, preparation rooms, toilets, and the business office are service areas and not fee-producing areas. It may be found that only 300 sq ft of office space is actually involved in generating income to support the practice. This space is divided into overhead costs to arrive at a space-cost figure.
If an item has little use, it has little effect on generating income. If an instrument is only occasionally used, it is probably not necessary initially. The rule of thumb is to not have anything taking up space that is not earning its place in your office, one way or another.
In considering purchasing a piece of equipment, it should be determined if its monthly use will return sufficient income to:
(1) pay the cost of the equipment (plus applicable interest),
(2) pay for its special insurance,
(3) pay for the labor-time involved in its application, and
(4) pay its space cost --if the purchase and its use is to be a profitable one. If these costs amount to $300 a month and the related fee is $15, the unit must be used at least 20 times every month to just break even.
No practice can survive on just a break-even basis or on the pride of ownership of professional status symbols. Good business sense dictates that if productive space is not being occupied by profit-earning equipment, it should be replaced by equipment that will earn a good return for the investments involved through the service rendered.
New vs Used Equipment
By contacting DCs in your area, you will likely find that several may have good equipment available that they rarely use or is in storage. Excellent purchases can be made this way, as long as the equipment does not indicate extensive wear. Shabby or mistreated equipment is never a bargain. Upholstery can be easily replaced, but items with damaged metal or worn wiring should be avoided.
Leasing vs Purchasing Equipment and Furnishings
Leasing equipment, a popular alternative to buying, can improve your cash position by conserving capital. The system is designed to service an individual or a firm with satisfactory credit but little cash. It is essentially a rental agreement including interest that usually offers you an option to purchase at a specified percentage of cost (10-15%) at the end of the lease period. Some companies specialize in leasing equipment, and some manufacturers have their own lease plans. Many leasing firms have several plans available, and the alternatives should be explored.
When equipment is leased, it is being paid for while it is being used. In addition to a low down payment (eg, 10-25%) in contrast to an outright purchase (100%), an advantage in leaing equipment is seen with the payments being immediately tax deductible. A prolonged schedule that is extended over the expected life of the equipment (eg, 10 years) is not necessary as it would be with an outright purchase. During an inflationary period, later payment will be made with dollars of less value than would a purchase. Longer terms can usually be obtained from a leasing company than can be obtained from a bank. The major disadvantage is that of added interest for the length of the lease, and this plus the purchase provision is not usually a better alternative than a bank loan. In addition, the interest is usually double for most leasing and finance companies figure on a straight-interest rate (add-on interest) while many banks compute on a declining balance-due schedule (simple interest).
In most large and medium-size cities, some companies specialize in leasing office and residential furniture. Optional plans may provide a lease-purchase arrangement. If you own some equipment, there are many finance and leasing companies that will agree to a sales-leaseback arrangement.
Purchasing Supplies
When you purchase various office supplies and furnishings, buy at several stores. It better to buy two items at 15 stores than 30 items at one store. There are three important advantages to this. First, different stores will have different items on sale at any given time. Second, it will give you an opportunity to introduce yourself and your practice to 29 more salespeople. Third, it will give you an opportunity to establish a wide base of credit if the stores do their own financing.
Telephones and Communication Services
Telephone service has become so sophisticated today that it will benefit you to visit your local telephone company and discuss what options are available and their comparable rates. It is best to obtain the facts on the first visit, think about them, and make a decision when the temptation to overextend yourself is not so great. Today, so many stores carry telephone equipment and answering devices that it will be to your advantage to watch the sales.
A second visit to the telephone company is a good time to establish the specific type of service you need, where the outlets will be located, and your professional and residential listings in the directory. Always consider an initial system that is flexible for growth.
In financing a new practice, two basic questions arise: How much money will be necessary ? Where will this money come from?
Financial Planning and Budgeting
The key to good planning is to base your planning on reasonable expectations. It is better to be conservative with furniture/equipment needs and patient volume projections and to be liberal with estimating expenses. Be positive without being overly optimistic.
It may take you from 3 to 6 months to meet your office overhead and from 6 to 12 months to cover your basic personal living expenses. Thus, these possibilities should be considered within your first-year budget. If you do better, you're ahead. However, history has shown that new practices have failed not because there wasn't a distinct community need but because the development period exceeded their capital. For this reason, financial safeguards must take precedence over optimism.
Be aware that there is a danger in both underestimating and overestimating financial needs. If you figure too low, unanticipated expenses or an opportunity for growth will be impossible to cover. If you figure too high, you will be burdened with an unnecessarily large loan and its interest to pay off. Too much borrowing may result in an inability to acquire additional capital if an emergency arises. In addition, surplus cash close at hand may be spent on luxuries.
Your basic budget should consist of all expenses necessary so that you can enter into practice. For example, there may be remodeling expenses. You will need office furniture, clinical equipment, office supplies, and clinical supplies, as well as funds to pay previously established debts. There will be rent/lease payments, telephone/utilities deposits and service charges, an assistant's salary, auto expenses, insurance payments, license and permit fees, dues, and necessary publication subscriptions. Undoubtedly, there will be legal and accountant fees to pay. Provisions should also be made for professional seminars, an advertising budget, and estimated taxes. Last but not least, your personal draw and an emergency reserve should be budgeted.
A realistic budget is based on careful research, not speculation. This takes investigation. Much of this can be obtained from current catalogs, price lists, visits to show rooms, and telephone calls.
Capitalization
In any free enterprise system, "it takes money (capital) to make money." Health practice capital refers to the doctor's original investment in the practice plus any profit reinvested in the practice. Capital is needed to set up physically and start up functionally any business. Even with good management, undercapitalization is a common cause of failure among small businesses according to Dun & Bradstreet.
Necessary capital may come from personal reserves or be borrowed from family members, relatives, friends, silent partners, lending institutions, or a combination of sources (Fig. 2.14). Regardless of the source, the liabilities incurred must be repaid from profits earned. To maintain a cordial relationship with the lender, the arrangement should be conducted in a businesslike manner with a formal written agreement that incorporates a specific schedule of payments for principal and interest. This point includes loans from close relatives and friends.
The Financial Marketplace
Just as it takes money to make money, it usually takes a good credit history to obtain credit. Thus, obtaining financing to develop a career is often paradoxical. Graduates seek financing to begin an income-earning practice and establish a credit rating, and lenders prefer to finance those who have an income and have built a credit rating. Established practitioners have little trouble in obtaining credit because they have collateral in real estate, equipment, savings accounts, life insurance policies, stocks and bonds, other investments, and a proven track record. The recent graduate rarely has this advantage.
In spite of what some believe, lenders are people and people make the majority of their decisions on an emotional basis rather than on a logical basis. The most important thing in obtaining a loan is for the lender to be assured that you will repay the loan. If you don't, his job might be in jeopardy. If you do, you make his decision look good to his superiors. No one is going to stick their neck out for you unless they feel comfortable that they are making a right decision on their own behalf.
While banks and other lending institutions desire all their loans to be fully protected by collateral, they know that this is unrealistic in the competitive marketplace. They can't make money if they don't loan money. Thus, they must obtain accounts with little collateral that present a low risk. The degree of this depends upon the status and philosophy of the institution at a particular time. A large bank is in a position to be more liberal than a small bank where a default can be quite painful. On the other hand, a small bank may need the business. In either case, the question arises, how can you convince a lender that you're a good risk?"
Professional Assets
There are several facts in your favor. Lenders know the expenses involved in a professional education, and they know that most graduates need financial assistance after graduation. They also know that doctors as a whole are exceptionally good credit risks and that, with help, they can generate above average income. These are facts that have pre-sold your situation, but care must be taken to enhance the lender's confidence in you personally and to not "unsell" the stereotyped reputation.
The most basic factors that will raise hopes or doubts in a lender's mind about your personal potential will be:
Your past credit record. Do you have a track record of paying your bills on time?
Your appearance and attitude. Do you look and act like a doctor? Do you portray self-confidence?
Your loan application portfolio. Have you done your homework? Do you know where you are going and how you are going to get there? Is the format "businesslike"? Are the projections realistic and supported by statistics?
Setting the Stage for Acceptance
Most loan applications are received by junior officers of the lending institution that must be approved by a senior officer or a board. To stack the odds in your favor, it is suggested that your first visit be with the president or a high official of the firm to which you c an describe your general needs and potential. Better yet if this appointment is set up by someone in the community known and respected by the senior officer. If you can "sell" this officer, he or she will direct you to someone who will help you process the paperwork and you'll have someone extra on your side that is in authority.
Tips in Obtaining Necessary Loans
Ask for as much advantage as you can. You may not get everything you ask for, but you won't get anything if you don't ask for it. For example:
Try to get an arrangement where you pay only interest and not principal the first year. This will keep your payments minimal when your income is lowest.
Request a "balloon" payment at the end of the loan period where you will pay a substantial sum (eg, 20%), thus keeping your monthly payments lower during the initial practice building period.
Seek the option to prematurely pay off the loan without penalty in the event your practice grows faster than anticipated or you happen to come into a sum of unexpected money.
Request an additional amount of credit if growth exceeds your expectations. As your practice grows, the need for capital may exceed personal reserves.
Try to obtain one large loan to cover all your needs. If this is not possible, seek equipment leasing from a leasing agency, furnishings on extended payments from department stores, and a personal loan from a bank to cover startup capital.
Shopping for the Best Interest Rates
A lending institution's operational philosophy is the product of its leadership. For instance, some banks in large cities specialize only in small loans, some only in large loans. Some will readily finance "energy-related" enterprises but are not particularly interested in residential mortgages. Only by asking local businessmen and other professionals will you be able to develop your list of optimal lenders. If an institution has had a good track record with other doctors, especially chiropractors, the officers will be more inclined to offer you better terms than a firm that is entering into "unknown waters."
Most banks have standard rates for the average customer and "special" rates for what they consider "prime" customers. Prime customers are individuals and firms that have established a good history of borrowing and prompt repayment. By selecting a bank with a full-range service and dealing with them on a long-term basis, in a few years you will be able to negotiate the interest rate on your loans.
Loans are easier to obtain from leasing and finance companies than from banks. The reason for this is their profit margin. Total interest is usually double for most leasing and finance companies because they usually figure on a straight-interest rate (add-on interest) while many banks compute on a declining balance-due schedule (simple interest) on loans exceeding 1 year. In add-on-interest accounts, interest is figured on the money advanced for each year of the loan. In simple-interest accounts, you pay interest only on the unpaid balance. For example:
$10,000 at 20% add-on interest for 5 years requires 60 monthly payments of $333.33 each ($166.67 principal, $166.67 interest), in rounded figures, for a total of $20,000 payback.
$10,000 at 20% simple interest for 5 years requires 60 monthly payments of $250 each ($166.67 average principal, $83.33 average interest) for a total of $15,000 payback.
Contract Deals
Occasionally, you may find a practice and real estate for sale on a "contract" basis. Under this arrangement, no downpayment may be required. This is inviting when capital is meager. However, the title of the property (real estate, furniture, and equipment) remains with the seller until the last payment is made and made on schedule. Such an arrangement is not advisable unless there is no other alternative. The reason for this is that if you are 30 days or more in default, for instance, on the 59th payment of a 60-payment contract because of circumstances beyond your control, you can possibly lose everything you have invested. It does not matter that the seller has forgiven previous late payments. In most states, you are only considered a renter of the property until the title change is legally processed and recorded.
Reserves
It is never wise to use all possible avenues of capitalization at the start of any practice. Invariably, crises occur that are not anticipated even with the best planning. Some emergency reserves should be held back, and these are in addition to major medical and disability insurance. The rule of thumb is that minimal reserves should equal 6 months of income. As the recent graduate is not likely to meet this figure, provisions for an emergency reserve should be made within the loan package.
There are three basic types of reserves: cash reserves, credit reserves, and investment reserves. Although these are essentially relative to the established practitioner, it is well that the recent graduate appreciates their need. It takes considerable self-discipline to maintain these reserves by denying yourself some luxuries.
CASH RESERVES
Cash reserves refer to liquidity where money may be obtained immediately upon need. An example is a savings account.
CREDIT RESERVES
Installment Purchases. Installment buying has become a part of American life. When used properly, it is a convenience and builds a good credit rating; when used wrongly, it can lead to financial disaster. A good credit line at your bank, will allow you to make loans up to several thousand dollars on your signature alone. A good department store credit line will allow you to buy furnishings on an extended time plan. If payment is made within 30 days, there is no interest charged. Thus, a good credit line can offer you security against financial emergencies or it can be a temptation to overextend yourself.
"Plastic" Reserves. Mastercard and Visa accounts, for example, offer a cash withdrawal service in increments of about $300 each up to your established limit. A similar service for an American Express gold card holder can offer $2,000--$5,000 in immediate cash.
There is no legal limit of how many Mastercard or Visa accounts a person may hold. To establish a broad base credit line, some people hold several accounts of each from different banks. Interest is charged only on the unpaid balance. For example, one card can be used for personal purchases, one for travel expenses, one for office-related entertainment, etc. Another method is to rotate the use of a specific card every few months.
A good credit rating depends upon use (quantity) and prompt repayment of credit (quality). Thrift is often said to be portrayed by a person who shops the sales and buys solely by cash. However, if such a person finds himself in a position where extensive credit is necessary, there is no credit history upon which a lender can make a decision. Thus, balance is needed for maximum security. Charge accounts cleared on a monthly basis are not charged interest. In this sense, they are equivalent to cash purchases but offer the advantage of a check as a record and the establishment of a good credit history.
INVESTMENT RESERVES
Investment reserves should not be touched unless a dire emergency exists because premature withdrawal from the investment will likely result in a loss. Examples are bonds, money market certificates, stocks, and rare coins. These investments yield their profit at the end of maturity or during a prime market condition.
Banks make many types of loans. Commercial loans, automobile financing, home improvement loans, equipment loans and leasing, inventory financing, and accounts receivable financing are a few examples.
As most students are far from wealthy upon graduation, the common type of loan sought is an unsecured loan. Such loans are usually granted only to those who have excellent potential to repay the loan for the risk to the bank is maximum because of the lack of security to protect the lender.
A carefully prepared loan application is one of your best vehicles in helping you sell your potential. To those lenders who do not know you personally, you will be judged by the preparation, scope, organization, neatness, and realistic projections that have gone into the development of your proposal. Lenders also know that people run businesses, not presentations. They will be alert to how you present yourself.
Lenders wish to know about your earning capacity, professional and management skills, and short-term and long-range prospects. They also want to know why you want the loan, how much do you want, how much you are investing in the venture, what competition you will face, how much you already owe, and the primary sources of repayment. Doubts may arise if you are not receiving legal advice or if you are not using a certified public accountant. For their minimum protection, they want to know if you have life insurance, fire insurance, liability insurance, malpractice insurance, etc.
All lenders will not require all this information, but it is better to provide it than to invite doubt or suspicions. In any event, be prepared to intelligently answer any questions posed in these areas.
Take care in selecting a potential lender. Seek out only those that have a good reputation in the community for the financial market is not without its loan sharks. Also be prepared to be rejected by biased lenders who know nothing about chiropractic health care. Attempts at re-educating the individual during a loan interview will likely be fruitless and exasperating. Your best prospect will be a bank that deals with one or more highly successful DCs.
The Loan Package
It cannot be overstated that the preparation of your loan package reflects your professional acumen.
A minimum of 10 sections is recommended:
(1) introduction,
(2) vita,
(3) anticipated floor plan,
(4) remodeling/construction costs if necessary,
(5) furnishings/equipment projection,
(6) office and clinical supplies projection,
(7) projected practice growth for the first year,
(8) projected statement for the first and last year of the loan,
(9) current financial statement, and
(10) a summary sheet.
It is also well to appendix profiles of the typical doctor of chiropractic and the typical chiropractic patient to substantiate your projections. For a brief overview of the chiropractic profession, the ACA's booklet Chiropractic State of the Art may be helpful.
Introduction. The introduction sheet may be made in letter or outline form addressed to the lender. It should briefly state who you are, what you wish to do, the need for your services in the community, and the potential for practice growth. Use credible national averages and trends liberally, but avoid discussing chiropractic philosophy or anything that might be considered controversial. Close with a paragraph or two describing the amount of the loan requested, the length of the loan, and requested repayment terms. These points should be kept quite general, without appearing indecisive, else you limit the opportunity for negotiation.
Vita. Your autobiographical sketch, best limited to one page, formally introduces you to loan approval personnel. In addition to the basic data about previous employment, education, special studies, etc, it should portray your organizational interests via memberships and offices held. Try to obtain a balance between clinical knowledge and business-related experience. A sample format is shown in Figure 2.15.
Anticipated Floor Plan. A neatly drawn sketch of your anticipated floorplan for your office should be included. This indicates that you have given careful consideration to equipment placement, patient flow, and have planned the physical aspects of your office carefully.
Remodeling/Construction Costs. If remodeling is necessary, enclose a description of what must be done and why the expense is justified, along with two or three estimates from contractors to indicate that you are "cost conscious." It may be helpful to enclose a photograph of present facilities plus an artist's rendering of the facilities after remodeling. Before-and-after exhibits are impressive if done in a professional manner.
Furnishings/Equipment Projection. This comprises a listing of the furniture and equipment needed to enter practice. Although every small item need not be listed, a description of basic needs for each room should be made so that the lender will see that you have given careful consideration to each requirement. See Figure 2.16.
Office and Clinical Supplies Projection. This list complements your furnishings/equipment list by describing the initial inventory of supplies necessary to conduct a practice. When possible, list by categories. Overly detailed lists taking up several pages will bore the reader who is only interested in bottom-line costs and if you have given careful consideration in arriving at the projection. See Figure 2.17.
Projected Practice Growth for the First Year. This sheet will show how realistic your thinking is. Show a tabulation of growth for your first year in practice, based upon customary fee schedules in the community. An example is given in Figure 2.18. Substantiate your projections with a notation of national averages.
Projected Statement for the First and Last Year of the Loan. The purpose of this sheet is to show potential for growth. It should incorporate your projected fees from services, followed by a listing of expenses. A common type of projection is shown in Figure 2.19.
Financial Statement. Inasmuch as most graduates have few financial assets, we suggest that your current financial statement be placed near the end of the loan package. Once you have developed a substantial net worth, the financial statement is essentially all that is necessary for a loan application. Placing this statement at the end of the portfolio will not fool anyone, but there is no reason why you should exhibit a weakness without prior conditioning. See Figure 2.20.
Summary. The summary sheet wraps up all the previous pertinent data. It should indicate how much money you need and its purpose. Figure 2.21 offers an example.
If you have doubts about your proposal, seek the advice of a good accountant. He is used to preparing loan applications and knows what bankers look for and like to see. However, bankers, like other professionals, like to see a fresh approach, and you won't get this from an accountant or attorney.
Obtaining an Endorser
Most banks are quite skeptical on venturing capital where management has little financial investment in the business. Thus, it may be necessary for you to seek a silent partner to loan you sufficient equity or obtain an endorser on your note to enhance your collateral. An endorser agrees to meet your obligation in the event you default on repayment. As the lending institution can collect from either party, the endorser must have a high degree of faith in your character and ability.
If your first attempts at obtaining necessary finances have failed, seek a relative with sufficient collateral who will serve as a cosigner on your loan. Fernandez claims that close to 50% of young physicians get some financial help from their relatives. In a few instances, even town councils have acted in such a capacity for a DC when it was shown that a distinct need existed in the community.
Other Means of Financial Help
Professionals are always seeking investment opportunities, and there are few opportunities that have less risk than a carefully organized and maintained health-care service. A realtor, an attorney, or another DC may be interested in becoming a "silent" partner. The same portfolio presentation used in seeking a bank loan can be used to impress a private investor or venture capitalist.
The Federal Small Business Administration was established to promote small business development and growth. However, they are essentially interested in developing potential for increasing employee volume to reduce unemployment. A doctor and an assistant practice is not very impressive to the typical federal bureaucrat. Most SBA loans are made in conjunction with a bank where the SBA guarantees up to 90% of the loan. Direct loans from the SBA can be made up to $100,000 if the business cannot obtain funding from a private lending institution, but the qualification criteria are quite complex and the procedures are quite time consuming.