If you are looking at your credit score in preparation for going to a bank and presenting your business plan for your chiropractic practice, you will need to make sure everything is correct.

A DC wrote me asking how to handle a dispute.  You will need to go to the vendor and make them aware of the problem and ask that it be fixed.

Another alternative is to use the dispute resolution process for the credit reporting agency which provided the report.  Here are the websites to use:

For Equifax:

http://www.equifax.com/online-credit-dispute/

ForExperian:

http://www.experian.com/disputes/index.html

For Transunion:

http://www.transunion.com/corporate/personal/creditDisputes.page

I never say “never.” But in this case I’ll make an exception. There’s no good to come of a situation where there is no contract.

Case in point: An chiropractor who is working as an independent contractor at an office. She is being “nibbled to death by ducks” at her office. The doctor wants her to use his business cards, go under his provider numbers. The office manager is concerned that she’s “costing the practice too much” (she’s getting paid $10 an adjustment; not exactly a hardship for the doctor). And she’s bringing in lots of new patient.

This situation is, as they say, fraught with peril. At every turn, this new DC is being taken for granted. What happens if she decides to leave and take her patients with her? She has signed nothing, so there’s no reason she can’t. The older doctor might holler, but it won’t do him much good if there’s nothing in writing.

Neither one of these doctors is in a good position with no contract. If you start working for someone and they say, “We’ll put a contract together soon,” make them do it immediately. Soon never comes.

I talked recently with someone who was buying a practice.  She was concerned about how many patients  she would keep after the practice sale.  She said she heard that you could expect to lose 50 percent of the patients.  Someone told me later it’s more likely that you will lose 80 percent of the current patients. Yikes!  Why would you buy a practice where you’re going to lose that many people!  What a waste of money!

So what’s the best way to assure that you will retain most of the patients.  One simple factor:  The selling doctor.  If you can get the selling doctor to continue to participate in the business, you will increase your chances of keeping more patients.  The best way to do this is to require the seller to be your banker.  Have the seller take on at least part of your debt.  For example, let’s say you’re buying a practice and the seller says he wants $250,000 for it.  Get a loan for $100,000 for the down payment, then put an “earn out” in the contract that you will pay him back up to $150,000 out of the revenues.  What does that cause him to do?  He will do everything he can to help you retain patients.  He will give you a great recommendation; he will really work hard in the practice for the three months of transition; he’ll tell his staff to help you.  You get the picture.

If you let the seller walk away with the cash, even if he agrees to a transition, the seller has no incentive to help you retain patients.  So remember, if you’re buying a practice, structure the sale so that the seller has to take part of the payment directly from you based on practice earnings.

For more information on buying a practice, see Planning for Practice Success.

Here’s a blog post from Working Writer that makes a good point for all professionals:

A new survey finds that 101 million adult Americans now get most of their news from Web sites, while 35 million people rely on TV comedians and eight million individuals turn to blogs for their main source of news. An overwhelming majority of Americans said they obtain most of their news from traditional news sources, including TV news programs (78.6%) and newspapers (66.8%).

The survey was commissioned by Edward Segal, author of “Profit by Publicity” (iUniverse, 2007), a how-to reference guide that shows real estate agents and brokers how to generate news coverage about themselves or the properties they sell. The book is based on Segal’s 25-year career in public relations, journalism, politics and real estate.

Someone said she took her business plan to a bank for her practice startup loan and they asked her what her overhead was. She didn’t know, so she asked me. I’m happy to answer the question, but I should explain that it means different things to different people.

Generally speaking, overhead is the ongoing expense of operating a business. In other words, it is the total business expenses (not including any personal draw or taxes) on your cash flow statement.

Some business people equate overhead with fixed expenses. Fixed expenses are those which you must pay even if you have no patients. For example, you have to pay rent and utilities and monthly phone costs and you must make your loan payments each month. You can’t stop paying for these things if you have no patients. In my opinion, one employee is a fixed expense; that is, you must have at least one employee to help run the office, even if you have few patients. Most of your expenses are fixed, so equating overhead with fixed expenses makes some sense

On the other hand, variable expenses are those which change with sales volume. Examples of these would be office and clinic supplies which are used up faster with more patients coming in, long distance phone charges, and additional employees. Some promotion expenses might be considered variable, if they include sales promotion items you give to patients. As you can see, there are few things of any great amount that are variable.

Some experts distinguish overhead as expenses that don’t directly generate profits. So advertising would not be overhead but your liability insurance would be. In my opinion that distinction is too narrow. I’m just letting you know how others might look at the concept.

To calculate overhead, divide sales by expenses to get the percentage. Let’s say your sales for the year are $250,000 and your business expenses are $150,000. Your overhead is 60%.

I oftern get the question: What’s a reasonable overhead for a health care practice? I’d say 60% is ok, 50% is better. You probably can’t do better than 50% unless you have no loans to pay off.

If you know of someone who is operating at less than 50% overhead, I’d like to talk to that person!

For more information on business concepts, read Planning for Practice Success.

Have you seen the commercial for the car with the rear-view camera? It shows you where you’re going when you’re backing up. This ad is a perfect example of the difference between benefits and features. Let’s say the auto maker advertised:

Get your great new gadget - the rear-view camera

You (the viewer) would have said, “So what?” So it’s got a camera?

What the ad did instead is to show the BENEFIT of the camera in solving a typical problem - trying to parallel park in a tricky parking spot. The ad emphasized the problems the guy had (hitting the tree, running up over the curb) and how now that he had the camera, his problems went away. That’s it.

Features are gadgets. They’re fun and some people can see the inherent benefits, but most people can’t.

Benefits are problem solvers. Some examples:

At Cosgrove Chiropractic, we can get you in and out quickly, so you don’t have to spend all day in our office. (Problem - busy people don’t like to wait for the doctor; Benefit/solution: quick service - reduced waiting time)

Pay by debit or credit card, or with our easy payment terms. (Problem - people don’t carry checks any more; solution - they can use a credit or debit card, or they can pay over time)

Got it? Think in terms of “Benefits = solutions” rather than “Features = gadgets.” You’ll find your marketing improves 100 percent and more patients will be coming in for services.

Q: How do I get money to live on while I’m taking my business plan to banks and starting my chiropractic practice?

A: First, you should include estimates of pre-startup living and moving expenses in your Startup worksheet, even though these are personal and not strictly business expenses. When you receive your line of credit for working capital, you can use it for personal expenses by writing yourself a check from the business and depositing it in your personal checking account. Be sure to keep the two accounts separate.

After you start your business, you can take money out each month to live on (”Draw”) or you can pay yourself a salary.

The trick is to be sure to take out enough so you don’t have to ask for more money! In other words, DSATM - Don’t Spend All the Money!!!

For more information on this subject, read Planning for Practice Success.

Important information about requesting an EIN for your LLC :

Please read this if:

1. You (the owner of the LLC) are filing as a single-member LLC and

2. You will have employees.

The IRS has changed its requirements for Employer ID Numbers for single-member LLC’s. Before you can request an EIN for your LLC, you must first obtain an EIN for yourself as a sole proprietor. So you will have TWO EIN’s for your practice.

The IRS calls a single member LLC a “disregarded entity,” meaning that it is disregarded for the purpose of filing a federal tax return. In this case, the LLC profits and loses are filed as part of the owner’s personal income tax return (Form 1040). Apparently, what has happened is that the individual states do not disregard the entity, requiring the companies to run parallel accounting systems for state and federal.

Bottom line: If you want to set up a single-member LLC, first get an EIN for yourself as a sole proprietorship, then get the EIN for the LLC.

Don’t ask me; I don’t make the rules. Just do it.

I heard that Noridian lost its contract in Iowa. This means that at some point soon you will get a new carrier: Wisconsin Physicians Service. I don’t know when this will happen. Right now, just continue as you have been. You’ll be notified what to do when the change occurs.

If you are presenting your business plan for your chiropractic practice startup, you may have had a banker ask you, “How much working capital do you estimate you will need?” Before you gulp and say, “huh?” here’s the deal on working capital. It’s simply the amount of money you need to borrow to cover your expenses until you have enough in sales to cover them.
For example, in the first month of practice, you might have expenses of $8,800 and you only have $5000 of sales. You’ll need $3,800 in working capital that month. Month 2, you might need $2,500; Month 3, you might need $3,100. Then in the 4th month and on, you don’t need anything to cover you. In total, you’ll need $9,400 in working capital.

The trick is to borrow enough. One way to estimate (this is a “worst case” estimate, so don’t panic), is to take 6 months of business expenses (not including any money you take out for personal expenses). In the case above, you would need $52,800. A lot of money! But it’s better to have too much and not need it, because if you run out of money, you’re out of the game.

Use the spreadsheets in Planning for Practice Success to estimate your working capital needs and other financial projections. Bankers love this stuff! You can buy the spreadsheets separately or with the book. Now, when you buy Planning for Practice Success, you receive a workbook to walk you through the process of putting together your business plan and starting you practice. Lots of great information, and all for one low price.