Retiring Wealthy from Practice
PRACTICE MANAGEMENT
Michael Carberry
There are as many ideas of what it means to be “wealthy” or “retired” as there are people who work a job or have a career. For some of us, work is what we enjoy, and besides a few vacations to relax and have a change of pace, the thought of retiring to live the typical retirement lifestyle sounds about as exciting as watching grass grow. For others, work is only the thing they do to fund their life outside of their job, and dreams of retirement to finally have the time to enjoy those other things are what make work more tolerable. I would think the vast majority of chiropractors are somewhere in between those two extremes. Regardless of where each of us falls on that continuum, accumulating enough financial resources for “retirement” or simply building a “rainy-day fund” should be a priority.
While plenty of salespeople will tell you what to do with your extra money once it’s been accumulated, there is less talk about how one should go about accumulating it in the first place. To be clear, I am not a financial planner, but rather a chiropractor, business owner, and practice consultant who has done extremely well financially over the past 25 years. Although there are many reasons for my personal success, several stand out as fundamental and are simple enough to share in this article.
‘ *Next, invest in your practice. Rarely are any investments ever as profitable as a doctor’s practice.J J
The best investment is investing in yourself. That primary guiding principle has served me very well. After all, you are the one who determines the degree to which you succeed, and sharpening your skills will always increase your financial potential. You can invest in yourself in many ways. It all comes down to the fact that the best way to secure your future is to be competent. The more valuable your skills, the better you will survive, regardless of what you do and what life throws at you. For a doctor, some primary areas to develop are communication (one on one or speaking to groups), patient care, sales, administration (how to organize an activity and get others to get things done), or any other skill that you determine will enhance your ability to survive well.
Next, invest in your practice. Rarely are any investments ever as profitable as a doctor’s practice. This is true for most chiropractors, yet many of us get into this idea that we should take the profit from practice and invest it in some other activity. While it’s smart to take some of your practice’s profits and diversify your assets, the main asset to reinvest in should be the practice. The practice should be the main cash-generating asset of your financial portfolio.
When it comes to reinvesting in your practice, keep in mind that there are three ways for a business to grow. Increase your prices, increase your volume, or increase the products/services that you offer. All thr ee are valid and all three should be considered at various times in your business.
In the early 1990s, I owned a higli-volume chiropractic clinic, seeing up to 700 patients a week. It was fim, exciting, and improved the health of a large number of people in my community. As we approached the outer limits of what I was willing to do in terms of patient volume, the logical expansion was to increase the number of services offered. As I hired medical staff, PTs, and other providers, it gave my patients and my community access to more comprehensive care, and all in one location. This expansion also increased as well as diversified my income, giving me more profit and more financial security.
Over the past 25 years, I have built and sold many clinics in several different states. I attribute that success to the two investments previously mentioned—investing in myself and investing in my practice.
Another key to achieving personal financial success is the ability to accumulate surplus cash. Of course, the first step is to earn money, however we all know people or businesses that have a high gross income but never generate a surplus (accumulated money in the bank)—it all gets spent. It seems that there is a natural tendency in this universe for an individual or organization to spend everything that is made, no matter how much is made. Therefore, the only way to generate a surplus is to make
it a “bill” that must be paid every month. This addresses the fact that an organization will spend eveiything it makes, so the only way to create a surplus is to make it a “bill” that must be paid just like all other bills. Without this step, it is impossible to create a surplus of cash and thus hnpossible to diversify into other assets. To do this effectively, it should be an auto-debit that goes into an account that you don’t normally use. This way the surplus “bill” is paid automatically and it’s not easy for you to spend the money.
Finally, maybe the most important strategy is to invest your tune into building a practice that has a high value and can be sold for three to five tunes the annual gross revenue. Most chiropractic practices have little value once the owner is gone, so they tend to sell for very little money. What a tragedy it is for a chiropractor to spend 20 or 30 years building a practice only to have it sell for a fraction of one year’s gross revenue. This situation develops out of a lack of business knowledge and/or poor execution.
To a buyer, a valuable practice is one built upon systems and staff, not the owner. The “personality-driven” practice has little value to a buyer beyond the equipment, patient files, and hopefully some good will. A staff-driven practice with solid systems is incredibly valuable. Not only does it allow for a smooth patient transition when the selling doctor leaves, but also there is actual value being transferred to the new owner—systems and staff.
The second benefit to building a staff-driven systems-based practice is that you can arrange your life in such a way that you can keep your practice (rather than sell it to “retire”) and maybe work five to 10 hours per week, allowing you to focus on other
‘‘Finally, maybe the most important strategy is to invest your time into building a practice that has a high value and can be sold for three to five times the annual gross revenue. 5 J
things that interest you. Not a bad retirement income, huh? Of course, to build such a practice takes know-how and work, but it’s probably not that much more work than what you are already doing since you most likely are doing most of the labor yourself in your practice anyway.
A doctor can employ many strategies to build a systems-based practice. Any strategy that results in a profitable practice that does not rely on the owner to be present could be considered a valid strategy. In the past 20 years, the most successful business model for chiropractic practice owners wishing to build a systemsdriven practice has been medical integration. By converting the chiropractic practice to an integrated medical center that employs medical doctors, nurse practitioners, physician assistants, chiropractors, and/or physical therapists, the owner of the clinic can easily achieve the systems-based practice while enjoying greater business stability and financial freedom.
The integrated practice model generally offers the following benefits when compared to the traditional chiropractic practice.
Practice Practice 1. Better chance of surviving Affordable Care Act changes._ No Yes 2. Is widely accepted by a maj ority of the public. No Yes Is easier to market to the public. No Yes 4. Positions chiropractor as part of a No Yes healthcare team,_ 5. Better chance of services covered by insurance. No Yes 6. Easier for the owner to take time off from No Yes work,_ 7. Treats a wider range of conditions._ No Yes 8. More often a personality-based practice. Yes No 9. Provides a better opportunity for a more diversified income. No Yes 10. Has greater income potential. No Yes 11. Is often regarded by public as a superior healthcare center. No Yes 12. Practice is easier to sell._ No Yes 13. Banks are more likely to fund a loan for a buyer._ No Yes 14. Will typically be sold for a much higher value. No Yes
Despite the obvious advantages of operating an integrated practice, it’s not for everyone. Doing so requires a chiropractor who is interested in business—interested in being an executive as opposed to just the doctor. It’s very rare for a chiropractor to own a medical center and also be the doctor delivering chiropractic care simply because the hat of administrator can be time consuming. However, for the chiropractor who has an associate and is ready for a new game, a medically integrated practice can be a rewarding endeavor both personally and professionally
As a last comment on retiring wealthy from chiropractic practice, the accumulation of money for the owner of a healthcare business should not be the highest purpose of the organization. That would not be good for the patrons of the business nor the owner and his staff because the business will probably not do well. The purpose of the business should be to provide excellent health care to the community in volume (to many people) and at a profit. As an owner, if you ensure that your highest purpose is patient care, and you offer services that are both compliant and profitable, then you are set up for success. The last ingredients are hard work and ingenuity in application of your efforts.
Retiring wealthy from practice should mean that vast numbers of people live a better life because of your business and the work you may have personally done to help them. The degree to which you are wealthy may very well be determined by the business model that you select and the steps you take to improve your business skills. Don’t sell yourself short. If you dream it, you can achieve it.
Michael Carberry, DC is the President and founder of Advanced Medical Integration (AMI), a consulting group which assists practice owners to integrate medical services with chiropractic and rehab services. To learn more about AMI visit http: www.AMIdoctors. com. Dr. Carberry first brought medical services into his original chiropractic practice in 1995. Since then, Dr Carberry has owned several medically integrated clinics in multiple states. Dr. Carberry also lectures nationally on business systems and chiropractic philosophy. You can contact Advanced Medical Integration at 888-777-0815
