Chiropractic Business Coaching
Hi, I’m John McGuire and today we’re going to talk about budgeting for wealth. Now with many of your practices you’re always looking to develop new patients as well as maintaining the patients that you have. That is a good start and a key element to the overall success of the clinic and how that relates to budgeting for wealth is quite simple.
When you have new patients coming in as well as maintaining patients you also have to worry about your entire overhead and bringing new patients in existing patients is one of your single most important things for your your collections and your total revenue. You do have to watch your number of staff, your overhead, your rent, and all those things included. However, keeping an eye on what’s coming in and what’s going out is going to be a key element for budgeting for wealth.
Grow your Chiropractic Clinic
Now let me explain that a little further. If you have a consistent record on your collections and you’re forecasting where you’re going to be in the future simply by growth and your track record and previous clinic performance you’re going to be able to adjust some of your overhead, streamline some of your processes, and increase your collections over time. Again, all these things have a tremendous way of really developing wealth for you. If you look back as an example say, last year, you did $500,000 in collections but your overhead was $400,000 and that may include paying yourself as the doctor as an owner draw or through salary or both. At the end of the day what’s left over and how much is your net profit. But how much cash you took in and how much cash went out are two very important things.
Every month when you’re looking at your financial statements (and if you don’t have good financial statements I suggest you get with an accountant and really review that) start getting some on a regular monthly basis. Because if you don’t have great reporting and you don’t understand your full financial picture of the business as well as where you are with things, it’s going to be very difficult to budget for wealth.
If you have a very good profit and loss statement, a very good cash flow analysis, and balance sheet those are three extraordinary things that will help you plan out to really better earn for yourself and better plan for the future. So every month if you’ve got X number of dollars coming in and at the end of the month your profit and loss statement shows a net profit. After all your revenue comes in all your overhead and then your administrative, this is what your net profit was depending on what that dollar amount is.
How to run a chiropractic office
You’ll also want to look at your cash flow statement because your cash flow statement may reflect a positive cash balance or even a negative one. Even though you have a profitable profit and loss statement you don’t want a negative cash flow statement. So if you’re showing profitable but you really don’t have extra cash to invest in or save for the future, those two things are very, very key when you’re looking at managing your practice, where you can perform better and actually build out a plan for wealth and retirement or just moving into something else.
Each month as you get your corrected and balanced financial statements done, whether you have someone on staff that’s qualified or an outside CPA source, you’ll want to one look at how you can improve your revenue. Two, you’ll want to really take a close eye on your spend. You know that may be marketing, that may be rent, staff, it could be some ancillary services you’re doing what’s that costing compared to revenue coming in. Perfect example, if you do massage and it’s costing you each month $1,500 but you’re only doing $2,000, is that worth the space in your clinic and is it worth the time for employment when you could be generating higher revenues or higher services?
You really want to look at each line item and be sure that you’re taking full advantage of your profit and loss. You want to budget that out and you want to take a look at each line item and see where you can focus on to do and perform better in. Once you get to that habit you can certainly build out better plans and working with your patients. In other words, you know a lot of chiropractors don’t necessarily want to tell the patients exactly all the things they need but rather what the cheapest way is to help them.
You should really totally focus on what they need and don’t worry about the dollars. I know that’s tough to hear but in reality if your mission is to help your community and help your patients you shouldn’t have to worry about that it’s something that you can work out with the patient. The patient knows what they need or will want because their health is that important to them. First and foremost, find tools and services that are really going to impact your patients. Find things that can have a direct benefit for them and also help you grow and sustain a much more successful higher profitable practice.
How to have a successful chiropractic practice
Some of those items are nutrition, some of those things could be ancillary services, some can be diagnostic tools and so forth. There’s a lot of valuable things that will assist the patients dramatically add to your profit margin, add to your profit and loss, as well as your cash flow. For example, if you currently just have an average of $55 per chiropractic visit and you do some of those things and you reassess the value that you’re providing you could go from $55 to $95 per visit even if you sustain the same numbers of patient visits each month.
You’re still going to do considerably better on a collection standpoint and a profitability. Those are really, really fundamental things that are very important to really develop a better profit and loss statement, net profit, and cash flow. If you had the same number of patients every month but increased your value per patient visit you’ll see a much better net profit and you’ll see a much better cash flow. Then, when you have that positive each month (because I’m a big fan at looking at the profit and loss statement and the cash flow statement), and if those are those positive or both of those have positive numbers you should have a plan in place.
Improve your collections per patient
Allocate a certain portion of that to stay with the practice. In other words if you have a positive cash flow and a positive profit and loss profit and loss, let’s say was $10,000 for the month of September, and cash flow was a positive $12,000. Take the higher of the two, cut it in half, keep one half reserve into the practice. Keep it in the practice and use the other portion to allocate with the financial planner or someone that you know that can help you build that wealth and budget.
Again, let me rephrase that. If the month of September’s profit and loss statement ended as a net profit of $12,000 and the cash flow was $10,000, take the higher the two. In this case that’s the $12,000. Keep 50% reserved because you want to keep money in the business so that you can grow. If certain things may happen or there’s an emergency or issue that you have to deal with, you’ve got to maintain the level of cash within the practice.
Your practice isn’t going to grow if you’re not putting money back into it, keeping some in reserve for a number of different reasons. Once you split that in half, take that other half and use part of it for your owner draw, and part of it for planning for the future. However you see fit, whatever a financial planner or an expert could help you with; those are great ways to really utilize your practice to prepare yourself for later in life, a new career, or whatever else that you would like to do in your future.
If you really stay disciplined to this approach it’s going to help your practice, it’s going to help you personally, and it’s certainly going to help your future. As you start develop out a plan there’s many things that many doctors do with this. This is a simple plan that we think is very effective and at the same time it’s a healthy approach to your practice. It’s a healthy attitude towards your patients, because first and foremost if you don’t have happy and patients who are satisfied with their outcomes it’s going to be very difficult. First and foremost focus on them, focus on what their needs are.
Utilize that to give them what they need. Increase your collections, bring in new patients from referrals as well as keep keeping and managing your overhead. All those simple things would seem difficult really aren’t. It’s just a matter of spending the time understanding them all and putting yourself in a position to where you’ve got that positive net profit and positive cash flow to utilize those funds both for the practice and for yourself and future.