Issue 15 - December 2003

Boosting your bottom line
By Stanley Greenfield, RHU

The bottom line. Where the rubber meets the road. The buck (if there is one) stops here.

You have heard all of these phrases at one time or another. They all indicate one thing — profit or loss. That is the bottom line. Determining the bottom line is not always easy. Many people merely are concerned that more dollars come in the front door without seeing how many of those same dollars are being spent to get those dollars in the door!

Let’s look a several different ways to beef up the bottom line:
• Hiring an associate
• Taking on an independent contractor
• Opening a satellite office.

Hiring an associate

Many doctors who feel that they are overworked think that they can increase revenues — and their bottom line — while reducing the hours they work by hiring an associate. The question is, “Will it?”

The answer depends on what you want to achieve by hiring an associate. If the real goal is to gain some additional quality time with the family, then the bottom line will not reflect this; the smiles on your family’s faces will!

However, if your goal in hiring an associate is to generate additional office visits that result in more revenue, you should know that generating additional revenue may take awhile. Until revenues pick up, adding an associate may actually increase overhead if you pay a base salary. Because of the increased overhead, you will initially also see a drop in your own income.

Another thing to think about before you hire an associate is your ultimate goal: Will you want to offer this person the opportunity to “buy in” to the practice? If this is the plan, then you need to develop an easily understood formula about how you value the share of the practice that you are willing to sell and how the associate will finance the purchase.

Taking on an independent contractor

Instead of hiring an associate, another solution to adding staff is to invite an independent contractor to work in your office.

Independent contractors build their own patient bases and split collections with you. Depending upon the office arrangement, they may also pay rent to use the office. This arrangement can bring down your costs and improve your net return from the practice.

Hiring an independent contractor can increase your revenues and reduce your overhead costs. But the arrangement also has its minuses:

Since this person is an independent contractor, you cannot keep him (or her) from offering services at another office in addition to yours. And you also cannot stop him from leaving and taking “his” patients with him.

Some doctors who hire an independent contractor attempt to call the person an “associate” so that they can maintain control of the contractor’s schedule or to avoid providing benefits. The IRS does not look favorably at these arrangements.

Opening a satellite office

Opening a satellite or branch office is another way of increasing revenues, by reaching out to patients in a second location.

When you open a branch office, you effectively increase your overhead. Will the increase in revenue sufficiently offset the increase in overhead? That is the question that needs to be answered. Here are some considerations:

• Will you need part-time or full-time staffing at that office?

• Will you work out of that office or hire an associate (here we go again!) to work in that office?

• If the office is only going to be opened on a part-time basis, can you ever expect to build any “walk-in” patients?

• What additional “wear and tear” will you incur by commuting back and forth between y

our offices?

• What additional overhead expenses will you incur, such as rent, phone, staffing costs, equipment and insurance?

If you do decide to do any or all of the above, make sure that you do it all within the laws that control such situations. The last thing you need is an additional individual on your payroll that you will

never be able to fire — an IRS agent!

Stanley Greenfield, RHU, is a Registered Financial Consultant and a Registered Professional Disability and Health Insurance Underwriter. His services include financial management, estate planning and comprehensive retirement planning to the Chiropractic community. He can be contacted at 800-585-1555 or by e-mail at stan@stanleygreenfield.com