A new practice will fly or flounder depending on your master of startup basics.
The biggest decision you make as a chiropractor is also one of the first you confront after graduation and licensure: Become an associate DC or strike off on your own? For some, this is a question of safety versus risk, and making the wrong choice can have severe repercussions.
Established doctors confront many of these same issues when deciding to buy an existing practice or build a new one, or when moving to a new location. Because so much is on the line, we gathered some experts in this area for their advice on starting a practice and doing it right from day one.
T minus 4: Planning the purchase
According to Mary Frost, assistant professor of philosophy and practice management at Palmer College of Chiropractic, about half of all new graduates traditionally become associates and the remainder opt to open their own practice.
But in recent years, an increasing number of new doctors are choosing to branch out on their own—if not immediately, then within the first year after graduation.
“It’s so exciting for them and they see these possibilities that are available to them and understand what they will need to do,” she says. “They are doing it because a lot of them are entrepreneurs at heart.”
For those more-industrious chiropractors, opening a business can be a rewarding proposition, albeit one with greater risk. The keys to potential success are the legwork and planning that begin long before the office doors open for the first time.
T minus 3: Concentrate capital
The learning curve for most new chiropractors is about two years, says Daniel Drubin, DC, president and founder of 4th Dimension Management. Once a doctor has been an associate for that length of time, they will typically have learned all they can from the more-experienced practitioner.
The knowledge gained, though, will mainly be in the mechanics of direct care. While the new doctor’s skills may be honed over that short period, his or her business acumen often remains lacking.
“They still don’t know how to become successful (on their own) quickly enough before they run out of capital,” Drubin says. “If a doctor doesn’t get off to a fast start, generally by the time they get to month five, they are already hurting financially.”
For this reason, sufficient levels of financing and careful money management are crucial considerations for making a startup work.
One of the first steps most doctors will take is into a bank. When Frost began teaching years ago, lending for new grads was all but impossible to secure. But, she says, there has been a softening of the market in recent years.
In essence, all lenders really want to know is whether or not a person can pay off a loan.
“They want to make sure the borrower can generate a net income of four times the amount of the loan payment and, if they can do that, that’s good,” she says.
Understanding the income potential of a practice requires a good business plan and a budget, something Frost makes all of her students complete during their time in school. She also makes them tally their business expenses including employee salaries, taxes, startup costs, and marketing.
Her students are then required to develop a personal budget, too, which includes student loan repayment and living expenses so they understand how much money it will take to meet those needs for a given period of time. Doctors need to think about potential sources of funds, taking into account the initial delay in reimbursement from insurers and third-party payers.
Drubin estimates $10,000 to $12,000 a month in overhead expenses as a minimum requirement, starting in month one. A doctor will need to establish lines of credit or amass cash to cover at least five to six months of expenses before the “gestation period” ends and he or she begins to break even.
Thomas Dorr, principal at Tom Dorr Business Consulting, says it’s relatively easy to get a general idea of when a business will go into the black. Doctors can estimate income by figuring the cost of a visit ($60, for instance) multiplied by the number of patients seen per day. Most doctors work in 15- minute increments and the average patient comes in about 10 times a year. He recommends having two to three years of projections when approaching a financial institution and asking for money.
T minus 2: Securing the location
Because a chiropractic office is more of a target destination than an impulse location like a coffee shop, doctors normally don’t get much in the way of walk-in traffic. On the other hand, convenience and appearance are important to patients, so choosing the right site can be crucial for success.
For this reason, Susan Yates, owner of The Paragon Group, recommends chiropractors open an office in a location where they already have contacts.
“Some go off where they don’t know a soul, and it is harder to build a practice in that kind of area,” she says.
Furthermore, whether opening in an unknown place or somewhere familiar, understanding the location demographics is fundamental. Teasing out census data can be helpful in determining where to land.
The typical chiropractic patient, according to Locus Chiropractic Demographics, has a median income of about $40,000 and is between the ages of 25 and 54.1 Women make most of the healthcare decisions in a family, so it is good to have a population of at least 55 percent women near an office. In addition, a large number of homeowners in an area indicates a stable economic environment.
Frost recommends looking at a three- to five-mile radius from the practice site. In this area, a doctor will want to know how many other chiropractors there are. According to Locus, the ideal population-to-chiropractor ratio is about 2,500 to one.
Depending on the location, it is also good to note the population density. For urban areas, it is best to determine where there are 750 or more people per square mile; in the suburbs, 50 to 750 people; and in rural areas, about 50 people per square mile.
For a more complete understanding of an area, however, you want to look beyond its face-value numbers. In Bellingham, Washington, for instance, Dorr says the city center is inhabited predominantly by liberal, health- conscious people. Its suburbs are home to more conservative residents, who might be less likely to access chiropractic services.
Chiropractors should walk through a potential neighborhood to see if there are good schools, shopping areas, and things people will want to be near. If at all possible, your target area should be in a growth phase. Dorr says it is wise to look for synergistic businesses like alternative medicine practitioners and fitness centers in the general location you are considering.
“If [chiropractors] have a chance to locate near a co-op food store, they will attract people of similar demo- graphics,” he says. “They know it might work because it will be a place they would want to live and work.”
As for the building itself, Drubin says it is wise to rent a space around 2,000 square feet in size. Rent and utilities should amount to no more than 10 percent of a doctor’s revenue. Dorr thinks paying any more than that is too much for a fledgling practice.
Drubin recommends opting for a five-year lease with a “generous tenant improvement package.” Be aware that it may take 60 to 90 days of build-out time for a new practice, so chiropractors should try to get a contract that allows them to forego paying rent until they are able to actually begin practicing.
If possible, a downtown location or one near commuter routes is a good choice.
“Quiet neighborhoods don’t get as much exposure from signage,” Dorr says.
T minus 1: Building your brand
The advice Yates gives DCs when they are moving to a new town is to go to a different diner for lunch every day and hand out your card.
The only way to get people walking through your door is if they know your practice exists.
“Contact PTAs and get speaking engagements, and join the Rotary and Lions and Kiwanis clubs,” Yates says. “Building a patient base is so important.”
Frost recommends talking with other professionals and getting involved in community events. She requires all of her students to take part in two community service events that are not overtly about marketing.
“This makes the community know that they (the new DCs) are going to be active and want to help them,” she says. “If someone already likes you, you are easier to call.”
All DCs should also expect to put a certain percentage of expected revenue into marketing, but the specific amount depends on the stage of practice life. Marketing is heaviest for a new practice, and chiropractors should plan to budget up to 10 percent of their projected revenue on marketing activities for the first two to three years. The next couple of years, it could go down to 5 percent, and mature offices should allocate about 2 to 3 percent over time.
DCs can throw energy into marketing even if they don’t have the money for it, especially during the startup phase of the practice. A digital presence is a necessity and, along with a website, it is good practice to be on Facebook and Twitter.
A balance between internal and external marketing is good to have, and Drubin says the quickest and least expensive way to get patients is through public speaking.
“I always tell chiropractors they have two primary responsibilities—taking great care of their patients is No. 1,” Drubin says. “And when they are not doing that, market like a maniac. You have to spend as much time working on a practice as in the practice.”
Liftoff at last
Whether launching your first practice or your fifth, many of the same considerations apply. As the experts make clear, leaving things up to chance isn’t an option. Failing to plan is planning to fail. And planning for success is the first step toward realizing the thriving, growing center of chiropractic health that is the practice of your dreams.
TAMMY WORTH, a freelance writer based in Kansas City, Missouri, specializes in business and healthcare subjects. She can be contacted at firstname.lastname@example.org.
1 Locus Chiropractic Demographics. “The Ten Essential Demographic Factors.” http://www.locusmap.com/support/the-ten-essential-demographic-factors. Updated Sept. 2012. Accessed June 10, 2015.