Physicians Practice - April 2008 - (Page 68)

START IT UP: FINANCE regional, not a national survey,” cautions Love. “A national survey taken in the metropolitan areas may not be representative of where you want to go.” TIGHTENING THE BELT Taking into account personal ﬁnances will help in the construction of assumptions for the practice. It’s all but inevitable that you’ll bring home less than the average at ﬁrst, so consider a conservative starting point for building your household budget — Love suggests a ﬁgure at or below 50 percent of mean salary for your specialty and region. “There’s a startup period where money’s going to be tight,” he notes. “In two or three years, then you begin to move up to the lifestyle you want. Will most physicians be able to exceed that average income? Yes. But it’s part of being mentally disciplined not to walk in thinking that you’re going to make twice what that regional average is.” If you can swing it, give yourself a margin of error by contributing at least some of the initial capital yourself. California family physician Eduardo Peña Dolhun, who started his own practice two years ago, explains how he made it through the startup period. “I started out with nothing, just doing housecalls. I worked with other doctors who did housecalls — essentially I was referred out,” he recalls. “I had ﬁve or six patients, and I didn’t even have an ofﬁce at ﬁrst. I saved up my money and moved into my current ofﬁce, and I shared the rent with three other doctors … for about a year and a half.” Two years after ofﬁcially opening, Dolhun now has a satisfying cash-only practice with a comfortably sized patient panel. the break-even analysis will be an illuminating exercise. “Once you do that, you go from uncertainty to risk, and risk is measurable,” notes Dolhun. “So if you do want to get ﬁnancing from friends, family, or a bank, you can go to them and say, ‘It’s going to take me six months to break even, and then I’ll be growing at 5 percent.’ Then you can talk with some numbers instead of saying, ‘I have this crazy wild idea of starting a practice … ’” SPEND A PENNY NOW A good marketing plan will help you keep that negative cash flow period to a minimum. NEGATIVE CASH FLOW READ MORE ABOUT IT! Visit this story on PhysiciansPractice.com for more of the information you need to know to get your new practice off to a great start: •Make sure you’re covering all the budget bases by reviewing our sample list of startup expenses. •Remember that it’s never too early •Type “going solo” in our Search to start planning for retirement. CPA Jerry L. Love offers his thoughts. Site box for Pam Moore’s key questions to ask yourself before making the leap. Dolhun didn’t break the bank with outsized overhead. But many newbies do make that mistake, and many others overreach on lifestyle as well, resulting in a debt load too heavy for a young practice to bear. Another common yet difﬁcult-toovercome problem for new practices is failing to pay quarterly estimated taxes. “The physician gets to the end of Year One and they owe $70,000 or $80,000 in taxes, and they don’t have it,” sighs Love. “And then they have to start paying on the next year’s estimated tax bill,” and so begins a vicious cycle of frustration. Borglum has seen this particularly expensive tax faux pas, too, and says that hiring an accountant who doesn’t specialize in medical practices opens physicians to all sorts of additional pitfalls. “The default general ledger list in Quicken, for example, doesn’t distinguish between ofﬁce and medical supplies, or between physicians and nurse practitioners,” he says. “And you do two or three years of accounting wrong before you realize it.” After you’ve lined up the right software — and a teacher to help you get started with it — creating Your practice may be open six, nine, or even 12 months before any signiﬁcant cash ﬂows through the door. A little scary, yes, but as a savvy Physicians Practice reader you have no doubt remembered to include a (modest) salary for yourself in the list of startup expenses. Another expense many physicians fail to factor in is the actual cost of borrowing money — the interest you’ll be obliged to pay on your loan or line of credit. (For more of these often-forgotten items, see the online version of this article, which includes a sample list of startup expenses.) But where is all this hypothetical cash supposed to come from? The bank with a branch on the corner and the friendly manager may not be the best place to start. “Lots of doctors waste a lot of time shopping around with community banks that make them jump through all these hoops, ﬁll out SBA paperwork, and it takes six weeks, and then they deny them the loan,” says Borglum. “Most banks really don’t know about lending to doctors.” So ask around — try your medical society, a practice management WWW.PHYSICIANSPRACTICE.COM 68 | PHYSICIANS PRACTICE | APRIL 2008 http://PhysiciansPractice.com http://WWW.PHYSICIANSPRACTICE.COM

Table of Contents Feed for the Digital Edition of Physicians Practice - April 2008

Physicians Practice - April 2008 Contents The Bigger Picture: Medicare Decision Time Letters Physicians Practice Pearls: Outsource Your Pain Noteworthy Cover Story: Trial Lawyers Tell All Management: When It’s Time to Change Ask the Experts Technology: Do You Know Where Your Data Is? The Tech Doctor: Are Your Discarded PCs Really Clean? Billing & Collections: Playing Hardball The Administrator's Desk: Recruiting for Patient Satisfaction Start It Up: Finance - Mastering the Numbers Game Coding The Great Practice Makeover: Taking Care of Business Associates Classifieds Advertiser Index

Physicians Practice - April 2008

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