COLUMN BUSINESS TALK Coin return P How to create money by reducing expenses BY ANTHONY LOMBARDI ractitioners who run multidisciplinary practices will find they are able to create new revenue by simply reducing expenses versus putting efforts into attracting and seeing new patients. By re-eval-uating every spending transaction, I went through and tracked every dollar spent in 2013 and 2014 to deter-mine what was needed, what was optional, what was unnec-essary, and what could likely be discounted by the supplier. Business classes should exclusively allot time on this topic. In many ways, focusing on expenses is more important than learning how to generate income – because it’s easy to do. An expense is anything that is essential or necessary to help you run your business and generate revenue. Essential expenses are things like rent, the electricity bill, phone bill and licensing fees. Necessary expenses can vary from one office to another, but could include certain advertising costs, costs of specific supplies (i.e. acupuncture needles), and costs associated with therapists and support staff. An asset is simply something that generates income, while a liability is anything that does not generate income. For ex-ample, you are an asset because you see patients and you di-rectly generate income. Your car, however, is a liability because it doesn’t generate income. If you own your office space, it’s an asset when you rent the rooms out to other therapists. Along the same lines, your primary residence is not an asset but a liability, because although it may have cash value, it does not generate income (unless, again, you have tenants living with you). If you rent an office space, the annual preset cost is $50,400, based on the following commitments: Office rent: $3,500/month for 1,000 sq/ft • • License and association fees, malpractice insurance: $5,400 • Fire, theft, slip/fall insurance: $3,000 If you own the clinic and land, the annual preset cost is $23,500, based on the following commitments: • License and association fees, malpractice insurance: $5,400 • Property taxes: $8,600 • Snow removal: $4,500 • Lawn maintenance: $2,000 • Fire, theft, slip/fall insurance: $3,000 If you rent one or two rooms from a clinic, the annual present cost is $13,800, based on the following commitments: • License and association fees, malpractice insurance: $5,400 • Room rental: $700/month How to find money Guaranteed expenses Depending on whether you own your clinic, rent the build-ing or simply rent a room, you will have a different set of guaranteed expenses. This means before you ever see a pa-tient you will be committed to certain yearly expenses. From a purely operational expense perspective, renting an entire office space is the most expensive option and renting a single room is the least expensive option – but it limits how much income you can generate because space is limited. Owning your own office space is less expensive than renting, and maximizes your revenue producing potential. I have put together a comparison using actual values and average values of certain expenses to give us an idea of the cost of doing business, before we even begin doing business. DR. ANTHONY LOMBARDI, DC, is consultant to athletes in the NFL, CFL and NHL, and founder of the Hamilton Back Clinic in Hamilton, Ont. He teaches his fundamental EXSTORE Assessment System and conducts practice-building workshops to health professionals. Visit exstore.ca for information. 18 Canadian Chiropractor October 2015 Darryl Meyers, who works at a Walmart in Burlington, N.C., noticed the lights were on in the pop machines in-side the break rooms. He suggested turning the lights off on the machine to save electricity. Walmart took his sug-gestion and has since saved more than $1 million every year. Robert Kiyosaki, author of the book, Rich Dad, Poor Dad , thinks of dollars as employees. The more employees (dollars) you have in your possession, the more impact you can have in generating more income. If you can find ways to retain more dollars, then you can preserve the quality of your product while building your financial base. By concentrating on my business expenses I have been able to “find the pop machine” in my office and saved over $4,000 per month by simply re-tooling the following expenses. Percentage set up Some therapists and chiropractic associates may work as employees and earn an hourly wage. This can become costly because you have to pay the employee even when they are not seeing patients. Instead, hire them purely as an independent contractor working on percentage. This means they only get paid when they are working on pa-tients, and this means the patient payments are going towards paying the therapist/associate fees – not you. www.canadianchiropractor.ca
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