Evolutionary Coda

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ome people are blessed to graduate from school with very little student loan debt due to savings or family support for their pursuit of a new career. Many, however, are not so lucky. It is estimated that 65–70% of graduates have $50,000–70,000 in debt upon graduation. At 3.5% (the rate at the time of this writing) over 10 years, that’s approximately $590 per month for a $70,000 loan! This certainly makes the idea of going out and borrowing another $10–$25K to start up a clinic seem

daunting, if not downright depressing. However, there is always more than one way to access capital and, depending upon your personality, an additional $10–20K loan on top of what you had to borrow to go to school may not really make it any harder to sleep at night. In fact, borrowing the money you need may help spur your motivation to work hard and succeed in your practice. In this chapter, we will discuss fixed and variable start-up costs and creative ways to raise the capital you will need during your first years of practice.

How much cash do you need?

It is possible to start your practice on a

shoestring, which we will define as anything less than $10,000 during the first year. Please remember,

however, that one of the main reasons for small business failure is undercapitalization. What that means is that a business did not have enough capital for the start-up phase when income is always unpredictable. In such cases, a really bad month or even a bad week can make it impossible to pay the rent unless you have a back-up line of credit or family assistance. In order to determine how much you will need for your new clinic, let’s look at some real-world budget scenarios and see what it really costs to start and run a thriving practice.

We will look at start-up budgets for four ways a practice could be run: 1) out of your house, 2) renting space from another practitioner, 3) in a 1,000 square foot clinic space with a partner, and 4) in a 600–750 square foot clinic space by yourself. Figures are based on averages from speaking with practitioners all over the U.S. We have also included costs for equipment and furniture that you may need to purchase at the beginning if you have not collected any of these items during your years as a student. For all scenarios we have assumed a reasonable salary for front desk help.

Practicing from home

Later on in the book we discuss the pros and cons of running your practice out of your house from a professional and logistics point of view. In this chapter, we are only presenting the

financial reality for a hypothetical home-based clinic. Please note that this is based on you owning, not renting, the space where you live. We are assuming a clinic with one treatment room and a small waiting/reception/herb area, which seems to be typical for home clinics. This scenario also assumes that the business is being run as a sole proprietorship. So there is no corporation paying rent to you for the space, although that is another possibility to consider. We have figured the costs annually. The cost of buying herbal medicinals is not included in any of our calculations because that is a profit center, not a pure expense, and everyone does it differently. The size of this clinic space is 500 square feet, and we are figuring supply costs based on seeing 30 patients per week. We are also assuming that any practitioner starting this way is buying furniture and equipment for their clinic somewhat on the less expensive side. Also, many people will obviously already have a computer, some extra chairs or an extra coffee table, desk, artwork, carpets, or other accessories that may be pressed into service for a clinic. We understand these numbers will vary. Thus we have made some generalizations that you may add or subtract from your calculations.

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Lease cost $0 Salary for 20-hr. per week front desk staff $12,000

Share of heat & light $600

Clinic supplies (needles, table paper,

paper towels, cotton balls, alcohol swabs, moxa) $75

Malpractice insurance $800

Student loan payments $7100

Continuing education $300

Office and cleaning supplies $300

Phone/fax/connectivity

(assumes two incoming lines at residential rates) $750

License fees $150

NCCAOM diploma renewal costs ($300÷4 yrs.) $75 Equipment repair or replacement costs

(This includes computer breakdowns.) $500

Marketing expenses $1500

Bookkeeping and accounting costs $500

Cleaning costs $500

Sharps disposal $25

Total $25,655 What equipment do you need?

Computer $500–1000

Inkjet printer $75–100

Fax machine $150

Phone equipment $150

Treatment table $300

Heat lamp, TDP lamp $150

Acutron machine $1500

New furniture (coffee table, two chairs,

carpets, lamps, desk, office accessories) $2500 All this means that your annual costs in your first year if you are practicing at home might come to $20–27,000 or between

$1,500 and $2,200 per month depending upon what things you

have accumulated before

graduation and what services you hire out, such as cleaning and bookkeeping, how many hours per week you hire someone to answer the phone, and the size of your student loan payment per month.

If you have graduated with some shiny new equipment items for your clinic, then your first year will be a few thousand dollars cheaper than those who have not. But these figures will give you a place to start, and you can assume that in any scenario we create in this chapter, we are including a student loan payment of $600 per month, which seems to be about average.

Renting space from another practitioner

Your annual costs in this type of scenario will obviously vary depending upon what type of practitioner you are renting from, how much space and time you use, and how many pieces of equipment you do or don't need. If the clinic is fully equipped and you are just coming in with your black bag of practice supplies, you may pay a little more in rent, but it may cost you far less than if you are renting and equipping an entire room or two for full-time practice. No matter what sort of deal you work out, you will still have some fixed costs, such as CEUs,

insurance, practice supplies, license fees, marketing expenses, and possibly student loan repayment, as well as whatever you are paying for rent. Let’s talk about rent costs.

The average cost around the U.S. for professional rental space is about $14–$18 per square foot per year. Depending upon what

P O W E R P O I N T

If you wanted to take home

$3,000 per month in your first year and your home-based practice is costing you an average of $1,700 per month to operate for a total of $4,700, you would need to see 21 patients per week at $55 per patient visit to get there. That's only 4.2 patients per day, five days per week at a very reasonable rate! (Note: these numbers do not include any product sales in your clinic.)

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part of the country you live in, how much of the shared clinic space you have access to, and how many hours per week you are using space, a 250–300 square foot room used three days per week plus receptionist services and storage for your files could cost you $500–650 per month. You will have to sort out issues such as how your appointments will be made, access to herbal medicines in the clinic, use of common areas, and storage of your patient files. Access to the phone and fax, heat and light, cleaning service, sharps disposal costs, or other upkeep costs may also be included in your rent or not depending upon what you can negotiate.

If you are using someone else’s completely equipped rooms and front desk services, you should probably expect to pay higher per hour or per day rent than if you are supplying all the furniture and fixtures, but such an arrangement can be helpful in your first year or so because it lowers your variable costs. In such cases, make sure you have something in your contract for what happens if something breaks, you drop burning moxa on the carpet or the table and cause a burn, or for any other possible source of friction that may arise when someone is renting someone else’s property in addition to the space.

P O W E R P O I N T

If you rent space three days per week and pay $600 in rent monthly, your average cost to run your practice will be around $16,000 per year. If you can see an average of 20 patients per week at $55 per visit your first year for 48 weeks of the year, your take home pay for those three days per week will be $36,000 before taxes. If you can see an average of 25 patients per week at $55 per visit, your take home pay will be $50,000 before taxes. (Note: these numbers do not include income from sales of any products and $55 is an average-to-low price per treatment around the country.)

A shared clinic

So you’re graduating and two of your friends from school want to go in on a clinic space with you. Once you have agreed upon a location, name for the clinic, ideas about clinic décor, designs for letterhead, business cards, and any other decisions that must be shared, you will have also to decide on how the space, time, and costs will be shared. Our first suggestion is not to get too small of a space. The universe will not let your shared practice grow and expand as easily if there is nowhere for it to expand into. Our feeling is that 850–1,000 square feet is the minimum size that would be workable depending upon the layout of the space and whether everyone wants to practice full time. That will allow three or possibly four small treatment rooms, a waiting reception area, a storage closet, and a small pharmacy area. If the space costs $16 per square feet per year, that’s $1,200 per month split three ways if everyone is paying an equal share.

There will also be a damage deposit and possibly last month’s rent to come up with in advance. In such cases, we suggest that you either create a limited liability company [LLC] (see Section 1, Chapter 5) or that everyone in the clinic form their own personal corporation [PC] in order that each of you is protected from the others’ potential clinical errors.

Whatever business structure you choose, you will still need some sort of contract drawn up. You may think that you are great friends and will never have disagreements. Don’t believe it.

In our mutual experience, a good contract protects friendships.

It is worth hiring a lawyer to do this for you. To keep the legal fees to a minimum, sit down together and create a list of the things you want the contract to do or to prevent. Even if you create an LLC or a partnership contract, there are all sorts of things that need to be decided and agreed upon in order for all of you to be happy and feel secure. This will include items such as what expenses will be shared and which will not, whose name(s) will be on the lease, what lines of herbal medicine or

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other products will be carried in the clinic and how the profits from those sales will be tracked and shared, how disputes will be handled, who will be in charge of hiring and firing employees, how someone gets out of the contract, under what circumstances others may join your practice, and what to do if one person’s practice gets off the ground faster than the others and he or she needs more space and time. This list could go on and on.

Still, it can be a wonderful experience to practice with others (see Section 1, Chapter 6). You can lend each other moral support, refer patients to each other, cover each other’s practices during vacations, share creative marketing and décor ideas, and even help each other with clinical issues. And it will cost you less than opening your practice alone. There is no doubt! Your costs in this situation are likely to be similar to those of someone who is renting space from another practitioner or perhaps a little higher.

Your own private clinic

This situation is the most expensive in both start-up cost and continued operation cost. However, if you are moving

somewhere you don’t know anyone or you are not excited about renting space or sharing space, you’’ll need to consider the costs of doing it all by yourself. What we hear from around the country is that the average cost of running a clinic is $30–40K annually or about $3,600 per month. This will be higher or lower depending upon what sort of space you rent, where you live, and what amenities you offer. As we said above, you may be able to control some of the variable costs of running a clinic, but the fixed costs are just that, fixed. See Section 2, Chapter 4, on negotiating a lease to help you get the best deal you can. We also suggest that in order to thrive, you need two treatment rooms in addition to your reception/pharmacy area. You may be able to get by with 650–700 square feet, but probably not a lot less than 600 unless the second treatment room is really tiny. Also,

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you want your clinic to look professional and comfortable, not cramped and dingy. And, you cannot chop your marketing budget down to zero, although in the marketing chapters of this book we give you lots of ideas that will cost you more time than money.

In any case, based on a practice cost of $36,000 and a take home pay of about $50,000 before taxes your first year, you will need to see 33 patients per week at $55 per patient visit to get there. To just break even and cover your

clinic costs, you will need to see about 14 patients per week at $55 per visit. That, of course, does not account for product sales, renting out space, or anything else you might do to earn a living in your clinic.

How to generate working capital

If you are lucky enough to have a working spouse, you may be able to start with the “break even” numbers listed above in all the scenarios we have discussed, not that you want to hang out there for very long. If you have to make a living, however, in addition to paying back your loans, you'll need to get your patient visits up to 20–30 per week pretty quickly. See the marketing chapters (Section Four) for ideas on how to do that.

In the meantime, if you have no money at all to start your practice, you will need to generate a few thousand in working capital and do it quickly. So what are the cheapest sources of money you can find?

• Home equity

If you have not done so already, it might not be a bad time to refinance your house. If you are paying more than 6.5% in mortgage interest, you could get several thousand dollars out from a refinance and still be paying the same amount in monthly mortgage payments. (If interest rates rise, this may

"If you are going to worry, don't do it. If you do it, don't worry."

—Michael Nolan

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not be a viable cheap money source). Put it in an interest-bearing money market account and only use what you need. If your practice grows really quickly, you can use the money you borrowed from yourself for your monthly mortgage payments!

Or, if you are really gutsy, sell your house in the city and move to a smaller town where life is less expensive. Use the money you have left over after buying a new, less expensive house to capitalize your start-up years. A third method might be to ask for a line of credit based on the equity in your home. Such credit lines can be quite inexpensive. Again, only use what you need and pay your minimums and as much more as you can each month promptly.

• Join a credit union

Credit union loan rates are often an entire percentage point or more less than a regular bank. If you have a family member that is already a credit union member, you should look into the rules for joining as well as their loan and line-of-credit rates.

• Borrow from family

This, of course, is one of the best ways to borrow money because there is often very low or no interest on the loan.

There may, however, be other more complex “strings”

attached to such cash, but depending upon your relationship with your family, it is a source of funding to consider. If you are worried about the potential effect on your relationship, write a simply contract for repayment and stick to it.

• Moonlighting

When I started my first business [HW], I had several house-cleaning jobs that I used in order to pay my bills while I got the new business off the ground. I made enough to pay my rent and modest living expenses. So the new business did not have to support me for the first year. This is a tough row to hoe in terms of personal time, but, if you are young and healthy, it can work.

• Life insurance loans

If you have a life insurance policy, you can often borrow from the cash surrender value without any business plan or other qualifications. These loans also have very attractive interest rates in many cases. The same may be true with some types of retirement accounts.

• An acupuncture birthday gift

This is for anyone with a large family. Write your friends and family just before your birthday during the last year of acupuncture school. Tell them that you will need $7K, $9K, or $10K to start your practice and you are looking for pledges which can be paid back over the next three years or can be taken in free treatments. You may find that your family supports what

you have been doing in school over the last 3–4 years and will pledge their support quite generously.

• Look for an angel

Private venture capital is not out of the question. If you are dreaming big and want to start something truly special in the way of a clinic, we suggest you get a book called Finding Private Venture Capital for Your Firm by Robert Gaston. He estimates that over 700,000 people commit nearly $56 billion in venture capital annually in this country. Ask around to your banker, lawyer, accountants, or other business people you know if they know anyone who might be in this category, or visit Venture Associates online at

www.venturea.com/clubs2.htm. You might have to go and give a speech explaining and supporting what you want to

www.venturea.com/clubs2.htm. You might have to go and give a speech explaining and supporting what you want to

In document 62 Raquel Moral Bergós (página 63-113)