Small Business Tips for the Self-Employed in the Medical Field

In this article, I’m talking specifically to the dentists, the chiropractors, the veterinarians, the optometrists… all you doctors who own your own business. I’m going to call you the entrepreneurial doctor. You are smart; you have the vision and aspiration to grow a grandiose practice. BUT, you’re not very good at the business side for the most part… Sorry, just the fact.

As a business owner, you want to keep your expenses to a minimum. You don’t want to spend money aimlessly. So, we are going to discuss four areas within your practice that you need to evaluate. By taking a second look at these things, you could save a lot of money.

1. Don’t forget the liabilities of your business.

Don’t forget that there is a liability side to your balance sheet. Most of us want to focus on the assets. We want to look at how much cash we have in the bank, and we want to see how much equity we have in our practices. Please, understand that I’m with you. Remember, I’m a business owner myself. I also deal with my personal balance sheet. But we don’t want to forget those liabilities.

It’s not uncommon, whenever I bring on a new client who’s an entrepreneurial doctor, that inevitably we have to deal with refinancing their practice notes or their equipment loans, building loans, etc. Why is this? Whenever you go and apply for that refinance, building, or equipment loan, the bank is not incentivized to help you reduce your interest rate once you’ve signed that note. So it’s not uncommon for me to see a client paying a 4% interest rate on a practice note when the free market is yielding 3%. A 1% difference on 5, 6, 7, 800,000 dollars can equate to a lot of money in interest. I’ve often seen where I can refinance a note with the interest rates close to the same and knock two or three years off the number of payments. So don’t forget to evaluate the liability side of your business for cost savings.

2. Check for better insurance policies.

We all make mistake number 2, insurance. Once again, I’m with you. We’re all insurance poor – life, disability, home, auto, umbrella policies, business overhead – the list goes on and on. Every year, you should take a hard look at your insurance policies. Yes, it’s going to take a lot of time and energy. That’s why you hire a CFP®, a wealth manager, who understands all of the little nuances I’m talking to you about. Someone like me has multiple connections with insurance agents and can shop among respective professionals. A CFP® can also take a look on a year-by-year basis to see if any other company has brought new products to the marketplace which can reduce your premium payments. I’m working with a client right now who is about to save $4,000 a year in insurance payments! That almost covers my fee, so it’s worth working with a good wealth manager to take a second look at available insurance products.

3. Don’t buy the toys!!!!

I’m not throwing rocks in a glass house, but don’t go and buy all the shiny new toys you don’t really need. Obviously, we’re talking about boats and cars and airplanes and all the other things that I’ve seen many doctors buy.

More importantly, this also applies to toys within the business. Whenever that sales guy comes around and mentions the latest, greatest technology or product, it’s usually November and December. They come around they say “if you buy this you’re going to generate a tax deduction for yourself, and it’s going to increase efficiency in your office.” We’ve heard the sales pitches. Many times, those sales folks are trying to meet their own quota. Run some data on the numbers, and get with your wealth manager to see if that particular piece of equipment will help you over the next 15 or 20 years, and not just next week.

4. Don’t forget to pay yourself first.

Number four is probably one of the biggest ones… don’t forget to pay yourself first. What do I mean? Well, you bought your practice and more than likely, you have a fair amount of amortization and depreciation that’s going to occur in the first few years. This means that you are not paying a lot in taxes. You will be tempted to improve your lifestyle, especially if you are not working with an advisor. Resist the temptation and get into the habit to start saving. Get some money back into your retirement accounts. You will thank yourself later. Your advisor will make suggestions like how much to save and which kinds of accounts to fund.

Follow these four tips, and you may see greater success on your balance sheet. Make it a great day… a financially simple day!