Reading time: 5 – 8 minutes

If today’s blog post title has you perplexed – don’t worry.  I am not masquerading as an accountant or tax specialist.  I have plenty to teach in my area of billing, coding, documentation and profitable business strategies to keep me busy for a long time.

But since teaching chiropractors to work SMARTER in their business is my mission, and since April 15 is near, I thought this would be a good opportunity to host a guest column on an issue none of us can afford to ignore – taxes!

A final word.  There are several reasons that I chose Jim Bowen, JD to author today’s blog post.  Because of the tremendous asset he has been to my business and finances, I have the utmost confidence he can help you too. He understands taxes (most of us don’t) and from working with scores of DC’s over the years, he understands the challenges we face as chiropractors.  Listen and learn.  I’ll see you next week!

Tom Necela, DC

Why do Chiropractors consistently overpay their income taxes?

Here is a sobering thought this time of year: between 89 and 92% of all small business significantly overstate their income tax liabilities.  My work with DCs has me believe that their rate is probably higher.  The average discrepancy between what my DC clients were paying and what they actual were required to pay is over $22,400 a year.  Over a period of time, this contributes to a widening separation in net income between the well-run business and the average business.

What accounts for this?

When Money Magazine set out several years ago to find out, they came up with a pretty interesting conclusion.  After working with small businesses for over 20 years and hundreds of DC clinics, I can add some additional reasons why the Chiropractic clinic is uniquely positioned to make quite a bit of money every year, but hands over more to the IRS than necessary:

1. Working within the wrong entity. Almost every chiropractic office would be tax-advantaged to operate as either an S-corporation, or an LLC that is taxed like a corporation.  Partnerships have several disadvantages while the sole proprietor suffers from the highest IRS audit rate there is as well as the lowest ability to operate efficiently.   Most sole props realize a 30-50% decrease in tax liability simply by converting to a corporate form and accounting properly within that form. Accountants and tax attorneys already operate this way, while DCs are left on their own
2. Not understanding basic and advance tax planning techniques. Once you have your correct entity, you need to know what to do with it, a subject not commonly taught at your Chiropractic College.  There is not one or two things to employ to achieve Tax Nirvana – it is a sophisticated integration of the clinic operation with the individual circumstances and goals of the clinic owner, that results in a low tax liability within the dictates of the Internal Revenue Code.
3. Not properly characterizing and documenting income and expenses. Think of this as no different from your business.  If you adjust, but do not characterize correctly or document sufficiently, you will not get paid.  The same adjustment characterized and documented correctly will get paid.  The ability to deduct a private school, children’s braces or a new Lexus also depends upon characterization and documentation.  As in health care, learn the rules and benefit from them.
4. Relying on an accountant. This is where Money Magazine comes in:  Money sent out a hypothetical tax return to 46 accountants and received…46 different amounts due!  Tax liability ranged from $36,320 to over $94,000 – for the same return.  The reason was obvious: during the season, accountants prepare an average of 6.7 returns a day – not much time for careful consideration of your circumstances.  A CPA is vital to preparing and submitting your returns, but they are just relying on the p/l you submit to them and you cannot rely on them for the lowest tax liability and audit rate that you deserve.
5. Not having a tax advisor or preventative audit. A tax and accounting review prior to sending your material to your accountant (or better yet, earlier in the year) is what makes the difference.  You should be looking for ways to reduce your chance of being audited, as well as keeping more of your earnings.  This takes pro-active planning with an advisor that understands law, accounting, business planning and has a detailed understanding of the Chiropractic business.
6. Not looking for improvement. DCs are experts in trying new ways to increase patient visits, collect higher fees and extending that PVA, but they do not take even a few minutes to see how they can reduce their taxes.  Inertia and denial are two main reasons, but overall, it is the lack of understanding that something can actually be done about it.  One of the basic rules of business accounting is:  It is not the amount of money you make that determines your tax liability, but how you take and account for that money that matters.

What can you do now about your 2009 taxes?  Plenty, as it turns out.
First: tell your accountant to file an extension.

Second: Give me a call or email your 08 taxes (09, if prepared).

Third: Take advantage of a15 minute, free consultation to see how far off you are and discover out the easiest way to correctly file your returns.

I review hundreds of returns for Chiropractors every year and it is rare that I find one that cannot be significantly improved.  With my background and experience in law, accounting, business planning along with an extensive knowledge of the DC practice, I provide a unique perspective to you and your clinic.

Interested in learning more?  Take a look at www.bowen.us to get a better idea of how I can help you…this year!

Remember, it is not too late to lower your 2009 taxes.  It just takes action.

James M. Bowen, JD, is the owner of Bowen, Inc.: a for-profit corporation dedicated to strengthening the chiropractic community by helping Doctors of Chiropractic become more efficient.  His consulting service provides efficient DC operations, satisfied and energized owners, increased compliance and guarantees increased net income – year after year.

Mr. Bowen can be reached at 406.370.9900, his email is jmb@bowen.us and his website is www.bowen.us

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Reading time: 6 – 10 minutes

Today’s topic: reciprocity.  Or more specifically, how to harness the powers behind this principle to help you improve patient relations, your business and your bottom line. And how to avoid the price of indifference on the part of your patients.

Let’s begin:

First coined in 1766, Webster defines Reciprocity as:

1. the quality or state of being reciprocal : mutual dependence, action, or influence
2. a mutual exchange of privileges; specifically : a recognition by one of two countries or institutions of the validity of licenses or privileges granted by the other

In chiropractic terms, both are entirely accurate.  As doctors, we sometimes fail to realize that there is mutual dependence going on within our business: our patients depend on us for our expertise in restoring their health; we depend on patients to pay us for our skills.  Additionally, this mutual dependence is a privilege – again, for both parties involved.  The patient is privileged to have access to our health care and the ability to pay for it.  As chiropractors, we are privileged to have paying patients who need our services.

Since we have now established that there indeed exists Reciprocity within the very nature of our patient-doctor relationship, the question is: what are we doing to enhance, improve or encourage the development of this relationship with our patients?  Here’s the key: our ability to engage the power of reciprocity enables us to irresistibly build our business and magnetically attract patients.

In fact, it is what much of the astounding success of entities like Facebook, Twitter, LinkedIn and other various social media sites have captured that has enabled them to exponential grow their businesses.  Not to mention the countless other examples of reciprocity that cause you to somehow be irresistibly attracted to whatever site, service or sale that is being offered.

Facebook, Twitter, LinkedIN all use it – why can’t you?

And you can use these same principles in your practice! Sound enticing? Read on!

Here’s a common example:  You receive an “invitation” from a long lost acquaintance, not quite a friend but at least neutral enough not to be an enemy.  It’s begs you to “friend” them on Facebook. Bizarre as it may seem, and even though you know the game, you go ahead and accept the invitation even though you may not really have much interest in re-kindling what was never much of an acquaintance or friendship in the first place.

Let’s go one step further:  another person, less than an acquaintance, sends you a request to  “follow them” on Twitter.  Again, you accept, not really knowing why but not wanting to refuse either.

And one last example:  someone you don’t even know sends you an invite to become LinkedIn.  You see from their circle of colleagues that they have friends or business associates in common.  And even though you may not know them personally, you accept.

All of these web 2.0 invitations work on the power of reciprocity and you gave in to it each time.  But this principle is certainly not limited to the web and, in fact, has been tapped quite effectively by scores of other businesses, charities and individuals who succeeded for the very same reason.  And here it is.

It is part of our natural instinct to want to give back to someone who first gave something to us.

It doesn’t even matter whether it is something so small as a web invite. Or a flower from a Hare Krishna (for those of you old enough to remember them).  Or an envelope in the mail that contains a free gift (the most microscopic pin with an American Flag and return address labels) and asks you to donate to the Veterans of the ABC War Fund.

And now you are swept in by the Principle of Reciprocity and you suddenly find yourself doing exactly what they are asking you to do.

Reciprocity in the Chiropractic Office

So how does this relate to our patients?

Quite simply, how are you giving back to them?  In challenging economic times, many chiropractors are foolishly cutting back on their budgets to make room for more “necessary” items.  Gone are the dollars spent on advertising. Gone are the dollars spent on new patient welcome kits, thank you cards and little gifts for being a patient or referring a new one.

And with it, gone is the understanding of what these items do for your practice and your patients. Gone is the power of reciprocity.  Gone are its tangible benefits because your patients no longer feel like “they owe you” but instead they feel like you don’t even care.

Here are a few ideas for harnessing the power of reciprocity in small, concrete ways which will stimulate your patient to give back to you in return:

• Say “thank you” to every patient on every visit and train your staff to do the same
• Distribute a “welcome kit” to all new patients that gives free samples of products you may use or recommend in the office
• Give an educational book about chiropractic instead of just a pamphlet or brochure, as it has more value and is more likely to be read rather than thrown away. (Certainly, I recommend Beyond Back Pain for this purpose!)
• Offer to spend time at local schools or performing corporate ergonomic evaluations
• Have your massage therapist do short, promo chair massages
• Have patients bring in their current medications, vitamins so that you can review them and see if what they are taking is appropriate and in their best interest
• Ask if there is anything else you can do to help them.

Certainly, if you don’t express other ways of showing care or concern, a little gift or a new patient welcome package won’t make up for your lack in other areas.  But consumer research shows that one of the greatest reasons your patients (or any customer leaves) is rarely for what we think it is.

In fact, here is the breakdown from a recent survey polling healthcare offices of different disciplines.  Patients leave because:

• 1%          Die
• 5%          Move away
• 6%          Financial concerns
• 14%        Unhappy with service
• 16%        Left due to lack of convenience (too far to drive, etc)
• 58%        Displeased with attitude of indifference on the part of staff/doctor

Obviously, the power of reciprocity was not at work.  The patients didn’t feel they owed you anything because they didn’t even feel that you cared.

The take home message is quite simple:  do everything in your power to show your patients you care and use the power of reciprocity to engage them to reward you for that care by giving back to you in the form of loyalty, referrals and the ongoing support of your business.

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Reading time: 7 – 12 minutes

I guess it happens to the best of us.

After writing over 300 weekly newsletter/blogs over the past several years, I finally missed one.  Technically, it was written. But circumstances prevented me from getting it published online in a format you could read.  Translation: virus, system crash, and a conglomeration of computer-generated evils descended upon me this past week!

Ironically, last week’s article was about preparedness, protocols and other systems for practice success!

One of the reasons I chose to write this article was the widespread lack of systems that I have observed (or not observed) in chiropractic offices over the last decade or so.  Unfortunately, this lack of preparedness, which often comes in the form of a lack of concrete systems or protocols for the practice is a major danger that lurks in all too many practices.  It leaves many chiropractors feeling overworked and causes practices to under-produce.

In fact, while some DC’s believe that their technical skills are the primary reason people seek their care versus the doc down the street, my observations and empirical data suggest the exact opposite!  In reality, there are scores of chiropractors whose hands-on skills are simply average but whose practices consistently generate in the top 5% of all chiropractic revenues.  This is not to say that the chiropractor who can’t adjust his way out of a paper bag is on the same playing field as you.  Minimum competency IS required.  However, that minimum competency is also presumed by your patient when they walk in the door.

Therefore, it is obvious that other factors are at work in your success.

Here’s a case in point:  Think of your favorite chain restaurant or secret love for a particular fast food joint.  Now, go behind the scenes at most of these restaurants and who do you see?

A stream of stuffed shirts, suits and ties representing organizational geniuses and experienced executives slaving away at the fry machine?  Hardly.  Typical employees at most fast food joints and chain restaurants include pimply-faced teenagers, ex-convicts or those who evidently fell off the career track quite some time ago.

And where are the owners of these franchises?  Well, let’s be more specific.  Where are the owners of the local store or restaurant chain?  The owners of the entire franchise are in some far off corporate suite in another state or lounging pool side at their villa.

But even the local owners of Cheesy Cheese Pizza Franchise #346 – where are they?  Likely, they are not slaving along side their slew of teenagers, dedicating their life to making the “best pizza East of the Northwest TinkiTinki River Valley.”

No, these owners have their Gerber e-Myth bible in hand and are no where to be found.

Contrast that with most chiropractic offices where the owner (you) is also the chief pizza maker (performing the technical side of adjusting the patients), may also be the assistant fry cook (x-ray tech), may also be the marketing director, financial coordinator, bookkeeper, inventory manager, human resources director, exit interview strategist, hiring coordinator, director of rehab and ancillary services, and chief financial officer.

Oh, and the typical chiropractor performs all those duties simultaneously in the typical manner of a (choose one): crackhead, chicken with his head cut off, or child just fed a steady diet of Fun Dip, donuts and pop.

Is it any wonder that chiropractors never seem to achieve anything but a subsistence level practice and that fewer and fewer seem to be genuinely thriving?

Having visited well over 300 offices in the last few years, I can tell you that 99% of DC’s fall into one of three categories:

1. Fire-Frenzy.  No visible systems in place and if there are systems, they are woefully inadequate or obsolete.  These docs (and their staff) spend most of the time haphazardly putting out fires only long enough for the next one to erupt.  The one positive aspect of these offices is most know they are completely disorganized and hope to do something about it someday.
2. Dangerously Deceived. These offices have some systems in place usually in a slightly murky form of a visit protocol (1^st visit = NP Exam, 2^nd Visit = ROF, Visit 3-396 = Random ) or sometimes a front desk system for processing patients or the phone.  By in large, though, these offices have still not developed systems to adequately train staff, maximize revenues, minimize patient schedule abandonment or efficiently utilize doctor and staff time.  As a result, several things emerge: the doctor is still forced to put lots of time and energy in to keep the practice running smoothly, they are always on the verge of a crisis (and may narrowly miss) and the doctor is destined for burnout (although he or she won’t admit it) because they are deceived into thinking they have systems in place.  This is the most dangerous category because they don’t really have effective systems and because the doctor has so much to lose  in the way of potential.  Unfortunately, this category is also the most common.
3. So Close, But… These offices have solid systems in place but can never seem to make it to the “next level” where the doctor (and staff) feel that the practice is running smoothly or on autopilot.  The doctor is savvy enough to have developed systems that have all the basics are covered and consistently taken care of, but there is no real elimination of problems.  There is still too much doctor dependence and, at times, too much on the doctor’s plate.  Although this level of practice has obviously achieved a respectable amount of success, the development of effective systems and implementation is the only way for the practice to grow without the adding more staff, more time or more work for the doctor.

So, doctor, which category do you think best fits your office?

Now that we’ve identified some problem areas, let’s discuss some potential solutions for each category so you can start working on these issues right away!

Category 1: Your lack of systems will result in continual frustration for you and your staff.  Spend the time (because it is likely more plentiful than money at this point) in fixing this issue.  My recommendation would be to go visit other chiropractors offices 1x per week to see what systems they have in place.  To avoid being perceived as the competition, choose offices that are 25+ miles away and, if you can, get recommendations to only visit offices that are doing well so you can learn.  This is time and money (barely any cost) well spent and soon you will glean some helpful ideas.

Category 2: Your systems need to be firmed up a bit. Spend some time trying to identify problem patterns in your business.  Not just the once in a blue moon occurrences, but things that seem to happen repeatedly and/or with annoying frequency. Write a list of these issues down and begin to develop a systematic plan for solving them.  Then, move on to the next item until you have developed a series of systems to really address the problem patterns in your practice.

Category 3: There may be an issue or two that you need to specifically address in the manner of those in Category 2, but most practices in this category need to really focus on efficiency and delegation.  Since this is an issue to some extent in all categories, below is a flowchart that I have used to arrive at more efficiency and better delegation:

Time to Face Reality

When looking at the issue of profitability and practice success from a big perspective, an honest appraisal of your abilities, habits and motivation will tell you where you stand.  Is your business sinking?  Either get help fast or abandon ship!  It may be noble to be long-suffering, but the question is: can you afford it?

For those of you whose business is adequate but less than stellar, sometimes an objective opinion or outside assistance is needed to get you to that next level, to conquer obstacles and achieve longstanding goals. This is not to say you are incapable, but the often quoted words of our favorite Albert come to mind: you know the quote about insanity and doing the same thing and expecting different results.  Far be it from me to call you, a perfect stranger, a little nutty but, if the shoe fits….

Download a copy of my FREE Practice Analysis Questionnaire and get on your way to getting some help.  There’s no obligation and did I mention it’s FREE!

Hope this article has been helpful, encouraging, eye-opening or just frustrating enough to spur you to do something about it – chiropractors, we need you in business and you need your business to be profitable and pleasurable!

To Your Success!

Tom Necela, DC

P.S.  Don’t worry, this post will be on-time next week – I have identified the bugs, eliminated them and placed my own precautionary systems in place so this won’t happen again, lest I be guilty of not practicing what I preach!

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