In the early years of a business practice, most of us spend the majority of our time learning to survive. Many naturopathic doctors graduate with extensive student loan debt, must absorb the mandatory costs of setting up a practice, and are often in a position where a line of credit is necessary. I believe it’s essential that individuals in practice develop good business skills to minimize debt and improve clinic operations. Understanding basic business skills and operating as a better business person not only increases productivity and profitability, but allows a person to have fun in the process.
In the famous Aesop’s fable about the goose and the golden egg, an impoverished farmer finds a golden egg in the nest of his goose. This happens consistently every morning making him exceptionally wealthy. Though happy with his newly acquired riches, he wasn’t happy enough and greed soon set in. Hoping to access the gold faster, he kills the goose and is left with nothing. The story’s moral is paralleled with how many of us choose to run our businesses. By that I mean we often put more emphasis on short-term success at the expense of long-term goals. People have a general tendency to focus on doing right (efficiency) rather than doing the right things (effectiveness). There is a not so subtle difference between the two which can radically impact your bottom line. To become successful business people, NDs have to apply effectiveness into their practices.
The first step of effectiveness is developing a budget. Budgeting is key in the structure of a solvent business practice. I recommend that individuals attempt to establish an overall profit plan for periods of less than one year, one year, three years and five years. The shorter the time frame, the greater the detail. Objectives are determined by establishing income goals and expense budgets. Once a budget is established, an individual (or group in a clinic) will have a clearer picture of short and long-term goals.
It’s important to remember that a business is not static. Rather, it’s a dynamic enterprise which requires periodic reviews and revisions—just as a patient protocol does. Creating an expense budget helps a person obtain a clearer understanding of the costs of doing business. For example, it will help you differentiate between fixed and variable expenses as well as reinforcing cost reduction strategies and minimizing fixed expenses.
In business, time is a valuable resource. A written plan can help you direct efforts to reach pre-determined goals. Sound financial management is a necessity for all business people; it will allow you to streamline everyday processes and alleviate some financial pressure. The absence of financial pressure will allow you to successfully conduct the “real” business, health care. As you are the source of business revenue, plan a reasonable amount of income to be reinvested in your practice—it is also important that this be done for proper tax planning. Think ahead! For example, set aside a special account for your HST. On a daily or weekly basis transfer your HST collected into the separate account. When you reconcile your taxes quarterly you will have ready income for CRA.
I also recommend that even young doctors, just starting out, think of their practice as finite. In other words, prepare for the succession of your practice from its inception. Ideally, a succession plan should be in place from the start of the business itself as you never know when it will be needed. Having a plan increases business value in the eyes of future associates, lenders and clients alike.
Self-employed does not necessarily equal self-sacrifice! We are dependent on ourselves for the success of our practice. A businesses future lies solely on the structure you’ve put in place to secure its existence. The planning process is therefore not complete until all facets of risk management have been addressed. How do the issues of disability, a critical illness, retirement or death manifest themselves for a practitioner, their family and their business? Whether a new or seasoned practitioner, it is prudent to address the holistic wellness of your professional practice (e.g., financial planning, insurance, etc.), do it now, and review it annually, much like a business plan. This allows you to plan your business operation for maximum effectiveness and profitability. To take control of your business, enjoying the fruits of your labour, you need to be effective practitioners, making proper choices necessary to ensure your success.
Published in BCNA Bulletin Spring 2011
The information in this article are presented for general knowledge and the content should not be relied upon as containing specific financial, investment, tax or related advice. Clients must seek their own independent professional advice to discuss their own personal circumstances before implementing this type of arrangement.