[Editor’s Note: In October 2019, we ran an excellent post about how to set up a medical practice by husband and wife team, Juli and Dr. William Albright of Alamo Plastic Surgery. After 8 months in business and exceeding their projected revenue goals, they were shut down in March due to COVID-19. This couple did a lot of things right by paying off student loan debt, starting their practice in a low cost of living state, saving up a significant amount of cash and living modestly. But the crisis still has had a major effect on their lives and relatively new practice. I thought it would be interesting to walk alongside them and see how they're weathering the storm in real-time. We have no financial relationship.]
Back to Broke
On Friday, March 20th, all elective and nonurgent surgeries were canceled in San Antonio. By the following Monday, the Texas Medical Board issued strong recommendations against any in-office procedures. Our predominantly aesthetic plastic surgery practice was effectively shuttered. Our March revenue (Month 8 of our start-up) was on track to be double our projected goal! However, by March 20th, the revenue went to zero with no obvious end in sight. The realities and uncertainties of COVID19 spreading prevented clear paths forward for a return to business as usual. These are a few of our takeaways for doctors considering starting a solo practice.
5 COVID-19 Takeaways From a New Medical Practice
#1 Cash is King
Interestingly, cash was #1 on our original start-up list “Steps for a Medical Practice Start-Up”. Soon after our business launch, like most, we felt significant pressure to generate new business revenue quickly. Although we did not cave to the siren call of a new expensive capital equipment purchase (*although we got dang close in February?!?), we were spending cash on PPC advertising in order to attract new patients. This PPC strategy was working (see actual revenue exceeding projected revenue above), but it was expensive.
The Friday our medical practice was effectively shuttered, we performed burn rate calculations to determine how long the business could support itself based on our expenses and cash-on-hand. The answer was only 2 months which is well short of the traditional financial guidance of a 3-6 month emergency fund. Personal finances were also a bit too close for comfort. Between starting the practice and paying our expenses for 6 months without income, our personal cash savings had been depleted. We had only started collecting a modest salary in January.
Without the cash reserves, our options were limited and less attractive: borrow money from our high-interest business line of credit, apply for a new business loan, or borrow against our retirement accounts. In retrospect, we needed to create an Investment Policy Statement for our business and our personal life. Guess what we are doing right now?
#2 Hit PauseReal Self community survey of potential cosmetic patients on 4/5/2020 accessed through the ASPS, 67% who had been considering a cosmetic surgery were putting the decision on hold for now, most citing financial uncertainty.
#3 Get Lean
After getting caught short on cash, we were determined to plan for the worst and hope for the best. We wrote down every expense (listed below and prioritized by size of the liability) and started to trim expenses. We looked at our service contracts, asked for discounts, or payment deferments, and (yes, sadly) even staffing changes:
This was and is very difficult to manage. Just as we value our patients, we also value our employees. With the office shuttered, there were no hours for the nurse. Rather than furlough without pay, we let her go hoping she could find another nursing position quickly or apply for unemployment. We gave her an extra week’s pay to ease the transition.
Rent for Office Space
We initially requested a reprieve from late penalties for April’s rent. We have a fairly broad and permissive Force Majeure clause in contract which may help us defer payments even longer if needed.
Fortunately, we did not have any long-term service contracts with any vendors, consultants, or marketing companies which made it easy to turn off our paid marketing. This may be different for other practices/regions.
Requested payment deferral and payment reduction given reduced liabilities (no surgeries).
Yes, we have not adhered to every WCI principle. We still had a sizeable monthly car payment on a 3-year-old sports car. Fortunately, we decided very quickly to sell this vehicle before prices started to dip and ended up owing less than what we sold it for. The goal was not accessing the equity but offloading the monthly expense (we also saved on car insurance and premium gas expenses). Although my husband really misses it, we have had no issue downsizing to one car, especially with schools closed and my husband mainly doing virtual consultation from home. [I'm impressed by how quickly they sold the sports car! — ed]
Most companies have been great offering discounts or deferred payments with minimal pushback.
Return Unused Office Supplies
We returned any office supplies we could and didn’t expect to need for the next few months (mostly implants). [Only in a plastic surgery practice would implants be considered office supplies!-ed]
Cancel all recurring monthly office supply orders.
With a new startup, we were used to making changes quickly and staying flexible. Within a week of figuring out the finances, we dredged up Trello (free action item tracking app) to coordinate projects and action items for our team working remotely. We really shifted the focus from day to day operations to the following:
Obviously, critically important and time-consuming. Government guidance on combating COVID and paths toward reopening of the economy (understandably) change daily. Tapping into available small business financial resources has been critical. We have spent countless hours reading actual legislation (ie. the CARES Act) and trying to predict how it may be interpreted and implemented by other government entities.
All paperwork is completed online through our EMR, and virtual consultations are performed through Google Meet (free with Google Business and HIPAA compliant if HIPAA agreement signed). We try to stay in contact with our existing patients while also increasing new patient inflows.
We decided to stop procrastinating and finally engage with our social media (Instagram and FaceBook). We also have time to do an exhaustive data analysis of all the PPC data for the last 6 months. Whatever insights we glean, we hope to apply to future campaigns. Our e-mail marketing never took off. Now is the time to develop this process.
We were planning on rehauling our website in another year, but right now is a good time to make interim updates and start outlining the scope for that project.
Now is a great time to get Continuing Medical Education credit. Many organizations are offering virtual meetings and credits and some are discounting them or offering them for free. Any research papers/data collection you intended to do but never got around to it? Now is a great time. We are also trying to incorporate this into our marketing strategy.
In this time of uncertainty, we try to support our community and other struggling local businesses.
#5 Look for Economic Opportunities and Silver Linings
In the time of COVID-19, we must remain optimistic in our personal lives and still look for economic opportunities (limited though these may be). Currently:
Our family remains healthy, and our local community has not been ravaged by COVID (yet, fingers crossed). Our hearts go out to those who have lost more than just money to this nasty virus.
For the first time, my husband will get paternity leave (albeit unpaid). We are expecting our third child very soon! Who said timing wasn’t everything!
We had been in the market until our financial situation changed. But there may still be opportunity here, if prices come down and financing stays permissive.
Stock MarketInvestment Policy Statement.
No great options so far, but always looking.
The current market fluctuations have made life very interesting to say the least. Overall, we remain optimistic and grateful that we live in this great country and community. We still do not regret our decision to open our own practice, in case you were wondering.
Do you own a medical practice? What steps are you taking to survive during this economic downturn/shutdown? Have you had to let staff go? What advice do you have for businesses that are shut down due to coronavirus? Please comment below!
Need to get your own financial plan in place? Invest in Fire Your Financial Advisor: A Step by Step Guide to Creating Your Own Financial Plan! Try it risk-free today!