2 Legged Animal That You Raise That You Eat Common Mistakes When Planning Your Medical Spa

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Common Mistakes When Planning Your Medical Spa

Everything starts with a business plan: If you don’t have one. write it A good business plan will help you get a handle on all the things that shine on the excitement of starting a new business. It is also a regular requirement for receiving funds.

Remember that this is a medical business and it comes with special requirements. Non-physicians cannot employ physicians, medical supervision, HIPPA compliance, and many other regulatory issues need to be addressed. Play fast and loose with these rules and you are asking for trouble. (One of our local competitors in Utah doesn’t provide adequate physician care. The state walks in one day, takes all their technology and patient records and shuts them down.) All lenders want to know how you’re going to handle it. these cases work. . Advertising

Budgeting is easy. Financial advice is tough: Say the words “medical spa” like a doctor and you’re everyone’s best friend. Banks, lenders, technology companies will all have big smiles on their faces and books in their hands, ready to lend money or finance everything you need. If you are not a doctor it will be more difficult.

If you need money or a line of credit for needs other than technology, a bank will be your first stop. Banks will offer better rates but are harder at screening borrowers and have the lowest tolerance for risk. Banks will require that you have impeccable credit and that the entire loan is secured. In most cases, everyone who owns 10% or more of the business will be personally responsible for the loan and must provide two or more years of tax returns. Be prepared for a blizzard of books. Banks will want to see financial statements, cash flow, business plan (although they don’t read), and have a few visits.

The bank will want to know what the funds are intended to be used for. They want to see tangible assets that are marketable and can be sold if the business fails or you can’t make the payments. They don’t want to hear that you need more money for marketing and advertising or salaries that don’t have a fixed amount.

The money that banks will lend you will take the form of a loan, or a line of credit. Loans have a set schedule and payments. A line of credit is somewhat different. The idea is that the bank extends a line of credit that you can draw on. Interest is paid only on the amount of money that has been spent. However, banks often require that the entire balance is paid off and unused for one month every year to ensure the business is liquid. If you can’t meet this requirement, the whole line goes back to a loan.

Some banks help and some don’t. In one instance the branch manager told one of our accountants who wanted some information that “he doesn’t need our business and we can just live with that”. Avoid these types if you can. A friendly dealer can go a long way in securing loans and provide some flexibility if things don’t go exactly as planned. If you find a great bank, send a Christmas card and some cookies once in a while.

If you are at the limit of what the bank can reasonably tolerate risk, they will often suggest or apply to you for an SBA (Small Business Administration) loan that is partially guaranteed by the government. (sba.gov/financing)

Half of something is better than everything: If you need more money than you have in assets, you still have two options. These include partnerships, joint ventures, business loans or equity.

Most startups have some form of equity trading. Partnerships are a good example. Sweat equity in the early stages provides ownership in lieu of a salary or salary. It is very common for entrepreneurs to receive little or no money, sometimes for years, until the business is on its feet. Sweat equity at this level usually only extends to founders but can extend to partners who need it badly. When we started the surface, I took more than 80% reduction in income.

Equity: The law is simple; The more money you need and the risk you take, the more equity you will give up.

Angels: This is the first stop for many traders. Angel investment (also called seed money), is often raised from friends and family or “high net-worth” individuals. In some cases you can find “Angel Groups” that meet together and look for investments. Angels are usually found in the early stages of a business and are often bought out when larger investors come in.

Business Debt: A recent development in business debt has made its way into the market and is worth discussing. A business loan is basically a business loan. The lender takes a higher interest rate than banks allow (usually around 14%) and takes more risk in return. In addition, you will have to leave a small portion of your company in what are called licenses. This low rate (usually less than 5%) allows the lender to share in any potential upside. A business loan is worth considering if you are confident of success and do not want or need to give up a large equity position in your company. But you will still be responsible for yourself.

Venture Capital: When most people think of raising a lot of money, they think of venture capital. For many startups, venture capital is not an option. VC money has some downsides though. It is hard to get and extremely expensive. When you add up the whole enchilada, you’re looking at about 80% compounded interest each year in return for that money. The VC is looking for an investment period of three to five years and an ROI (return on investment) of 700% or more. Whw. You will also lose complete control of your company and have someone always looking over your shoulder. There are times where this actually makes sense. Many VCs are well connected and bring these resources to the table.

So, now you have the money you need. What will you do with it?

Most medical spas have grown out of an existing doctor’s practice. The ideas of having technicians generating income, low overhead, increased patient flow, and the feeling that “I can do that” are attractive to a large number of doctors who are tired of going to medicine. . (We have been approached by an incredible variety of physicians seeking to enter this market including; neurologists, cardiothoracic surgeons, and even podiatrists.)

Multiple locations: After some initial success, many doctors and MedSpa owners try to open additional locations. (For some reason, second hospital startups are often opened by a relative, usually a wife or daughter.) These second locations did not achieve the success of the first hospital for a very simple reason; they are a completely different animal. If you are thinking of opening multiple locations it is a triple workload. Many conditions are outside the capabilities of most doctors and involve a huge financial risk. Staff and human resources, legal issues, medical care… most fail within the first year.

Successful multi-location projects are built around systems. If your first clinic doesn’t work without you there, you’re not ready for a minute. Expanding to speed is a sure reason why you need to increase your resources. Then you are in big trouble. If you have closed a second hospital, lenders will be very wary of lending you money.

Turnkey Solution: Franchises and consultants love to drop this phrase. The sheep is an attractive one. Experts will guide your steps to financial glory. Marketing, finance, training, everything will be delivered in a nice little box with a bow on top. But, knowing the number of franchise owners and the problems they have encountered, I will give this advice; careful.

The current crop of franchises has many problems. (One of them in California was closed for selling medical practices to non-doctors. They have reopened and are among the most aggressive advertisers.) Franchises are attractive because they say they have all the answers. . If you just write checks all your problems will be over. Not so fast. What you will really get are some scripts, pre-written sales scripts, and bad ad-slicks. You’ll also get: locked into certain technologies that may be second-rate (authority gets kickbacks), spend money that can be spent elsewhere, and pay taxes on all your income. (The franchises that offer a flat fee are an even worse idea. They have absolutely no incentive to help you.)

Big dogs eat small dogs. The next five years will see dramatic changes and disruption in this marketplace. Large, well-funded medical businesses with skilled doctors and high-quality care will open the next door to you. (You’re the corner store, they’re Wal-Mart) These businesses will be category killers and if you’re not well established with a broad market presence and multiple revenue streams, you’ll be gone.

Towel warmers $80,000. Choosing the right technology is one of the things that will make you go one step further, or put you in cement boots where you stand. I often think of the way a doctor describes a pair of IPL [Intense Pulsed Light devices] who wants to buy; like $80,000 towels. Before you decide on which system to buy you will need to crunch the numbers. How many shots will the IPL captains have until they need to rewrite? How much support is there? What kind of training is provided? Does the device perform better than its competitors? Before you sign the next few home payments, make sure your technical decisions.

Buy or rent. Leasing is the best way to go if you want to pay for your equipment as you use it while conserving your capital. Many tech companies have delayed payment plans for up to six months. Buying used equipment is often the best way to save money if cash flow is not an issue. (We buy used medical lasers and IPLs online from a trusted dealer and sometimes negotiate with our purchasing power for other doctors.) You can often save up to 40% off the cost of a new device if you have the money. in hand

Don’t be fooled: Cash flow is a problem for many start-up hospitals. Revenue and growth forecasts are often exaggerated in the excitement of a new business. Before you invest in artificial leather care tables, make sure you can pay your bills. A medical spa startup spent $350,000 to build out and has no money left to attract patients. They have no business in four months.

A few simple financial rules:

he The Golden Law is actually translated as: He with the gold made the law.

You’ll end up personally paying for the money: Physicians sometimes think they can use the equity in their medical practice or future earnings as security. Of course not.

o Be nimble: Take only the amount of money you need. It is tempting to collect as much money as you can. Don’t do it. All money received will come with strings attached.

Get enough cash: Lenders hate it when you need extra cash. They worry that something is going wrong in the original plan.

o Sometimes you can’t get there from here: Competition is fierce. If your product is already owned by a competitor, think carefully before going into debt to compete in a market you cannot win.

Fasten your seat belt: Budgeting is like anything else. In order to really find the best solutions you will need to do some research. Find a mentor, someone who has done it before and knows what to avoid. And remember, the most common reason businesses fail is not lack of capital, but poor decision making.

Source links for all the deals and information discussed in this article are available online at MedicalSpaMD.com

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