Practice Startup Success

Starting small - a success story

I received an email from a new DC whom I had been helping: 
She had looked at a space that was much bigger and for which the landlord wanted way too much money.  She decided to go small, and says, "I have never once regretted my decision to rent this space-it is already home to me and will only get better once I'm actually seeing patients."

I talked with another DC who was looking at 1400 square feet vs. 1800 square feet.  At $20 a square fot he would be spending over $800 more a month.  The question you need to ask in this situation:  "How will I make this extra space profitable?"  or, "How many more patients will I have to see to pay this additional rent?"

In most cases, you are better off taking the smaller space and moving in a few years.  In the case above, he was going into a condo and buying.  He decided to "bite the bullet" and get the larger space so he wouldn't have to sell later.

Stay small as long as you can.

For more leasing information, get my book "Leasing Your Office" or read the office leasing chapter in Planning for Practice Success.  Both at www.dcpracticesuccess.com

Complying with ADA public access

I talked today with a soon-to-be graduate who is looking at office space in a large city.  He found a great office but it has only a stairway as access.  He is also going to have to do some renovations to the office.  The question is:  What does he have to do in order to comply with the ADA requirements for public access?

The ADA (Americans with Disabilities Act) says that if you build a new building or undertake "alterations" to an existing building, you must comply with ADA public access requirements.  So does he have to put in an elevator?  Good question.  There is an "elevator exemption" for buildings with fewer than 3 stories or if the facility has less than 3,000 square feet per story, but, "the professional office of a health care provider" is an exception.  That is, if you can follow the double negative,  the elevator exemption doesn't apply to health care offices. 

There are also requirements on changes to facilities that alter the "path of travel."  For example, if you altered your office to create some barrier to wheelchairs, that would not be allowed. 

NOTE1:  There are tax incentives for expenditures for complying with the ADA requirements, so it would be good to check on those. 

NOTE2:  Your local (city) building department may also have its own requirements.

NOTE3:  There are also some different requirements for putting a business in a private residence.

I spent some time trying to figure all of this out and concluded that you should call the local building department and let them tell you what to do.  It's quite complicated and I don't want to lead you astray on this one.

One final note:  ADA is administered by the Dept. of Justice.  So if you don't comply and someone complains, the "Feds" will be at your door.  It's not nice to fool with the IRS or the DOJ.  Just figure out what you need to do and do it.

Beware of CAM - a hidden leasing cost

I hear this all the time, most recently several people at a seminar last weekend:  Beware of CAM   (common area maintenance) costs in leases.  They can increase your lease cost considerably because they are calculated on your square footage.  A $5 a month CAM on a 1200 sq. ft. office costs $6000 a year in extra leasing costs!  Don't let it stop you from leasing the office, if everything else is ok, but you need to be aware of the extra cost and figure it into the cash flow section of your business plan. 

On a related note, one grad told me she was quoted over $100,000 for build-out in a new building (what's called "A" space).  YIKES!   Much of that was for the x-ray room.  Many chiropractic offices these days don't have x-rays, because digital x-rays are easier to use and send.  Find a willing clinic and send your patients to them.   You may have to work with the x-ray techs at the clinic to get the kind of x-rays you want, but it's certainly worth it to save on the cost of x-rays.  AND, you can create relationships with the people at the clinic for referrals and for them as patients.

I also got a call from a student who wanted to lock in a lease for a building that was "just perfect."  The only problem was that he would not be able to open his office until 2008.  Leasing companies won't wait that long, and you certainly don't want to spend money while you are a student.  One lesson I've learned is that if there is a fish on the hook, there is usually a bigger and better one still swimming around.  Don't hesitate to walk away from a deal. 

Check out my other blog for a great story about this:  Good luck? Bad luck? 

My book Leasing Your Office could be helpful to you in this process. 

Too Much Office Space?

 I’ve had discussions with several clients recently who are concerned about taking on too much office space in a lease. A “typical” chiropractic office (if there is such a thing) is about 1000 to 1200 square feet. Unless you are getting a GREAT deal on this space (say, under $10 a square foot), don’t get talked into leasing more space.

Here is an example: Let’s say you lease 1800 square feet. That means you have 600 square feet that is “excess.” At $20 a square foot, that means you must pay an additional $1000 a month for unproductive space; i.e., space that you aren’t getting any revenue from. Now, if you can find a productive use for that space; say, by letting a massage therapist use it or by selling some products that can give you at least $1000 a month, it might be worth it. If you use it for a classroom in which to give lectures, you are not getting additional funds from the space. (You could as easily do the lectures in the public library at no cost.)

 In other words, if a real estate agent tries to convince you “This is the only property available in this area so you’d better take it,” check that story and think long and hard before you agree to rent unproductive space. For more information, buy our the “Leasing Your Office” e-book: http://www.dcpracticesuccess.com/p4ps_orderpage.html . 

Determining Build-Out

Q:  Is there a standard I can use to figure the cost of the "build out" - the amount I will need to pay to make the office work for me?

A:  There is unfortunately no “standard” for build-out. I know new DC’s who have paid $30,000 to improve a small office in a small town, and others who have paid almost nothing to improve a big office in a big city. As you are looking for space to lease, choose the space that requires the least build-out. OR, try to get the property manager or building owner to put the build-out payments into the lease, in return for a longer-term lease.

See my new e-book "Leasing an Office" for more information.