Interview with Mr. Eric Miller – Episode 337
In today's episode, John describes why you must treat your practice like a valuable business asset if you want to be successful.
This episode serves as a valuable resource for healthcare professionals looking to enhance their business acumen and secure the long-term prosperity of their practices.
Our Show Sponsor
We're proud to have the University of Tennessee Physician Executive MBA Program, offered by the Haslam College of Business, as the sponsor of this podcast.
The UT PEMBA is the longest-running, and most highly respected physician-only MBA in the country. It has over 700 graduates. And, the program only takes one year to complete.
By joining the UT Physician Executive MBA, you will develop the business and management skills you need to find a career that you love. To find out more, contact Dr. Kate Atchley’s office at (865) 974-6526 or go to nonclinicalphysicians.com/physicianmba.
Did you know that you can sponsor the Physician Nonclinical Careers Podcast? As a sponsor, you will reach thousands of physicians with each episode to sell your products and services or to build your following. For a modest fee, your message will be heard on the podcast and will continue to reach new listeners for years after it is released. The message will also appear on the website with over 8,000 monthly visits and in our email newsletter and social media posts. To learn more, contact us at john.jurica.md@gmail.com and include SPONSOR in the Subject Line.
Our Episode Sponsor
Dr. Debra Blaine is a physician like many of you, and her greatest challenge was fear. The whole concept of leaving clinical medicine was terrifying. But she is so much happier now as a professional writer and a coach. According to Debra, “It’s like someone turned the oxygen back on.”
If fear is part of your struggle, too, she would like to help you push through those emotional barriers to go after the life you really want. Click this link to schedule a free chat.
Or check out her website at allthingswriting.com/resilience-coaching.
The Business Side of Healthcare Practices
In this engaging segment, John and Eric shed light on the often overlooked dimension of running a healthcare practice – treating it as a business. Drawing from his extensive experience working with physicians and other healthcare business owners, Eric underscores the critical need for an understanding of the financial dynamics inherent in medical practices. The discussion unveils some key aspects, including common pitfalls to avoid and the need for astute financial planning.
They also explore the importance of seeking professional advice, collaborating with financial experts, and understanding the unique economic challenges within the healthcare industry. Eric shares success stories of physicians who have transitioned from viewing their practice solely as a profession to adopting a business-centric approach, resulting in increased financial stability and ongoing growth.
Building Value and Planning for Practice Exit
They explore the issue of planning for the sale of the practice from the very beginning of its inception. Eric recommends building a practice that is not solely dependent on the owner, with multiple revenue streams, and ongoing strategic planning from its beginning.
This concludes with insights into optimizing the sale of a practice, ensuring financial security for physicians nearing retirement, and the potential for substantial returns with proper planning and execution.
Eric Miller's Advice on Pursuing Your Practice
I one-hundred percent say “do it.” You'll never regret it. But also make sure that you teach yourself or you learn the business side of the type of healthcare that you deliver so that you can maximize what that would be for yourself.
Summary
Miller, a seasoned financial advisor specializing in healthcare practices, delves into the essential aspects of financial planning for healthcare professionals. His book “How to Become a Financial Beast” [this is an amazon affiliate link] covers a comprehensive range of topics relevant to practice owners, offering practical guidance on optimizing personal and business finances.
To connect with Eric Miller, you may visit his company's website. You can explore the available resources and services offered by Eric Miller and his team at Econologics Financial Advisors.
NOTE: Look below for a transcript of today's episode.
EXCLUSIVE: Get a daily dose of inspiration, information, news, training opportunities, and amusing stories by CLICKING HERE.
Links for Today's Episode:
- How to Become a Financial Beast, by Eric Miller (this is an Amazon affiliate link, so I'll receive a small payment if you buy it using the link)
- Econologics Financial Advisors
- Contact Eric Miller directly using this email address: bfff@econologics.com
- How to Start and Grow a Profitable Cash Based Medical Practice – 293
- Want to Establish a Concierge Practice Before Finishing Your Fellowship? – 210
- The Best New Business Solves a Problem – 171
- How to Be a Shrewd Business Coach and Consultant – 111
- Dr. Debra Blaine's Coaching Services
Download This Episode:
Right Click Here and “Save As” to download this podcast episode to your computer.
Podcast Editing & Production Services are provided by Oscar Hamilton
Transcription PNC Podcast Episode 337
Manage Your Practice Like a Valuable Business Asset
- Interview with Eric Miller
John: I've noticed that many physicians who start non-traditional practices like med spas and weight loss clinics, they truly treat that as a business. In fact, I had a guest recently who sold her med spa, and she really did well. But many doctors failed to treat a medical practice that way.
When I was a CMO, I helped recruit physicians and bought some practices, and they were usually very disappointed in what they got. I was really happy when I came across Eric Miller, who's going to join us today because this is the thing he does, trying to bring value to practices and prove their business acumen and producing income and so forth. So, hello Eric and welcome to the show today.
Eric Miller: Hey, John. Thanks so much.
John: I've done a little intro prior to us starting here that's separate. But just tell us about yourself and how you got into helping clinicians of various sorts.
Eric Miller: Yeah. When I first got interested in personal finance I took the direction that a lot of people do. I work for an investment company, I focused on retirement planning and 401(k)s and such. And at some point in time, I just decided that's not really what I wanted to do in this field. I really wanted to be more of an advisor, a financial planner, and not just sell investment products.
And then having a background where my family was in healthcare I was like, "Well, here's what I've seen. These are people that desperately need financial help because it's really not taught to them in school." We started in 2008, which was a heck of a time to start a financial planning company, if you remember back then.
John: Yeah.
Eric Miller: We started working with healthcare owners and I learned really early on because all the questions that I would get from them had to deal with their practice. "My practice is struggling. I'm not making enough cash." Here I'm trying to get their personal finances in order and they're asking me all these questions about their practice. And I'm like, "I don't really know about your business. I've never seen your financials or I don't know how it works. I don't know how you guys get paid." It was just kind of an "aha" moment where I realized that if I was going to be a financial advisor that was going to cater to healthcare owners, I better understand something about their biggest investment, which is their practice of course. And that's where it started. Then we started working with veterinarians and physical therapists and optometrists. And then anyone that had a private practice, these are the types of people that we focus on.
John: Yeah. And it is a different world in healthcare, and even subsections of it are different. The practice is one thing, a hospital environment is a totally different thing. And there's a lot of billing and there's a lot of write-offs because you only get part of what you bill unless you're in the cash based business. So, that must have been an eye-opener.
Eric Miller: Yeah, it was. I was like, "Oh, no wonder we have a screwed up medical system. I'm looking at all these, how reimbursements work and I'm like, oh my gosh, this is crazy." But I did learn how the business runs, and that really made us more of an ally for that owner. Because I could show them "This is what this thing should be providing for you, and this is how much you should compensate yourself." And just gave them some certainty on that, because most of them just have no idea how to even pay themselves.
John: Yeah. They don't even know how to set up a structure. They've got to learn if they're starting their own practice, obviously, but it's like, "You better sit down with the attorney and the accountant and figure that out." But they don't really have a business background.
Eric Miller: That's right. Yeah. That was another thing I realized too, is just how much they didn't really understand. They understood the practitioner side, they just didn't really understand the business side of it very well.
John: Yeah. And that's I think why we see more and more that just come out of the residency and go and work for a hospital or something. But I think a lot of them do that for a while. They get really frustrated. They feel like they're in some kind of futile system or slavery where they're getting beat up to work 10, 12 hours a day and they say, "Forget it. I'm going to go on my own." But then we come back to this problem. So, you've talked with a lot of different people in healthcare that have these practices from doctors to physical therapists and so forth. Are there certain things that you see are kind of the biggest mistakes, or I guess I had a question here I was going to ask you about. Why their practice isn't sound and why their personal finances aren't secure?
Eric Miller: Yeah. Well, I'll say it goes back to that principle I just taught you. Almost all of these people went to school for seven or eight years to learn how to be a practitioner of some kind. But they never learned how to be a good owner, a good investor. And I think when you start thinking about the moment you own your practice, you're a business owner, and that means you have different roles and functions. And those are just things that would never taught. Any management skills, any owner skills, or how to invest money. How much should I be making? Where do I allocate it? That was never taught to a doctor. He's got to figure that out on his own. But the ones that are really well off today embraced that they are owner investors and it really guided how they made financial decisions.
John: Do you end up having to walk them through how to even look at a P&L and figure out if they're generating enough income to cover their expenses and what would be considered a reasonable salary?
Eric Miller: Oh, yeah. We definitely look at the profit and loss statements and I can see where there's money leaks at, how much are they spending on staff wages, cost of goods and other things that we'll look at. But I think the primary thing is that most people just underestimate how much they need to bring in every month. If I ask a doctor "What's your make break number?" They give me a number. But then I say, "Well, does that include your owner profits, business reserves, money for taxes and money to reinvest back into the business?" They're like, "No." I'm like, "Well, then that's not your make break number." Once we really show them, this is how you should be operating, then it lights a little bit of a fire in them. Like, "Oh my gosh, we need to see more patients. I need to do more services." Because we get them on a road to real financial solvency, not just getting by.
John: Yeah. I think things have changed a little bit. Maybe people are a little bit more astute today, but especially back when I was starting out and even just 10 years ago, basically they would just figure, "Okay, if I just see enough patients, I should be able to cover my overhead." And they wait to see if it works. It's probably not a good way to go into business without knowing how to market and how many patients do they actually have to see? What do they have to charge to actually make enough income to take care of their family?
Eric Miller: Well, I even look at it a little differently. I'm like, all of you have a facility. I don't know how many square foot, 3,000 square foot, 4,000 square foot, 2,000 square foot.
John: Yes.
Eric Miller: How many patients could you see in a month? And how much room do you have for other practitioners in here as well? And really start to get them thinking about treating this business like an investment and not a job. And I think that is a key thing that a lot of owners need to look at is that their practice is an investment. It's not a job. And really trying to get max value out of it should be a primary goal that they have.
John: It's funny you say that because they may kill themselves practicing and trying to generate enough, but then they always are looking at outside investments, which isn't necessarily a bad thing, but they're looking at the outside investments differently than they're looking at their own business, which I think is the point that you're making. It's like return on investment.
Eric Miller: I'll ask them what their biggest expense is, and you ask a practice owner what their biggest expense is, and they're going to say it's staff wages or some kind of overhead expense. And I'm like, "Nope. It is money you had the opportunity to make and you didn't." It is lost income. If I have a facility that could be doing $200,000 a month because the size of it allows for it, and I'm only doing $100,000 a month, well, you're giving up $100,000 of income. At a 40% profit margin or 30% profit margin, that's a big number.
They don't have to look very far to go out and chase shiny objects to create more income. They just need to look at their current facility and say, "How do we build this thing up so that I can maximize its use?" I think that's the big difference that a lot of practitioners aren't doing, but that's how corporate works. That's their "How do we fill this thing up to the brim as fast as we can?"
John: Right. Well, I think you alluded to it earlier, but I'm going to get specific and ask you this. It seems like whether you're a family physician or maybe you're a gastroenterologist or a surgeon of some type, a lot of this comes back to maybe hiring other staff that can do things and create revenue for the practice. Is that one of the big options to try and use that space and expand?
Eric Miller: Yeah, for sure. You have so many hours in a day. You guys are open so many days a week. How much room do you have for multiple practitioners in there? That gets terrifying for a lot of owners or for a lot of practitioners because they're like, "Oh my God, now I have to teach this other person how to do." But it's not as bad as what they think. And once they do adopt that viewpoint, not everything is on their shoulders and start giving away responsibilities to other people that are competent, then that gets them the most valuable resource, which is of course, their time back. And that is something that I think a lot of owners dream about, but it never really happens for them.
John: When I was in practice, I did hire other physicians and it worked out kind of nice because they generated enough to cover their salary and maybe contribute to the bottom line a bit. I just had a glimpse of that before I went into basically hospital leadership. But are there other things that they can do? Have you seen any practices that...? I don't know, I get some physicians who think, "Well, maybe I should also sell things like vitamins or other products." Have you seen any success in that area?
Eric Miller: Well, sure. Anything that you can. When you look at your business, just don't rely on one of anything. Write down every single service that you provide, whatever that is. I actually have an exercise on this that we do with owners, and then I have them rank them, which are the highest profit margins, which are the most in demand and which are the easiest to deliver? And have them go through an exercise and start looking at, "Okay, these are the four income sources or services that we do that seem to generate good profits, are fairly easy for us to deliver, and people want." And I think everyone could do that exercise and really it would be eye-opening in some cases. But yeah, certainly looking at alternative lines of revenue are always a good thing. But like I said, I think just your existing services just doing a higher volume of what you're doing right now, more than make up for any deficiencies that you have.
John: I think sometimes when the physicians think of that, they're thinking, "Well, if I'm going to do more volume, it's just going to take up more of my time."
Eric Miller: Yes.
John: But I guess what you're saying is, well, find out a way to do that, but also do it with other people working for you, rather than you doing everything yourself.
Eric Miller: And this is where it becomes an investment and not a job. Because now I'm looking at "How do I bring someone in? I'm terrified to bring on an associate. I'm not sure he is going to have enough business." And that's where you have to start thinking like a businessman. How do I market to get more patients? How do we increase the outflow so that we can get more known in the community and get more referrals and all those things. I just think it's going to force you to do things that you're not used to doing, but then you're going to have a result that's 10 times better than what you thought you were going to have. And if you can have that viewpoint, I think it's going to lead to a lot of financial success.
John: I think most of the family doctors, they think of, "Well, that's easy for a dermatologist or someone that's doing procedures", but I think if they just look at it closely as you've said, and really dig into it. When I was in practice, sure, I had one NP that worked for me for years. But nowadays, I am affiliated with an urgent care center, and basically 99% of the care is provided by a non-physician provider. So, you can definitely adopt something like that.
Well, this leads me into the next phase, which is the other thing that just blows my mind is most physicians, when they get to the near retirement, they kind of just fade away. They might sell their practice to a hospital, but they're usually very disappointed by them. Because basically unless they stay and are the provider, usually they want to leave. There's not really much that they're selling at that point. So, how do you think about that? When should you start planning for that exit, and how do you optimize maybe actually getting something for the practice?
Eric Miller: You should start thinking about the exit the moment that you started the practice, which maybe isn't necessarily practical or real, but it is one of those things that you have to start planning ahead of, "How do I want to exit this practice? Do I need to sell to a hospital? What are my options first and foremost?" And then making sure that you build it so that it's valuable to someone else. And to your point, there's not going to be a lot of value there if all the production of the practice is on you. It's just not. There are certainly things you can do to minimize your production. When I say that, make sure that the business isn't 100% reliant upon you. Even if you get that down to 50% or 40%, you would be amazed at how much the value would increase of the overall practice by doing that. It's staggering.
John: Again, in my experience, someone might be lucky to get $100,000 when they're ready to retire as they turn over their practice that they're not going to work in. You would say though, the amounts you could get if you do a little planning and hire some people that can do some of the things you were doing, it could be some multiple of that.
Eric Miller: Yeah. I'll just choose one, which is the veterinary industry. You wouldn't think that a veterinary hospital on the corner street that you have right there with three doctors in there would be worth $5 million.
John: No, I wouldn't.
Eric Miller: But they are. Yeah, they are. Depending on the type of healthcare industry that you're in, there's always bigger groups out there that want to absorb and buy. And if they're going to want to acquire you, and they see that the production is just you and you're not willing to stay on for a period of time, you're going to get pennies on the dollar. But if you have maybe one or two other associates in there, maybe you're doing 20 to 30% of the production, then you may get a multiple of six to eight times your profit. It could be maybe one to one and a half times your earnings, depending on the method that they utilize. If I have a million dollar asset, I'd rather get a million dollars out of it than get $100,000 out of it.
John: When I think of a veterinarian too, I don't think they're doing much different from let's say a physician or some other person. They're prescribing, they're dispensing.
Eric Miller: It's not different at all. Somebody comes in, it's just with a human being. It's a dog that gets treated. They go back, they go into a treatment room and exam room, there's surgeries that are done. It's almost the exact same thing. But yet because a practice has multiple veterinarians doing that, it's worth it. What did I have? I think the largest veterinary sale that I saw was someone that had six doctors. And he sold for $22 million.
John: Oh my goodness.
Eric Miller: Yes.
John: Wow.
Eric Miller: That was a business. There was multiple people, there was executive, that's a business. That's going to sell for a high multiple. If it's just one person with one assistant, you're not going to get as much. That's just unfortunately how business valuations are governed.
John: Yeah. We talk about burnout here a lot, and physicians getting all excited about a side gig or doing something else, but if you knew that you could build something like that, it'd be exciting and you'd put a lot of work into it, but you'd get the satisfaction knowing that not only are you going to have a good income, but at the end of the road, you're going to have this nice asset that you're going to sell for whatever you sell it. But it's going to be definitely something worth doing.
Eric Miller: Absolutely. And you don't really have to sacrifice your current income all that much and you can still save plenty of money and create other income sources outside of the practice. But if you just put a little bit of effort into treating the practice like something that has more significant value than what maybe you thought it did, then it really can reward you down the line. And it can be life changing money in some cases.
John: I want to switch gears for a second. I don't know if I'm really switching gears, but you did write a book called How to Become a Financial Beast, and I took a look at it. I think you cover a lot of these things in that book. Is that right? We're just talking about how to build something that's an actual business that can be sold.
Eric Miller: Yeah. I really do cover the financial journey of a practice owner, someone that owns a healthcare practice. I talk a lot about exiting, how to make sure you're paying yourself correctly, how to build wealth outside of the practice, how to create a maximum value exit, what your options are. We definitely dig into everything related to a healthcare business.
John: By the way, to my listeners, you've got a pretty big outfit going on in terms of looking at your website. You've got a lot of people working with you. Tell us more about what you do, the full extent of what you and your team does for people working in healthcare.
Eric Miller: We are financial advisors. Most physicians that I know have worked with maybe a local advisor like an Edward Jones or Merrill Lynch or somebody like that. We do a lot of the same things that most of them do. Most of them have one to two meetings a year, go over your portfolios, look at your current investments, and it's pretty much the extent of what the conversations are. Maybe do some retirement planning. I think the big difference is that we focus on making sure that we're talking to you every single month about your finances, not just your personal finances, but your business finances.
Because one thing I've learned is that your money doesn't take time off, and there's always going to be some kind of decision that you're faced with or something that you have, "Okay, what should I do here?" And I wanted a service model that was different from the traditional financial advisor model. That's really our niche, is working with practice owners in the healthcare space, understanding how their business works, looking at your business financials, making sure that you're operating on the right targets, and most importantly, that you're taking enough money home from the practice to build other income sources and live the life that you want to live.
John: Excellent. Because I can imagine a group of let's say two or three, and this happened to me when I joined a partnership. They had no retirement plan. I'm in there for two or three years. I'm like "There's something missing here." It's like "Not that I'm an expert, I just know we should be putting money aside and we should be doing it in a way that makes sense." You can advise the practice owners on that kind of thing as well?
Eric Miller: Absolutely. Yeah. We tell them how much they should contribute if they do have a current retirement plan. Most of these physician groups do, pretty rare that I see right now they don't have some kind of 401(k) plan or retirement plan. But that shouldn't be the only source that you have. And I think that's where a lot of people get in trouble is that they're just pouring money inside something like that, and then all of a sudden, it becomes a giant tax bomb when you start distributing money from it.
So, you have to be a little bit more prudent and figuring out, "Okay, I need to also think about taxes when I'm looking at my cash flow, and how am I going to do that?" So, it's looking at qualified plans. It's certainly looking at traditional stocks, bonds, dividend paying stocks. We look at insurance based products for guaranteed income and tax-free income, and then of course, real estate for cash flow. I don't believe that there's one size fits all. I think all of these different sources can provide you what you need. And I don't get pigeonholed into just doing one thing.
John: Yeah. It sounds good to diversify anyway because these things go in cycles and it's nice to not have everything in the same cycle going down at the same time.
Eric Miller: That's for sure.
John: Econologics is the company. Is that correct?
Eric Miller: That's correct.
John: Econologics Financial Advisors. Where can we find the website for that?
Eric Miller: They can just go to www.econologics.com. We have plenty of financial assessments and downloads that you can have.
John: Okay. I'll put that in the show notes for sure. I'll also put a link to the book. How about any last advice? Someone who's maybe they've been in practice, as an employee, they're thinking of starting their own practice, or maybe there's a couple of docs together thinking of doing something. Any sort of closing advice for people thinking about doing that?
Eric Miller: I 100% say do it. You'll never regret it. But also make sure that you teach yourself or you learn on the business side of the type of healthcare that you deliver so that you can maximize what that would be for yourself. I love it when people do that. I love it when people get entrepreneurial like that, and they should, but you also have to understand the business side of it. And that's what I would recommend that they all do.
John: I know of physicians who have the acumen and teach other physicians how to do that, but it would make sense though, if you could just get your accountant, your attorney and a financial advisor like you on board to discuss these issues, you pretty much have things covered in terms of what you need to do to start a practice.
Eric Miller: You would 100%. You have to build a really good team. And I would recommend everyone work with a competent CPA, an attorney. Probably you don't need them as much, you'll need them later on. And then 100% a financial advisor but one that understands your business. That's a big key. One that understands how your practice works. Because otherwise they're going to fall into the same traditional model that you experienced before. But that team is really important to build.
John: I like the idea that you're doing monthly checkups with your clients and catch things. It might be going off the rails.
Eric Miller: I'm telling you. I learned that early on. It's about every four weeks someone calls me up and has some crazy idea about something to do. I was like "Let's make sure that we're talking to them really routinely so that we just keep them on track. This is what you're doing. What about this, what about this question? Okay. We'll handle this." And it really has been a very workable service model for us.
John: Excellent. I appreciate the time you spent with us today, Eric. This has been really helpful. I think physicians who have been staying away from the idea of maybe going out on their own might give it a second thought at least, that it can be done, and there are ways to optimize it. So, I really appreciate that.
Eric Miller: Yeah, I hope so. Thanks for having me on, John.
John: It's been my pleasure. All right. With that, I will say goodbye.
Sign up to receive email reminders, news, and free stuff every week!
Enter your name and email address below and I'll send you reminders each podcast episode, notices about nonclinical jobs, information about free and paid courses, and other curated information just for you.
Transcription PNC Podcast Episode 337
Manage Your Practice Like a Valuable Business Asset
- Interview with Eric Miller
John: I've noticed that many physicians who start non-traditional practices like med spas and weight loss clinics, they truly treat that as a business. In fact, I had a guest recently who sold her med spa, and she really did well. But many doctors failed to treat a medical practice that way.
When I was a CMO, I helped recruit physicians and bought some practices, and they were usually very disappointed in what they got. I was really happy when I came across Eric Miller, who's going to join us today because this is the thing he does, trying to bring value to practices and prove their business acumen and producing income and so forth. So, hello Eric and welcome to the show today.
Eric Miller: Hey, John. Thanks so much.
John: I've done a little intro prior to us starting here that's separate. But just tell us about yourself and how you got into helping clinicians of various sorts.
Eric Miller: Yeah. When I first got interested in personal finance I took the direction that a lot of people do. I work for an investment company, I focused on retirement planning and 401(k)s and such. And at some point in time, I just decided that's not really what I wanted to do in this field. I really wanted to be more of an advisor, a financial planner, and not just sell investment products.
And then having a background where my family was in healthcare I was like, "Well, here's what I've seen. These are people that desperately need financial help because it's really not taught to them in school." We started in 2008, which was a heck of a time to start a financial planning company, if you remember back then.
John: Yeah.
Eric Miller: We started working with healthcare owners and I learned really early on because all the questions that I would get from them had to deal with their practice. "My practice is struggling. I'm not making enough cash." Here I'm trying to get their personal finances in order and they're asking me all these questions about their practice. And I'm like, "I don't really know about your business. I've never seen your financials or I don't know how it works. I don't know how you guys get paid." It was just kind of an "aha" moment where I realized that if I was going to be a financial advisor that was going to cater to healthcare owners, I better understand something about their biggest investment, which is their practice of course. And that's where it started. Then we started working with veterinarians and physical therapists and optometrists. And then anyone that had a private practice, these are the types of people that we focus on.
John: Yeah. And it is a different world in healthcare, and even subsections of it are different. The practice is one thing, a hospital environment is a totally different thing. And there's a lot of billing and there's a lot of write-offs because you only get part of what you bill unless you're in the cash based business. So, that must have been an eye-opener.
Eric Miller: Yeah, it was. I was like, "Oh, no wonder we have a screwed up medical system. I'm looking at all these, how reimbursements work and I'm like, oh my gosh, this is crazy." But I did learn how the business runs, and that really made us more of an ally for that owner. Because I could show them "This is what this thing should be providing for you, and this is how much you should compensate yourself." And just gave them some certainty on that, because most of them just have no idea how to even pay themselves.
John: Yeah. They don't even know how to set up a structure. They've got to learn if they're starting their own practice, obviously, but it's like, "You better sit down with the attorney and the accountant and figure that out." But they don't really have a business background.
Eric Miller: That's right. Yeah. That was another thing I realized too, is just how much they didn't really understand. They understood the practitioner side, they just didn't really understand the business side of it very well.
John: Yeah. And that's I think why we see more and more that just come out of the residency and go and work for a hospital or something. But I think a lot of them do that for a while. They get really frustrated. They feel like they're in some kind of futile system or slavery where they're getting beat up to work 10, 12 hours a day and they say, "Forget it. I'm going to go on my own." But then we come back to this problem. So, you've talked with a lot of different people in healthcare that have these practices from doctors to physical therapists and so forth. Are there certain things that you see are kind of the biggest mistakes, or I guess I had a question here I was going to ask you about. Why their practice isn't sound and why their personal finances aren't secure?
Eric Miller: Yeah. Well, I'll say it goes back to that principle I just taught you. Almost all of these people went to school for seven or eight years to learn how to be a practitioner of some kind. But they never learned how to be a good owner, a good investor. And I think when you start thinking about the moment you own your practice, you're a business owner, and that means you have different roles and functions. And those are just things that would never taught. Any management skills, any owner skills, or how to invest money. How much should I be making? Where do I allocate it? That was never taught to a doctor. He's got to figure that out on his own. But the ones that are really well off today embraced that they are owner investors and it really guided how they made financial decisions.
John: Do you end up having to walk them through how to even look at a P&L and figure out if they're generating enough income to cover their expenses and what would be considered a reasonable salary?
Eric Miller: Oh, yeah. We definitely look at the profit and loss statements and I can see where there's money leaks at, how much are they spending on staff wages, cost of goods and other things that we'll look at. But I think the primary thing is that most people just underestimate how much they need to bring in every month. If I ask a doctor "What's your make break number?" They give me a number. But then I say, "Well, does that include your owner profits, business reserves, money for taxes and money to reinvest back into the business?" They're like, "No." I'm like, "Well, then that's not your make break number." Once we really show them, this is how you should be operating, then it lights a little bit of a fire in them. Like, "Oh my gosh, we need to see more patients. I need to do more services." Because we get them on a road to real financial solvency, not just getting by.
John: Yeah. I think things have changed a little bit. Maybe people are a little bit more astute today, but especially back when I was starting out and even just 10 years ago, basically they would just figure, "Okay, if I just see enough patients, I should be able to cover my overhead." And they wait to see if it works. It's probably not a good way to go into business without knowing how to market and how many patients do they actually have to see? What do they have to charge to actually make enough income to take care of their family?
Eric Miller: Well, I even look at it a little differently. I'm like, all of you have a facility. I don't know how many square foot, 3,000 square foot, 4,000 square foot, 2,000 square foot.
John: Yes.
Eric Miller: How many patients could you see in a month? And how much room do you have for other practitioners in here as well? And really start to get them thinking about treating this business like an investment and not a job. And I think that is a key thing that a lot of owners need to look at is that their practice is an investment. It's not a job. And really trying to get max value out of it should be a primary goal that they have.
John: It's funny you say that because they may kill themselves practicing and trying to generate enough, but then they always are looking at outside investments, which isn't necessarily a bad thing, but they're looking at the outside investments differently than they're looking at their own business, which I think is the point that you're making. It's like return on investment.
Eric Miller: I'll ask them what their biggest expense is, and you ask a practice owner what their biggest expense is, and they're going to say it's staff wages or some kind of overhead expense. And I'm like, "Nope. It is money you had the opportunity to make and you didn't." It is lost income. If I have a facility that could be doing $200,000 a month because the size of it allows for it, and I'm only doing $100,000 a month, well, you're giving up $100,000 of income. At a 40% profit margin or 30% profit margin, that's a big number.
They don't have to look very far to go out and chase shiny objects to create more income. They just need to look at their current facility and say, "How do we build this thing up so that I can maximize its use?" I think that's the big difference that a lot of practitioners aren't doing, but that's how corporate works. That's their "How do we fill this thing up to the brim as fast as we can?"
John: Right. Well, I think you alluded to it earlier, but I'm going to get specific and ask you this. It seems like whether you're a family physician or maybe you're a gastroenterologist or a surgeon of some type, a lot of this comes back to maybe hiring other staff that can do things and create revenue for the practice. Is that one of the big options to try and use that space and expand?
Eric Miller: Yeah, for sure. You have so many hours in a day. You guys are open so many days a week. How much room do you have for multiple practitioners in there? That gets terrifying for a lot of owners or for a lot of practitioners because they're like, "Oh my God, now I have to teach this other person how to do." But it's not as bad as what they think. And once they do adopt that viewpoint, not everything is on their shoulders and start giving away responsibilities to other people that are competent, then that gets them the most valuable resource, which is of course, their time back. And that is something that I think a lot of owners dream about, but it never really happens for them.
John: When I was in practice, I did hire other physicians and it worked out kind of nice because they generated enough to cover their salary and maybe contribute to the bottom line a bit. I just had a glimpse of that before I went into basically hospital leadership. But are there other things that they can do? Have you seen any practices that...? I don't know, I get some physicians who think, "Well, maybe I should also sell things like vitamins or other products." Have you seen any success in that area?
Eric Miller: Well, sure. Anything that you can. When you look at your business, just don't rely on one of anything. Write down every single service that you provide, whatever that is. I actually have an exercise on this that we do with owners, and then I have them rank them, which are the highest profit margins, which are the most in demand and which are the easiest to deliver? And have them go through an exercise and start looking at, "Okay, these are the four income sources or services that we do that seem to generate good profits, are fairly easy for us to deliver, and people want." And I think everyone could do that exercise and really it would be eye-opening in some cases. But yeah, certainly looking at alternative lines of revenue are always a good thing. But like I said, I think just your existing services just doing a higher volume of what you're doing right now, more than make up for any deficiencies that you have.
John: I think sometimes when the physicians think of that, they're thinking, "Well, if I'm going to do more volume, it's just going to take up more of my time."
Eric Miller: Yes.
John: But I guess what you're saying is, well, find out a way to do that, but also do it with other people working for you, rather than you doing everything yourself.
Eric Miller: And this is where it becomes an investment and not a job. Because now I'm looking at "How do I bring someone in? I'm terrified to bring on an associate. I'm not sure he is going to have enough business." And that's where you have to start thinking like a businessman. How do I market to get more patients? How do we increase the outflow so that we can get more known in the community and get more referrals and all those things. I just think it's going to force you to do things that you're not used to doing, but then you're going to have a result that's 10 times better than what you thought you were going to have. And if you can have that viewpoint, I think it's going to lead to a lot of financial success.
John: I think most of the family doctors, they think of, "Well, that's easy for a dermatologist or someone that's doing procedures", but I think if they just look at it closely as you've said, and really dig into it. When I was in practice, sure, I had one NP that worked for me for years. But nowadays, I am affiliated with an urgent care center, and basically 99% of the care is provided by a non-physician provider. So, you can definitely adopt something like that.
Well, this leads me into the next phase, which is the other thing that just blows my mind is most physicians, when they get to the near retirement, they kind of just fade away. They might sell their practice to a hospital, but they're usually very disappointed by them. Because basically unless they stay and are the provider, usually they want to leave. There's not really much that they're selling at that point. So, how do you think about that? When should you start planning for that exit, and how do you optimize maybe actually getting something for the practice?
Eric Miller: You should start thinking about the exit the moment that you started the practice, which maybe isn't necessarily practical or real, but it is one of those things that you have to start planning ahead of, "How do I want to exit this practice? Do I need to sell to a hospital? What are my options first and foremost?" And then making sure that you build it so that it's valuable to someone else. And to your point, there's not going to be a lot of value there if all the production of the practice is on you. It's just not. There are certainly things you can do to minimize your production. When I say that, make sure that the business isn't 100% reliant upon you. Even if you get that down to 50% or 40%, you would be amazed at how much the value would increase of the overall practice by doing that. It's staggering.
John: Again, in my experience, someone might be lucky to get $100,000 when they're ready to retire as they turn over their practice that they're not going to work in. You would say though, the amounts you could get if you do a little planning and hire some people that can do some of the things you were doing, it could be some multiple of that.
Eric Miller: Yeah. I'll just choose one, which is the veterinary industry. You wouldn't think that a veterinary hospital on the corner street that you have right there with three doctors in there would be worth $5 million.
John: No, I wouldn't.
Eric Miller: But they are. Yeah, they are. Depending on the type of healthcare industry that you're in, there's always bigger groups out there that want to absorb and buy. And if they're going to want to acquire you, and they see that the production is just you and you're not willing to stay on for a period of time, you're going to get pennies on the dollar. But if you have maybe one or two other associates in there, maybe you're doing 20 to 30% of the production, then you may get a multiple of six to eight times your profit. It could be maybe one to one and a half times your earnings, depending on the method that they utilize. If I have a million dollar asset, I'd rather get a million dollars out of it than get $100,000 out of it.
John: When I think of a veterinarian too, I don't think they're doing much different from let's say a physician or some other person. They're prescribing, they're dispensing.
Eric Miller: It's not different at all. Somebody comes in, it's just with a human being. It's a dog that gets treated. They go back, they go into a treatment room and exam room, there's surgeries that are done. It's almost the exact same thing. But yet because a practice has multiple veterinarians doing that, it's worth it. What did I have? I think the largest veterinary sale that I saw was someone that had six doctors. And he sold for $22 million.
John: Oh my goodness.
Eric Miller: Yes.
John: Wow.
Eric Miller: That was a business. There was multiple people, there was executive, that's a business. That's going to sell for a high multiple. If it's just one person with one assistant, you're not going to get as much. That's just unfortunately how business valuations are governed.
John: Yeah. We talk about burnout here a lot, and physicians getting all excited about a side gig or doing something else, but if you knew that you could build something like that, it'd be exciting and you'd put a lot of work into it, but you'd get the satisfaction knowing that not only are you going to have a good income, but at the end of the road, you're going to have this nice asset that you're going to sell for whatever you sell it. But it's going to be definitely something worth doing.
Eric Miller: Absolutely. And you don't really have to sacrifice your current income all that much and you can still save plenty of money and create other income sources outside of the practice. But if you just put a little bit of effort into treating the practice like something that has more significant value than what maybe you thought it did, then it really can reward you down the line. And it can be life changing money in some cases.
John: I want to switch gears for a second. I don't know if I'm really switching gears, but you did write a book called How to Become a Financial Beast, and I took a look at it. I think you cover a lot of these things in that book. Is that right? We're just talking about how to build something that's an actual business that can be sold.
Eric Miller: Yeah. I really do cover the financial journey of a practice owner, someone that owns a healthcare practice. I talk a lot about exiting, how to make sure you're paying yourself correctly, how to build wealth outside of the practice, how to create a maximum value exit, what your options are. We definitely dig into everything related to a healthcare business.
John: By the way, to my listeners, you've got a pretty big outfit going on in terms of looking at your website. You've got a lot of people working with you. Tell us more about what you do, the full extent of what you and your team does for people working in healthcare.
Eric Miller: We are financial advisors. Most physicians that I know have worked with maybe a local advisor like an Edward Jones or Merrill Lynch or somebody like that. We do a lot of the same things that most of them do. Most of them have one to two meetings a year, go over your portfolios, look at your current investments, and it's pretty much the extent of what the conversations are. Maybe do some retirement planning. I think the big difference is that we focus on making sure that we're talking to you every single month about your finances, not just your personal finances, but your business finances.
Because one thing I've learned is that your money doesn't take time off, and there's always going to be some kind of decision that you're faced with or something that you have, "Okay, what should I do here?" And I wanted a service model that was different from the traditional financial advisor model. That's really our niche, is working with practice owners in the healthcare space, understanding how their business works, looking at your business financials, making sure that you're operating on the right targets, and most importantly, that you're taking enough money home from the practice to build other income sources and live the life that you want to live.
John: Excellent. Because I can imagine a group of let's say two or three, and this happened to me when I joined a partnership. They had no retirement plan. I'm in there for two or three years. I'm like "There's something missing here." It's like "Not that I'm an expert, I just know we should be putting money aside and we should be doing it in a way that makes sense." You can advise the practice owners on that kind of thing as well?
Eric Miller: Absolutely. Yeah. We tell them how much they should contribute if they do have a current retirement plan. Most of these physician groups do, pretty rare that I see right now they don't have some kind of 401(k) plan or retirement plan. But that shouldn't be the only source that you have. And I think that's where a lot of people get in trouble is that they're just pouring money inside something like that, and then all of a sudden, it becomes a giant tax bomb when you start distributing money from it.
So, you have to be a little bit more prudent and figuring out, "Okay, I need to also think about taxes when I'm looking at my cash flow, and how am I going to do that?" So, it's looking at qualified plans. It's certainly looking at traditional stocks, bonds, dividend paying stocks. We look at insurance based products for guaranteed income and tax-free income, and then of course, real estate for cash flow. I don't believe that there's one size fits all. I think all of these different sources can provide you what you need. And I don't get pigeonholed into just doing one thing.
John: Yeah. It sounds good to diversify anyway because these things go in cycles and it's nice to not have everything in the same cycle going down at the same time.
Eric Miller: That's for sure.
John: Econologics is the company. Is that correct?
Eric Miller: That's correct.
John: Econologics Financial Advisors. Where can we find the website for that?
Eric Miller: They can just go to www.econologics.com. We have plenty of financial assessments and downloads that you can have.
John: Okay. I'll put that in the show notes for sure. I'll also put a link to the book. How about any last advice? Someone who's maybe they've been in practice, as an employee, they're thinking of starting their own practice, or maybe there's a couple of docs together thinking of doing something. Any sort of closing advice for people thinking about doing that?
Eric Miller: I 100% say do it. You'll never regret it. But also make sure that you teach yourself or you learn on the business side of the type of healthcare that you deliver so that you can maximize what that would be for yourself. I love it when people do that. I love it when people get entrepreneurial like that, and they should, but you also have to understand the business side of it. And that's what I would recommend that they all do.
John: I know of physicians who have the acumen and teach other physicians how to do that, but it would make sense though, if you could just get your accountant, your attorney and a financial advisor like you on board to discuss these issues, you pretty much have things covered in terms of what you need to do to start a practice.
Eric Miller: You would 100%. You have to build a really good team. And I would recommend everyone work with a competent CPA, an attorney. Probably you don't need them as much, you'll need them later on. And then 100% a financial advisor but one that understands your business. That's a big key. One that understands how your practice works. Because otherwise they're going to fall into the same traditional model that you experienced before. But that team is really important to build.
John: I like the idea that you're doing monthly checkups with your clients and catch things. It might be going off the rails.
Eric Miller: I'm telling you. I learned that early on. It's about every four weeks someone calls me up and has some crazy idea about something to do. I was like "Let's make sure that we're talking to them really routinely so that we just keep them on track. This is what you're doing. What about this, what about this question? Okay. We'll handle this." And it really has been a very workable service model for us.
John: Excellent. I appreciate the time you spent with us today, Eric. This has been really helpful. I think physicians who have been staying away from the idea of maybe going out on their own might give it a second thought at least, that it can be done, and there are ways to optimize it. So, I really appreciate that.
Eric Miller: Yeah, I hope so. Thanks for having me on, John.
John: It's been my pleasure. All right. With that, I will say goodbye.
Sign up to receive email reminders, news, and free stuff every week!
Enter your name and email address below and I'll send you reminders each podcast episode, notices about nonclinical jobs, information about free and paid courses, and other curated information just for you.
Disclaimers:
Many of the links that I refer you to are affiliate links. That means that I receive a payment from the seller if you purchase the affiliate item using my link. Doing so has no effect on the price you are charged. I only promote products and services that I believe are of high quality and will be useful to you. As an Amazon Associate, I earn from qualifying purchases.
The opinions expressed here are mine and my guest’s. While the information provided on the podcast is true and accurate to the best of my knowledge, there is no express or implied guarantee that using the methods discussed here will lead to success in your career, life, or business.
The information presented on this blog and related podcast is for entertainment and/or informational purposes only. I do not provide medical, legal, tax, or emotional advice. If you take action on the information provided on the blog or podcast, it is at your own risk. Always consult an attorney, accountant, career counselor, or other professional before making any major decisions about your career.
Leave A Comment
You must be logged in to post a comment.