Strap in, this is going to be a rough ride…
Strap in, this is going to be a rough ride…
For 10 years I was practically the “poster child” for an associate based practice. I owned 8 offices with no less than 30 associates at any one time for all those years.
Since then I’ve consulted with easily over 300 practices on an intimate personal level, having reviewed more financials in the form of quarterly and annual profit and loss statements, balance sheets, scorecards and numbers than just about anyone on the planet in the chiropractic space.
I have seen EXACTLY whether or not it’s “worth it” to hire associates and the following in-depth “special report” should help guide you as to whether hiring an associate is right for you and or financially viable and the common pitfalls to avoid.
In truth we start the “discussion” of “is it worth it” with; WELL, IT DEPENDS!
- What are you trying to achieve:
Generally when I ask a chiropractor why they want to hire an associate I basically get a variation of one, or both of the following,
I want more time, Or I want more money! Or I want both
Which basically translates into, I WANT LESS STRESS
A common misconception is that hiring an associate will give you any of the above (more time, more money or less stress). In fact, in my experience, the overwhelming outcome in the majority of cases is less time, less money and more stress. There is a tipping point where it changes more favourably for the practice owner, which I address towards the end of this “white paper”.
Let’s break that down…
Less Time:
Everyone underestimates just how much time and mentoring it takes to get an associate to grow. Then take into account that this associate needs nurturing, a shoulder to cry on during “dark days”, time off work when the cat goes missing and phone calls explaining how they wont be able to make it in because of an unfortunate altercation on a night out that has resulted in them having a “sleepover” at the local law enforcement establishment aka jail. Yip I’ve had it all and so will you.
Additionally much like a parent child relationship, you will not only deal with “that stuff” but also cop ALL the flak should they not succeed. The reasons are endless; not enough new patients, not enough support, not enough pay, poor staff, poor procedures, poor leadership and the likes. Of course this doesn’t mean that some of the “criticism” isn’t justified, as we are all bound to make mistakes as we are all learning and growing as business owners, but rest assured they will certainly let you know where you’ve “messed up”, perhaps to your face but certainly behind your back, after all, everyone is full of advice when they have not attempted it themselves.
Point is, the relationship requires “MORE”. More patience, more time, more training, more investment, more new patients and the likes, than you initially anticipated. I’m not saying it won’t be worth it, but it requires you to understand that and even more importantly, them to understand that also, and stick around long enough to give themselves a chance at succeeding.
Less Money:
This is intrinsically linked to the changing market over the last 10 years. When I started as an associate over 15 years ago I got paid a 30% flat rate commission on what I saw. I still made more money than 90% of the associates I see today because it’s quite simply a “Eat what you kill” / “the more you see the more you make” model, which suited me. In reality, percentage has very little to do with making a lot of money as an associate. After all 100% of a pittance is still, a pittance!. The onus is still on the associate “to do the businesses”.
Having grown up in an entrepreneurial family, I felt blessed to get paid a whopping 30% AND not have the “risk” or responsibility associated with owning a business. That’s essentially 30% net profit. VERY few businesses operate at those profit margins.
An NYU report on U.S. margins revealed the average net profit margin for SME (small to medium enterprises) is 7.71% across different industries. They went on to state that their “rule of thumb” was that 5% is a low margin, 10% is a healthy margin, and 20% is a high margin.
In my experience a profitable single practice owner’s median net take home is anywhere from 30% to 60% net profits. Of course there are those that make “higher margins” but that’s just a rule of thumb. Also worth noting that someone might see 20 patients a week, have no Chiropractic assistant and practice off the side of his house and make 90% net profit. My point remains, 100% of a pittance is still a pittance!
There are differences between the UK/EUROPE vs USA/CANADA;
It’s pretty simple. There is a supply and demand issue across the world but it’s at least 10 times more exaggerated in the UK/Europe simply due to the fact that there are so few colleges. For context, a few years back the official statistic was that the UK’s general chiropractic registrar’s net gain, taking into account the amount leaving the profession due to retirement and other reasons and new registrants joining the profession after qualifying was less than 20 chiropractors across the entire country. Let that sink in for a second.
At the time I remember thinking that I personally could have, and would have hired every single one.
Because of this it has had a knock on effect to the industries “expected pay”. It’s simple economics. Much like the housing market, if supply is down, then prices go up. In short the supply of associates “world wide” but specifically in the uk is way down which simply means the commissions they are “demanding” is going up.
As a rule of thumb I’ve seen associate pays in the USA being between 30% to 40% while the pay for associates in the UK has spiralled totally out of control. I’ve personally seen practices headhunt associates from other practices with offers of up to 70% flat rate with the mean being between 40% and 50%. Quite honestly in some cases it is totally unsustainable to continue to pay associates what they are demanding. The maths simply doesn’t work.
Unfortunately, because of this I predict that more and more practice will simply opt to not hire associates, and who can blame them.
This doesn’t mean that you can’t make it work with associates but you must go big or go home. In my opinion, and from the vast examples I look at on a daily basis, It’s become almost essential to be a 7 figure practice, to make it “worth it”.
The death trap of being stuck in the middle!
Too big to be small, too small to be big. Is the single biggest mistake, as it simply leaves a practice owner too exposed when an associate flies the proverbial nest. The key to making it work is “add”.
In truth the number of associates is even more important than the amount of visits they see. 2 associates that see 250 a week is as “exposed” as 2 that see 50 a week. Actually you would argue that you’re even more exposed as the chances of you finding a like for like replacement within the allotted 1 -3 months notice period is practically impossible.
I suggest a minimum of 5!
Why 5, because out of 5 associates, typically 2 are higher performers, 2 are “steady eddies” and one needs to get kicked to the curb faster than the babysitter’s boyfriend when the car pulls up. Assume 3 of the 5 are “leaving”, at any one time. I also want to set the context that “leaving” is not always a bad thing. Everybody leaves . Doesn’t mean it’s on bad terms or not exactly the right thing for the business and individual for them to leave but let me repeat that EVERYBODY LEAVES. Stop running your business without a “bench”, it is bound to catch up with you eventually .
A note on High performerming associates.
What do ambitious high performers do? THEY LEAVE. That’s the very nature of being a high performer. If you’re reading this, and you own your own practice there is a good chance “you left”. My point exactly!
That leaves 2 “solids” aka Steady eddy’s.
In my experience, here is the breakdown of the “steady eddy’s”
One we love, they’re great for culture, and actively participate in the business and add value to the practice and clients. The term “steady eddy” is somewhat harsh as they are probably more than carrying their weight and there is a win-win relationship where they are profitable for the business and add to the culture and they are rewarded as such. Many will make more money as an associate than they will as a practice owner and wisely choose to not to open a practice as it’s “just not for them”.
The other “steady eddy” is your “underperforming steady eddy” that needs even more nurturing to get them to a place where they are profitable. This “underperforming” is often excused if they are a good culture fit. Just be careful not to “excuse” this for too long because we “like them”. I know it’s hard but remember you’re running a business and it still needs to be profitable. The biggest risk is if they lack patience and fall to the “blame you game” to justify their reasons for not succeeding.
That just leaves the last one, aka the chiropractic associate equivalent of a sloth. Sorry but it’s true not just for chiropractic associates but ANY sales team.
Statistically the bottom 25% of any sales team needs to go!
I recently heard an interview with Barbara Cocoran from the wildly successful show “Shark Tank”. She says that the secret to her success that led to her growing one of New York’s most successful real-estate firms that she founded in 1973 with just $1,000 and eventually sold in 2001 for almost $70 million, was that as a rule she would fire the bottom 25% every year.
Here is a quote from an recent interview she did with an online entrepreneur publication:
“I knew if the bottom quarter of the sales force wasn’t earning its keep, I wouldn’t be able to support the top salespeople who were making all the money.”
Make sure you factor in the hidden cost!
This is very relevant for you to factor in for all your “Steady Eddy’s” and “sloths”. Be careful to over simplify your justification for “keeping them” by thinking only in terms of “breaking even” or that you’re still making a small profit off them. Good chance you’re not factoring in the lost income out of sheer wastage that occurs because they are diverting new patients aways from the stars. An inconvenient necessity to help them grow and learn, but still an irritating “loss making” exercise .
My 2 year rule and “they are at their best” rule!
Not a science by any stretch but it’s scarily accurate. I usually regard an associate as a “flight risk” if they have either been with me for more than 2 years and or they are “at their best”.
2 Year Rule; My rule has always been that if an associate has been with you for more than 2 years, then you are in “bonus territory”. You should in that case consider putting the contingency measures in place, or plan as if they are not going to be around for all that much longer. Of course there are exceptions, as I also had in my business, with some associates staying for over 10 years in total but trust me, 2 to 3 years is “itchy feet” territory.
The “they are at their best” Rule:
I once heard an interview from the chef that has statistically trained more Michelin starred chefs than anyone in the world. He was asked by the interviewer if he ever got rid of these “stars”. To the interviewer’s surprise he said “when they are at their best I immediately get rid of them”.
Although we don’t want them to leave, the nature of a “top performer” is that they begin to want to do things “their way” and begin to have ideas of their own that they want to “express” or think they can do it “better than you”. I’m not knocking that, it’s actually part of what you “need” to be successful. It’s what drives entrepreneurs to take on the risk and do it themselves.
They begin to channel their unmet entrepreneurial frustrations towards “you”. Not purposefully. It’s Simply a coping mechanism, but they are often irritable, grumpy and morose at the “they are at their best” phase. It’s simpy time for them to “fly the nest”, and the culture often improves when they go. Chet Holmes said it brilliantly in his classic sales book “the ultimate sales machine” when referring to top “sales people”. He states that while we are all hoping for “top sales people”, the very “ego” needed to perform as a sales person doesn’t always mean they are the easiest to work with. He states that you can’t have your cake and eat it. Frankly there are times that “stars” can also be a “pain in the arse”. Again I know first hand, I was one. I was a nightmare to employ, and since have self diagnosed myself as “unemployable”.
I’m an outstanding entrepreneur. I may suck at a lot else but I am excellent at what I do, having grown 2 separate multi-seven figure businesses from scratch, in completely different arenas, by the age of 39. But you would never want to hire me, I would drive you insane. Hence why I’m so grateful to have found a wife like Natalie that puts up with me 🙂
So one you factor in the “2 years rule” the “I’m at my best rule and should leave” and the “bottom 25% must go” rule you can probably assume that near 70% of the associates are flight risks in the next 12 months
That’s why I feel that 5 is the minimum you need to slightly de-risk yourself. One of my most successful associate practices in my inner circle mastermind started working with me on about $900k per year with about 5 associates and is now a smidge away from 2 million dollars a year with about 8 associates and making 35% + net profits. Impressive! Must have a pretty good coach 🙂
Lifestyle options-
The above explanation is very heavily weighted towards commercial considerations.
If that isn’t the biggest concern for you then, sure, there is nothing wrong with 1 associate but make sure you are clear on the the fact that the “outcome” is more about the feel good, nice energy, good karma, little extra money and perhaps and maybe a little extra comfort when you take time off.
Go big or go “single doc”
Here is my opinion NOT FACT. However before I give my opinion, let me remind you that it is a pretty well measured opinion. I am just about the most well placed person on the planet to give my opinion on this matter and here is the single biggest deciding factor whether to go the associate route or simply practise by yourself.
Your output ability!
Meaning, if you’re a doc that can, and wants (both must be present) to see above 250 visits and more a week then I strongly suggest you continue on that path. You will make more money and have less stress. Invest the available resources and capital (there will be alot) in building a robust supporting team. Focus everything on making your output and potential to see more numbers even greater and or making your life in practice easier while maintaining higher numbers to allow for longevity.
If you’re wanting to “go for it” with associates then you need to do it as though it makes commercial sense for you to make enough money and live comfortably without you “adjusting” at all in the practice. Even if you never plan to stop adjusting, it will guide you to the scale that’s needed for it to be a viable option long term and whether you would want “that scale” or amount of associates and staff.
Building Equity.
Last thing to consider. It might be that you are willing to sacrifice net income now, to build equity in the practice by hiring more associates which SHOULD increase the value of the practice on an exit. This is NOT the clear cut case in the chiro market. Not because you’re “wrong”, but because of the lack of liquidity and trade in the chiro market.
This differs slightly in the USA as there are some private equity players buying up practices. This is a great thing for the market because everyone’s practices are worth more since there are some players who are actually willing to pay what they are worth. This has not yet happened in the uk market but in my opinion all practice owners in the UK SHOULD be hoping it does, as it will begin to create trade and equity in the market.
So there you go… My 2 cents on the industry’s associate space. I hope it serves to guide you and most importantly shows a clearer path to a model that gives you fulfilment. Some of you reading this should never embark on a practice with multiple associates and a big staff base, while others reading this will be happier doing so. It’s about self awareness.
Either way, a gloriously abundant path lies ahead whether you choose to hire associates or not!
Lastly, should you think I can help you create that gloriously abundant practice and life, please do reach out. I have after all helped many many doc’s triple their practices and I would love to help you do the same!
I’m rooting for ya
Love and light
Ryan
