Welcome to Tax Reduction & Freedom Month and my latest episode on The Freedom Formula for Physicians Podcast.
This month we are talking a lot about taxes and what physicians can do to both growth their practices and tackle tough tax issues.
Of course before you have any major tax issues, you need to be making a lot of dough!
That’s why I thought I’d bring a special guest to the podcast, Mark Foreman, CPA.
Mark is one of our CPA partners with Foreman & Airhart. He has specialized in small businesses- particularly white coats like doctors and dentists.
In this podcast, it is revealed how to:
– Learn 3 Awesome Financial & Marketing Tools That Both Mark & Dave Utilize In Their Businesses
– Discover How To Focus On Your Ideal Patient & Create Their Avatar
-Discover The Problem Mark Had With A Recent Client’s Partnership Capital Account
– How Mark Would Analyze & Interview Potential Members of Your Board of Directors (Plus: The Resource You Need To Know To Do A Background Check Of Your CPA!)
TRANSCRIPTION
Mark Foreman, CPA- Learn How to Grow a Thriving Practice
Dave: My name is Dave Denniston. Welcome to Tax Reduction & Freedom Month and my latest episode on The Freedom Formula for Physicians Podcast.
This month we are talking a lot about taxes and what physicians can do to both growth their practices and tackle tough tax issues.
Of course before you have any major tax issues, you need to be making a lot of dough!
That’s why I thought I’d bring a special guest to the podcast, Mark Foreman, CPA.
Mark is one of our CPA partners with Foreman & Airhart. He has specialized in small businesses- particularly white coats like doctors and dentists.
His practice emphasis is on business advisement and strategic planning to proactively advise doctors and dentists with complex financial needs.
He is a longstanding member of the Minnesota Society of CPAs, the American Institute of CPAs, and the Society of Louisiana CPAs.
A native of Louisiana, Mark graduated from the University of Southern Louisiana. He and his wife, Gail, have three children and lives here in Minnesota.
He has also co-authored a book we’ll be discussing some, 57 Ways to Grow Your Business.
If you are physician in private practice or are considering it, there will be some great pieces of advice here for you today.
Welcome Mark!
Mark: Hello, thanks for having me.
Dave: Alright, great. First, tell us a bit about yourself. What inspired you to be a CPA and do what you do?
Mark: Well I knew when I entered the college that I wanted to be in some type of business because I figured that’s where the money was but I had really no inkling as to what I wanted to do as a profession, if I wanted to go into banking or other areas of finance. So just through happens stance I was talking with a friend of mine who I respected and he said “I’m going to be a CPA” and I said “that’s interesting I’ve never heard of that” you know at that time and so I said “well tell me a little bit about that, what does that mean?” and he said “that’s a Certified Public Accountant” and I said “well that’s interesting”.
So I started doing a little research and I asked in a few questions of other people and I said “You know what I think that’s what I want to do” so that’s what I started pursuing from that day on and I’m happy to say it’s been a choice that I have not regretted and it’s been a good ride.
Dave: What’s so funny is you kind of stumbled into it and then you really studied it and got into it. Knowing you personally, your practice has changed quite a bit over the last 10 years. You have been honing in on doctors and dentists. Tell us more about that and how you are serving docs in your practice today.
Mark: Well I think as you evolve, as my practice has evolved, I’ve learned a lot more about what I enjoy doing, what really excites me. In my interactions with my clients and so once I identified that which is really the service business aspect, you know I mean manufacturing is great, banking is great and these other types of businesses but I just chose to focus on the medium sized service business. Because it emulates and is similar to my practice and so it’s a natural thing for me to focus on and get really good at it as supposed to a generalist and everything but an expert in none. So I decided to pursue this area and has been very enjoyable.
Dave: Well in reality is I think that docs and dentists have a lot of complicated issues in terms of running the staff and unlike some business, they just don’t have the time to think about this stuff.
Mark: Yes that’s very true and I tell you what from a practitioner, you have to make a decision at some point of your career, whether you want to work for the hospital and be paid as an employee or do you want to go into private practice, it’s a big decision, a personal decision. That decision has a lot to do with your personality and your personal interests of wanting to manage the back office of a practice, in dealing with personnel issues, personalities and customer relations and all these things that owners have to do that you don’t necessarily have to do as an employee of a large group let’s say.
Dave: Yes stamp the clock. Well I think, one of the things you & I were chatting about recently was how doctors, in particular, are under fire today. Practically every year there is a fight over reimbursement and Medicare and doctors wages stagnating. Then, on top of that, many physicians’ income is in the sweet spot for the government where they can capture the highest amount of taxes by %.
Mark: Yes, just you know in observing what has transpired in the tax code the last few years and the way congress has interacted it’s really been there in action which really caused this situation where the bushier tax cuts that we all enjoyed which brought that top federal tax bracket from 39.6 down to 35. Well just do to inaction just expired and it just didn’t get renewed and so now we have a 39.6 that mean you might as well say 40 right? It’s pretty close to 40% and that is before any of your other taxes, state income taxes, sales taxes, here in Minnesota the men care tax, you know all of those things, you’re over 50%.
Dave: Well I think what’s interesting is a lot of docs they like that comfort of stamping the clock and a lot of people are saying they’re tired of this system, they want to be in control and i thought you gave some really good advice where in order to really focus on growing their practice you emphasized that docs should be focusing on their ideal client or their ideal patient, an avatar if you will. So how would you guide a doc and their practice toward identifying their ideal patients? How do they do that?
Mark: Well what I would suggest is look at your previous experience. Think about the interaction that you have had with your patients that you have found the most enjoyable. Really this is a discussion best had on a specific basis but I’ll try to give a broad explanation. If you find something that you enjoy both in practice from a technical standpoint but also in a personal relationship with the type of customer that you’re servicing then you’re going to be better at it. The same thing occurs with operating your business. If you find what is enjoyable to you, you will be better at it, anything that you don’t find enjoyable but it has to be done then you outsource. I communicate that often to my clients and because owning your own practice can be the most enjoyable experience of your life but it could also be fraught with misery and anxiety and I found that the difference between those two is this understanding of what brings you joy and doing that and doing it well and then outsourcing or having someone else do the stuff that you don’t do well and knowing those differences is really important and I think fundamental into having that successful practice.
Dave: I would generally encourage to like think about what is that ideal person look like? What age are they? If you could picture them in your mind, the person that maybe gets a certain number of procedures and needs some help, what’s their mentality? Who are the people that they are around? What activities do they do? Those kind of things, right? There are things that you could think about for that ideal patient.
Mark: That’s right and then from a professional standpoint when you have a practice you should surround yourself by professionals, the basics are accountants and attorney, a practice management consultant, financial advisor and also your counselors, those are the people that you go to for advice and direction, you should utilize them fully and that will increase your enjoyment factor I have found.
Dave: It’s kind of like having a board of directors and of course you can hire and fire anyone from your board, you’re the one who owns the company, its private company so you don’t have to worry about someone else coming in. So I encourage everyone to think about that, what are ways that you can form that board and have annual meeting with your board. Those can be pretty powerful.
Mark: Yes and another interesting observation that I have found which supports the practitioner in going into private practice is the technology that has evolved quite rapidly these last few years. That was one of the things that kept many practitioners away from private practice was the burden of the back office, the record keeping and the personnel issues, human resources, tax rules, paper rules, all these burdens but technology has really driven down the cost of all of these things and that is a good thing.
Dave: Do you have any particular tools or anything like that that you think technology that you see many successful dental or physician practices do that you think should be more utilized?
Mark: What I have found is that most small to medium sized practices have a dual record keeping system and this is just the way that technology has evolved. You have some companies that do very specific software, we call it practice management software which does a very good job of appointment taking, records retention, documentation of your client files and they do that very well. But for some reason that particular software does not generally do a very good job of financial record keeping and so there’s been a growth in a consolidation so to speak of the financial record keeping, QuickBooks is a big, I mean they own a large share of the financial record keeping market and so many of our clients will use that application and even the migration of data has improved recently where the data dos not have to be always entered by someone into a keypunch that there’s a migration of data from the banking records and the practice management software into the QuickBooks or the other applications. And so it reduces that time function of getting the data that you need to make good decisions.
Dave: Very good, I think the one tool I would turn people on to is the I have run into recently, I just started utilizing is something called Time Trade, so you guys might want to check that out, you go to Time Trade. For just myself it’s only a hundred bucks a year where it integrates my schedule so clients or patients could end up making an appointment and they could import it right into their own iCalendar or outlook calendar. So think of those tools that you guys could utilize and make sure you have people around you who can help you to find ways to automate your business.
So, in 57 Ways to Grow Your Business, you talk a lot about presence- for example, defining the USP, having the reception area being special. What are two or three hints that you think most doctors can improve presence? (Dave will bring up a few marketing ideas)
Mark: Yes that’s a good start. You know in every business whether its professional services or manufacturing or retail, your store front is what people identify you with and it’s what, it’s the first thing that they come to. And you could think of that store front as a logo, you can think of it as your front door to your lobby, you could think of it as your website, those are the faces of your practice. It’s amazing how little time people spend on these things. So they have to be simple, bold and direct. And then aside from that so people want to find out a little more about you then they’ll dig to the next level whether they will look at your bio, what school did you go to, what are your certifications and even that they’re not going to send fifteen or twenty minutes looking at a two or three page resume, they just want to see three or four bullets and they will make a decision that quick as to assist the doctor for me. So that’s what I mean by this present brand identity.
Dave: Well there’s this couple other thoughts that I’ve talked about with a few people, if you’re trying to attract that ideal customer and you have their profile. let’s say they’re in their mid-50’s and they like drinking coffee maybe you can think about having something different rather than a normal fish tank and a reception there, maybe you can have an espresso bar to make it a fun experience for people. So many people hate going to physician’s offices, what can docs do to make it unique, different, special? You can charge premium prices for people paying cash or out of pocket rather than Medicare.
Mark: That is true, a wise man told me once that it’s better to be different than good. You know being good is important especially in medical field but being different has been proven to be a good strategy.
Dave: Another thing that people might want to think about if they’re interested in outsourcing or doing something, slightly different you can do some really cheap stuff through Fiverr.com, so it’s a cool tool that you could use to get flyers or update your website or do something different and do it really, really cheap. Anyhow another area in your book that you focus on is “what could be” vs. “what is” and that this is a trap a lot of docs and dentists fall into. A lot of this circles around business plans and targets and key performance indicators. Tell us more about this conflict that can occur and the vicious cycle that’s easy to get ensnared in.
Mark: Yes, it’s very important and I’m speaking mostly from a financial standpoint, let’s say you’ve been in practice for two or three years and you’re wondering “okay what is the next two to three years look like?” and what I say instead of focusing on the next three years first of all you look at the previous three years and then you really do some soul searching and some number crunching and sharpening your pencil. You figure out “okay what did I enjoy, what did I not enjoy? What, who were my good customers? Who were my not good customers?” So identify these things, these are what I call what is, find out what over the last three years, what was your revenue, what were your expenses, what was your profitability, what was your profit margin? And also what I just said, what did you enjoy, what did you not enjoy and really hone in on that and identify it and reduce it down to even a memo to yourself. Then only then should you focus on what could be and I think that that is an exercise that will be well served.
Dave: And what is that what could be? Is it what they want revenues to be or a lifestyle or what is that?
Mark: That’s right, that’s a lifestyle. First of all you start with lifestyle. What do I want to be? Do I want to be a multiple office, ten million dollar revenue practice where you really won’t be practicing much anymore then you’re going to be a manager? Or do you want to establish a one to two million dollar revenue which is something you could possibly manage on your own with employees but you are the primary doc, you’re the primary servicer of your clientele? Once you reach that point then you just go along and stay at that level and then it’s just a matter of managing your cash flow and saving for retirement and all those things.
Dave: So you have to make those decisions early on and what do you aspire to become. Do you want to have partners? Do you not?
Tell us about a time, what are some of the situations where someone fell under this trap or not that you think other people could learn from?
Mark: Well I think historically I found some clients who don’t do this exercise, they don’t really hone in so what they’re doing is they’re letting the world or they’re letting their practice evolve on its own because if you don’t take proactive action there is action that will occur. I mean people the phone will ring, patients will come in, you will service those patients, you will collect your money, you will pay your bills and the world will move on if you don’t take proactive action based upon your wants and desires. And so what happens often is you get stuck and rot and you end up not maximizing that enjoyment factors what I call it. And so that’s the trap of not meeting with your professional periodically and strategizing and saying what do I want? Where do I want to be in a year from now? Where do I want to be in two years from now? And really pursue those goals instead of not because something will happen if you will not do it, it’s not just something as desirable.
Dave: Do you have any particular story in mind where something this occurred?
Mark: Not anything in particular but the stagnation, stagnation is a decision you know and I have seen it many times where people just go through the motions, go to work every day and don’t have that real, they don’t have their hands on the wheel of the rudder. They’re just reacting and that’s the, I wouldn’t called it a trap but that’s a result of inaction.
Dave: Talk to me a bit about partnerships in private practice- a lot of dentists for example are solo shops or small partnerships whereas doctors tend to be part of larger practices. From your experience, what are the things that break apart partnerships and what things can held bind together partnerships?
Mark: Very good question. You know it’s very important to manage expectations of yourself and for what you expect out of a partnership arrangement and it’s important that you communicate the distribution schedule and the work schedule and communicate amongst ourselves often. And it could be just you and your partners or you could bring in a mediator or a coach to try to work through issues, it’s very not dissimilar to a marriage, you need to understand each other’s expectations, you need to understand your own and then you also need to understand your partner’s expectations. It’s because when you have this disconnect of reality and expectations is when problems occur.
Dave: Do you think that this is something that should be done weekly and monthly to keep up a partnership and meet up at lunch? What is that look like?
Mark: I think at the beginning of the partnership you should have a lot of meetings and I could see informal or formal or a combination of both but as you work together and things kind of fall into a pattern and then that pattern is the things are going well then you don’t have to meet as often but you know and you will know if there is any dispute whatsoever on the way the practice is being operated.
In fact I have a circumstance occurred just a few weeks ago where there was a two person practice and as it happened I took over this client from a previous accountant and so I noticed that there was a disparity in the capital account of the partnership and so I inquired this of the practitioners and they said “well in the beginning one of the partners bought in but didn’t have enough money to fund the capital account so we would just deal with it later” and so now I’m saddled with the responsibility of explaining the differential and okay so I have to go to one partner and say “okay you can take more distributions than you would normally take and then the other person would have stake left until this capital account evened out again” and it might take two or three years and so it was a difficult discussion for me because I have to go back to the beginning and explain to both practitioners why it originated even though it’s probably explained to them previously but whenever someone is saddled with having to earn and pay taxes on money that they’re not going to get that’s a tough sell. And so I think I navigated it appropriately and we’re not going to have a shareholder dispute because that’s the worse.
Dave: Oh yes, well let’s talk about early on and practically were telling people to get together regularly with their partners, have a team of adviser and they’re still trying to run the dang practice, so how do people fit time from your experience for this stuff? How can they make it happen to make all of these meetings that you’re recommending in doing?
Mark: Well I suggest using a combination of face to face also video calls I think are very efficient way of communication with your professionals and not have to go to someone’s office. I think face to face are very important but I think you should supplement with video conferences and just telephone conferences and have a mix and that saves on time because docs’ time are very demanding to say the least. And also it goes back to that when you’re operating your practice try to configure your practice in such a way that 90% of your time or more are devoted to primary customer care or patient care you know, not administrative duties. Hopefully you have outsourced those responsibilities to either internal employee personnel or your outside professionals.
Dave: Well what about for that confident team? What should a doctor look for? How can they tell good ones from bad ones?
Mark: Well find ones that communicate effectively, it’s very important. Talk to your peers and they will be very freely to give you advice on their personal experiences with that particular person. So when you’re interviewing an accountant, talk to other practitioners who have had experience with that person, are they responsive, do they return phone calls and emails promptly? When you go to a meeting the meeting is well organized? Does that person communicate effectively? It doesn’t take a lot of investigation to find the right fit I have found, you just have to ask a few questions.
Dave: Lastly, a big emphasis that you mentioned to me last week is the important of having a competent team of advisors. What should doctors be looking for in advisors? How can they tell the good ones from the bad ones? For example, is there any way for them to do a background check on their CPA?
Mark: Yes on a CPA side, every CPA is licensed so you have the state board. You can go to the state board and see if there were any complaints of that particular practitioner and you can log on to the website and you can find whatever information you can find as to how long they’ve been in practice, do they actually have a certificate? Because I mean it’s very rare but I mean you could have a situation where someone holds them out as a professional but they’re not licensed. I think the CPA and the legal community have done a good job of putting in place this peer review practices and these oversight to ensure that most, any CPA or any attorney or any financial advisor you hire is going to be competent. And then it’s just a matter of beyond that, is it a right fit for you?
Dave: Right. Any other closing thoughts in terms of growing a practice, ways of how to hold it together? Any other closing thoughts you want to share with the folks on the podcast?
Mark: Well if any of your listeners wants to get a copy of my book just let me know, send me an email and I’ll give on up to you.
Dave: And what’s that email Mark?
Mark: mforeman@foremanairhart.com
Dave: Okay great and so they will just email you their address to send a copy.
Mark: That’s right.
Dave: Thanks again for joining us Mark!
If you are a physician or someone servicing physicians and want to tell your story, grapple with these tough issues, and get on the soapbox for a few minutes, I’d love to share it too in the next Freedom Formula for Physicians Podcast. Make sure to contact me on my website daviddenniston.com/physicians and subscribe to this Podcast at www.DoctorFreedomPodcast.com or on Itunes.
For the Freedom Formula for Physicians podcast, this is Dave Denniston. Thanks so much for joining us and make sure to subscribe and check in again soon! Have a good one.
