Finance Fundamentals in Chiropractic

Dr. Joseph Esposito: Hi, welcome to the Align Your Practice podcast. This is Dr. Joe Esposito. I'm excited to have a good guest on today, Eric Rahn. How are you, Eric?

I'm doing great.

Dr. Joseph Esposito: Awesome. Well, I've been excited to have you on because I wanted to have some more kind of mature business conversations. I know, you're being framed out as the business guy over the last couple of months. So here's the chance here for you to shine and all that brilliance. What I want to do is maybe break down a little bit about the people that are coming out of school now with a little bit more mature of a business mindset. And they're talking right off the bat, I want to open three clinics, I want to open five clinics. And in the past, we kind of shy away from well, they gotta learn leadership. They got to, they got to hit these markers, which is all true. But I think now setting the framework out for doctors that are entrepreneurial spirit, to understand, actually the architecture necessary to make their dream come true. Instead of saying, well, we'll wait down the road three to five years, because there are doctors when we architected correctly, I think they can they can hit their their goals in a more projected period of time that is realistic for them. Does that make sense? Yeah. You know, let's talk a little about, you know, not only that, but not the value of chiropractic in the marketplace has been skyrocket over the last five years, whether we look at what's happening on Wall Street, what's happening on private equity. So you start seeing the the market maturing, so not only is it more mature of the doctors coming out with a business mindset, but the market the industry, is being more mature on a value perspective, Have you have you felt that as well, when looking at the industry?

Yeah, for sure. I think it's we look kind of historically, I came out of the medical field background, you know, I was in a large medical system there for the last seven or eight years prior to come into a line life and the medical field over the prior probably 15 years or so you started to see a consolidation and the independent practices trying to find ways to do this in a different way. And they realized they started to need to be economies of scale. So they started to kind of drop into the systems and find more economies of scale. within that realm, you saw the dental world sort of going into a similar situation, now we're seeing that stage of chiropractic is falling into that same sort of bucket where they're, they're realizing that there's, there's money to be made for one, and there's a there's an opportunity now to to start finding those economies of scales, you know, the day of mom and pop shop, doing one Chiropractic Clinic, you know, they're still there right now. But I think they're starting to feel the strains of what it's like to exist as a solo practice, and they're looking for other opportunities to grow and expand. And, you know, we we offer a lot to do that with with those guys.

Dr. Joseph Esposito: So, a couple of points in regards to that. I agree with you that the chiropractic is mostly solo, but it's moving very fast, based on what you're saying, the cost of digital marketing, volatility, the marketing landscape compared to 2030 years ago. And the cost of acquisition of those tools, and the outcome of that reads coming out of those channels, is volatile and costly. So it's requiring a higher end team, either in house or outsourced, which is expensive. In house, you're gonna need an enterprise group of clinics to be able to have the ability to gain market share. So I think that's some of the components that's creating the utilization of a enterprise model. On top of that, the valuations of chiropractic you couldn't value a clinic over one time your profit. So if you make 200,000 a year that the value of that clinic would be 200,000. In the enterprise model, we're looking at 56789 10 times one year's profit, which changes the matures the market and allows this unification of clinic. So in the line life, what we see people that we are able to help it's either new students who meet this this guidance, it's struggling doctor that doesn't have that business or marketing expertise that wanted to join the Align like movement. And the third is enterprise level mindset or organization where they are looking at, you know, I'm working 60 hours a week, make a lot of money, but I want to reproduce myself I want for that kind of model. So, what I wanted to do today with you, Eric is like talk a little bit about the finance structure, what you become aware of and you could speak to this as some of the data because you've spoken to are brilliant, great clinicians drive a lot of revenue, but really don't have as much a sense for the financial foundation of their practice to forecasting the future. They're just amazing clinicians with great minds, a lot of passion unable to drive revenue, which is different than a business person. And my fear is, as we grow a lot of top line revenue to think you can run an enterprise business, meaning multiple clinics, without budgeting without forecasting, just because you got great hands, and a passionate voice, that's not going to hold up on the second. And third. So what we know over the years is the first thing doctors masters conversion, they learn how to convert patients to accept care. The second thing they learn is how to master the attraction. First, they got a handful in, they get the business going, then like I gotta get more business, a master traction. Later on down the road, they kind of focus on retention, and they start to keep patients. And lastly is when they grow big. They fall down a lot with their team and and up learning team building. But the the other component is, is financing. So I wanted you to kind of open our eyes and ears to what does this look like from your perspective as a businessman. And if you could join us throughout, I was thinking the next 12 months, coming on occasionally and given us a little nugget, throughout the year of things we can think about as entrepreneurs to refine our sharpen are still on, per se, on our ability to grow in enterprise business. So yeah, your thoughts?

Yeah, I think kind of what you're touching on when it comes to the concept of attraction and conversion and retention. And all of that comes through mastering operations, you know, as a as a master operations, you're learning how to really handle the patients that are coming in the door. What's happening kind of behind the scenes that most entrepreneurs or how do you say entrepreneurs so much, I think you see a lot with chiropractors or other providers and other medical professions is, it's, there's a passion because they have a passion for the patient, and they have a passion for driving their business, sometimes they there's not as much attention being focused on the stuff that a lot of people think it's boring, the financial parts, the behind the scenes stuff, that's actually the sort of the cornerstone, and the foundation of what's going to really stabilize your practice is the different types of financials. And so, in my conversations, since I've been here, you know, to your point, lots of brilliant practitioners, lots of brilliant, passionate people like I've chiropractors are, it's a different breed, you know, from what I'm used to as far as, like, what they're what they're passionate about, but, but there's there, I've noticed some gaps in some of my conversations. And in regards to a better understanding, there's a desire, you know, I will say there's a desire to understand what's behind the scenes, and what is this all mean to me? And, and what, what can I do, like, what can I do differently. And so a lot of it for me is just an awareness. It's so just starting at the basics, you know, really just a basic understanding of the of a profit and loss statement and a balance sheet, you know, your balance sheets, just trying to keep you in check on your assets and liabilities, just understanding what debts you have versus what you actually own. And sometimes, there's a, there's a lack of understanding on the asset side of understanding, like there's value to this practice that you're doing right now, you know, and in making sure there's a clear understanding of that, and then just on the Profit Loss side, understanding the different lines, you know, this is where my money is coming in, and this is where my money is going out. It's one thing just to say, I know, I've got this much money at the end of the day, but truly understanding the engines behind the profit and loss and understanding what's motivating each of those minds. There's a little bit there's potential there, you know, there's potential to, to understand that at a deeper level. Because once you understand that barometer, now you can start to figure out, what are the levers we gotta pull, what are the buttons we're going to push, so that we can maximize these things, we want to maximize your revenue, all that stuff that's on the top line. And we want to figure out what we can do to to be more efficient with that expense line so that that bottom line becomes a larger number, because that bottom line, then starts to dictate what your debt ratios are some of these other like, terms that matter when you're gonna go open up another, another practice, you have to start to build that cache and you have to start to build that cache based off of what that net profit is.

Dr. Joseph Esposito: Yeah, so if you're a personal practice starts to struggle a little bit. You basically turn on your passion, you get more convicted, and the number just lights to move up. When you run an enterprise and there's three practices or five practices, and you start losing 3% Over here. aren't getting cost per acquisition is going up a bit, conversions down 3%, cost per acquisition is up 10% payroll starts to creep up, and boom, your margin dropped 11%. And for six months, and you didn't see it. So I think for me, my my growth and scar tissue over the years, is, when you're running more of an enterprise level, the ability to move that machine takes a little more than just that brute energy and passion that we have as doctors. So it's just realized, if you're thinking of opening, becoming an, what I call an enterprise organization, meaning multiple facilities or even multiple doctors, you got to influence people, verse, turn on your passion, it's an different timeframe in order to make that happen. So that you have to be more sensitive to your dollars and to the trends that are going on in the business. And to Eric's point, you can, in your own practice, you can look at the end of the month and go ha, I made 1000 laughs You're running five practices, you can say, Huh, I'm 50,000 short on payroll, like you can't do that. It's a different. It's a different sensitivity. So what's your recommendation? Eric, like, if there's someone listening or inside a line life, I know, they're welcome to maybe quarterly buzz you and you give them a little bit of insight. But just for a doctor that may be listening. How do you get that? I mean, I don't even I don't know the answer to this, but maybe you do. Is it just some YouTube videos, hire a consultant, talk to your accountant maybe to like start the journey? Because to me, it took me five years of really learning how to use the document understanding and it's one thing, but making decisions off of it took me many years. What is

your thoughts? Yeah, you know, it's interesting, it's almost like, there's a lot of the dummies books that are out there. Yeah. And there's, there's, there's financials for Dummies, you know. And I think sometimes what we do is we overcomplicate it. And it's really, when you think about how you run your household, even when you're running your house, you you've got a top line, and you got any other bottom line, you know, your top line is just the money that you're making off of your paychecks, all of your expenses are things that you're paying for to live on a daily basis. And then at the end of the month, whatever you have left is your profit. So it's the same concept is, is running a business. And so I think that there is a million resources out there, whether it's YouTube, or books, or those sorts of things, reaching out to people like, you know, reaching out to even us, you know, we're we're always willing to at least have a conversation with people just I think what I love about a lion life is that we do exist for our our Doc's, and we want our owners to be successful, but we're constantly providing some of that outside counsel for people that are interested because we have a system here, a system that works, you know, we talked about the mastering operations, if we're going to get to that enterprise level, if you're a franchise owner, and you want multiple clinics, or multiple docks, you have to master operations, but you also have to master your financials. And then to be truly successful, then you have to master your leadership skills. And the leadership skills is really about what you were just saying, like you have to understand your people, you have to know, because if something is missing in, in this center over here, and in you're not paying attention to it, that can be falling off the rails, the leadership skills is what's helping you keep your hands around all of the different things that are going on. And the multiple centers, right. And so that's, that's so key. And I think that what a lineup as a system is doing is they're helping you master operations. And right now, I feel like we do a great job of that we master operations. I think we are mastering financials. So we use the word that I continue to use internally is that we are maturing, we're maturing the way we think we're maturing the way we approach things. We're looking at things from a slightly different vantage point, I'm coming in with a different, not that my way is the right way or the wrong way. It's a different way, than my way is just getting us to look at things a little bit more holistically, I think, than what we were before. You know, we're, we're not just top line focus, we're bottom line focused. And so we want to because the bottom line is what's going to help you to grow and expand.

Dr. Joseph Esposito: Yeah, and I like some of the moves you're making with software to have a better, better accountability to the bottom line on a global scale as an organization and then drilling down into per clinic, some of the moves that you're testing, and I know behind the scenes, I know there's nothing on the frontlines yet, but I know where you're going which is supporting business owners to make sure they take home as many dollars as possible into their pocket because I think it was foreign to Harnish or I think it was him who said prompting sanity and cash flow is king. It's vanity Saturday and King is his device. realize that dollars, right? At the end of the day, so

let me talk about the software just for a second, I think the goal of the software is really because it's a report card. And right now we the report card that we are using, we have lots of report cards, you know, that's that's part of the mastering operations is understanding, how well are we doing with our attraction and conversion and retention. And, you know, what, what is our acquisition costs on the marketing says, we have all kinds of great tools and report cards that we do offer. Now with this software implementation, the idea is to give us the same level of reporting just strictly on the financials. And so it's, you know, the solvers giving us abilities to, to benchmark benchmark against each other benchmark against within peer groups, and across the whole, our whole enterprise to be able to say that you rank X amongst the group, and then the way you write x amongst to appear, and then dial it down to that that deeper level where I see my expense line is this much. But when I break all this down, I see the number of I don't know what that really means. I don't even know what that is good or bad. As compared, it's an expensive one to have to have. You know, and so what, how do I know if that's even good or bad. So the this was giving us an ability to say, you know, it's good and bad, and all of these expenses is a very subjective thing. But at least now we can compare it across peers to say, they might appear is, seems to be doing a much better job, I wonder what's going on over here, if he or she is doing something different, I'm gonna dig in a little bit to figure that out. So the idea of this software is that once we get this rolled out completely as so that franchise owners can actually start to dig down to that deeper level of understanding, and then gaining knowledge, we, we all would exist to trade knowledge off of one another, so that we can be bigger, better and stronger.

Dr. Joseph Esposito: And I think that's an missing value, missing, understanding the value of data. Because if you're an organization that pulls together, not only branding, to affect perception of the, of your business, but on the inside the IP intellectual property of the financials to say, in this one city with five clinics, if you're paying 30% More in payroll than for other clinics in the same region, it's something to investigate, as Eric's pointing out, because, you know, I always talk about mindset, and we live in the stories of what we think is normal, when you look at everyone around you, they have a different normal, it makes you it gives you the availability to have awareness around it, and then challenge it and solve it, like you're saying, so that data, I think, is such a value proposition that Oregon single clinic owners just don't have that, in a sense report card or benchmark that that we can provide. Yeah. So if, if you were given advice, I want to hope in have a successful clinic, doing about a million dollars, top line revenue, 60 to 80,000 a month, I got some good savings, I'm ready to make some moves. Like what advice would you give me what you say? Stay on that operations, start learning leadership, mass, your finance level, all of them up a little bit at one time? How do I proceed? I want to open a second within a year. And I'm pretty good at my business, I can hold the staff together. But how would you guide me if I had a year to make it happen?

Yeah, you know, I think that we have so much resourcing internally now, you know, and when it comes to the coaches, you know, the coaches become sort of the primary person to have this conversation with because the coaches are also going to be in tune with what does it take to be successful to get to that next that next level? And so but then, you know, almost sort of so we've got other, you know, we have a financial guy and internally that's, that's helping us to, to be more mature on how we think. But I think my number one advice is that you got to don't rest. I think what happens a lot of times is we're growing the current center that we're in, we want another one, we get so focused on this other one that we start to miss fire on the one that we actually have, and we can't afford to do that. So we want to build in that cushion that says, you know, if it's 60 to 80 grand a month is where I need to be to be comfortable. Go start thinking about another provider starts thinking about another center. Don't stop. Don't stop with this one, because you have to keep that one growing. But it comes back down into you looking at what is making you successful what's going to continue to make you successful and mastering it operations piece. This not just understanding that I've got the skills I've got the charisma to make it happen, but knowing how to dial into the reasons why behind it Everything I need to know why I'm making this revenue, I need to know why I'm missing in this particular category. And Bill to speak to that, it's going to help take a lot of stress off when you're going into another center where you're guessing and you're not really sure what some of those different things are, you know, now you're just going to shoot from the hip. And that's not a, it's not a super free mindset to be in, I think you have to look at, are your current patients satisfied? And are your current employees satisfied? Because if they're not satisfied, that's gonna be doubly hard when you go to open up a second center. And I have have to figure out how to how do I make this new group of people happy when I'm not even made this group of people happy yet, so make sure that they're that you truly have good, good employee satisfaction, and great patient satisfaction so that you can sustain that going into the next to the next level? And then

Dr. Joseph Esposito: you got another thing on the table investigating that analytics to we do? Yep. Is that future facing, being able to provide a doctor, this is how your employees feel. And this is how you're right quantified,

exactly objective data that's going to tell you whether or not that you that the perceptions that you might hold are real or not, because we we all have subjective perceptions of what we think. But when we actually measure that, is it truly holding up. And then I would, I think the other thing I would say is, you know, making sure that the standards that were set forward for you are being hit on, you know, whether it's the branding, whether it's the compliance to the simple day to day stuff, because I can't say it enough, he, we want to multiply our money. But we also have to remember that sometimes we're going to multiply our problems. And so we have to make sure that we have a grip on what those problems are, so that when we go to expand, we're not multiplying those as well.

Dr. Joseph Esposito: That's a good point. Because what I've seen just expanding my own group of clinics years ago, is if I was 10%, off the system on the first clinic, the second one automatically is that 20% off system, because I'm not there, if 5% off, maybe 10% On the second one. But if you got 30% gap on your systems and your first one, you're going to be 40 or 50. And you're gonna have a hard time holding it together. So yeah, good point, because the main office is going to be training the others, although corporate helps out the main office chains out there. So if you're trying to build an enterprise, be true to your system on on the first one, like an obsessive way to the point that it is overwhelmingly master on system that you brought up a couple other points that I think is worthy for doctors to hear when they're in the seat of I want to open multiple clinics, is you feel real confident the operations, you got top line revenue feel good, you're maybe a little cocky, maybe you don't have that humility left, because you're driving a lot of bottom, you know, bottom line money is that the same time you're mastering systems, like you're saying, you have to pick up finances just start the road as soon as possible, like Eric saying, whether it's a conversation with the corporate team that align life, whether it's financial documents for Dummies, whether it's YouTube, like gain awareness around it, and the second one, the other one is leadership, you know, you and I can list our top five leadership books for people so they understand multipliers as one of my favorites, understanding the way I lead as it as a human and expose a lot of my gaps so I could be self aware around them. But I think the journey is just take ownership of those two things, the finance and the leadership, because that has to mature to be able to hold this organization. What's your thoughts on that? And what would be your top book if you had to? Yeah, I

would say boy, anything with Adam Grant is just killer when it comes to leadership styles and skills and and I'm a huge fan of Simon Sinek because I think he's always super future focused he's always thinking about the end it's always about the people this you can be successful you can do it and a tyrannical way it make money but it's not long lasting you know, that's the problem is that that's the boys is kind of a short lived mindset where cynic is always more about the long game like what is it? The infinite game is his most recent book and it really is looking back at the companies who have been successful long term at some of those companies that were that were around forever, who have really kind of fallen off. It's because of their mindset is different than what they originally had it set on their mindset wasn't it really became more about fixing the hero now fixing the hero now fixing the hair now and so wasn't ever really future focused. And so when you really start to gain solid leadership skills, it's always Future Focus you're always looking at. I know that I have to learn average the talent that I have so that this company can be successful. And when this company is successful, then I'm successful. So it's about the, it's the order in which things happen. It's not about me being successful, first and foremost, right? It's about that, it's that pattern that gets, I gotta get my people to be in a place where they're successful, so that this company can be successful, that I'm going to be 66 as well. And so I love that kind of thought process. Because it gets to the root, I have to, I have to, I have to be relational with my people to drive and motivate them to get the most out of them so that I can be successful. That's a whole different mindset than just starting what I want to be successful. Okay, great. Let's unwind that a little bit and see what is it going to take to make you successful? You know, like you said, we can list our top five books we can kind of even list what we think makes them someone successful because that's that's also a subjective thing to talk about. And but what I've noticed in chiropractic is that successful Doc's are they feel free, you know, they have a, there's a sense of freedom to them, that they're, they're more, they're just more joy filled, like I just, I see it so much. And when you start to really kind of dial into that a little bit to find out like, what, why are you the way that you are, there's a there's a different mindset that's happened, they haven't been so laser focused on top line revenue, and they got buried in that they they're more focused about mission are more focused about the whole and other people being successful, and all those other things, and all of a sudden, oh, wow, the fruit of that labor is that I'm successful now. You know, and so I think when it comes, when I think about leadership skills, that's often what people will ask me a lot of times when I get speaking opportunities, they'll ask me, like, what do you believe it takes to be a strong leader? You know, and, and I think that you got to be relational relational. First and foremost, is what makes somebody a strong leader. I think having, you know, there's, there's sort of the tactical parts, like going to be a good planner, you know, you have to be organized, they have to be a good delegator, and those sorts of things. But when you start to talk about the strongest leaders, we know, the strongest leaders we know are relational, they're good communicators, they, you know, they just have that ability to interact in such ways that, that draw us to them. You know, we, when we name our favorite leaders, were not naming them because they were billionaires, were naming them because there was something about them as a person that draws us to them.

Dr. Joseph Esposito: Yeah, that's a maintenance, great, great awareness process. As you speak, I'm challenging my leadership and the different perspectives that you brought up, you know, it is, there's also accountability, good leaders have accountability, they're trustworthy, because you know, they're going to back the behind the words coming out of their mouths, you have a sense of peace around a good leader. So you always have to be cautious of what you're saying, as entrepreneurs as as CEOs as visionaries, we got to make sure that the words out of our mouth can be backed with accountability. And that's

yeah, and accountability, also means we're not always gonna nail it. Right? So it's okay, it's okay to be wrong. And it's okay to, you know, when, when we miss, it's okay to circle back around and be like, Ooh, you know, what? A screw up. You know, that doesn't make us weak, you know, that makes us strong.

Dr. Joseph Esposito: That's yeah, that's huge. It's a huge lesson for young leaders is that humility of owning the gap, explain the lesson learned, and getting back, directing the ship in the direction, not ignoring the conflict, not being the victim of the conflict and handing the blame to everyone around you. But I like what you just said, it's a position of power to say that you made a bad decision, or you didn't understand or whatever it may be the humility around that, to me, has helped me in leadership, because I have a very high confidence and conviction, I'm very high on a dominant scale. But I have to balance out with humility, in order to keep my leadership to say, hey, you know, if you don't with that type of strength of conviction, you end up losing the leadership capabilities. So moving forward, Eric, I really appreciate this conversation, I think I want to have us dive deeper for the audience to teach them and help them open their awareness about the two gaps, which is financials and leadership. So maybe we can start breaking some of these down because I know I saw your list of some of the framework around the detail the granular data that you bring to the table on operations as a finite components they need to master you also broke down leadership and you gave some finite components and granular level about about that as well. So both leadership and finance that I think, as you mentioned are clear Hearing gaps for this maturing profession. So those are my thoughts. Any any final thoughts on your end?

Yeah, I would love, I certainly would love to be able to be a part of that process, and what does it look like to kind of dig into that at a deeper level, I think, you know, each one of those things that I mentioned, this could be an hour, you know, it's just because you could really get deep into those things. I, I think the thing I would remind anybody that's listening to this as well is that the beauty of what I've walked into the limelight, you know, five months ago, is a system that works, you know, in a brand that's strong. And so there is no need to recreate the wheel, we've got internal sources that can help us mature along the way, you know, and so I would encourage anybody, that's whether you're currently in a Limelight doc that's listening to this, and you, you're looking for additional help, coaching, guidance, or whatever it exists, we have, we have a resource for that, you know, and if you're somebody on the outside of this, and you're trying to figure out like, Man, I want to be able to do some of these things. And I'm just not really sure where to go, that we're here for that to you know, we're we're here as a system that is proven to work that has a lot of great resourcing has matured tremendously in the last 12 months, just by the resourcing that you guys, you know, Joe, as you as a CEO, in your ownership has, has committed to this next level, and to scale. And so you brought in some really, really smart people on some different positions that's helping us to get to that next level. So I think that reach out, you know, we're, we're happy to help.

Dr. Joseph Esposito: And I appreciate you giving that opportunity for those, both in line life and outside to have just a meaningful conversation. Eric's contact information will be in the show notes. So if you want to reach out to record Eric, and although I usually do this the beginning, we got right in the conversation, what I love about Eric an opportunity to talk to Eric, because he comes from outside the profession, as an executive in a hospital systems in conventional health care also has a long history and one of the fastest scaling businesses. Walgreens has a lot of experience in the leadership roles of a very fast growing organization. So I think it'd be a refreshing conversation with someone that has the viewpoint of the chiropractic profession now on our team, but also has a lot of scar tissue and insight on business as a as an entity, not just solely focused on one industry. So it'd be exciting conversation for those to have with you. So thanks again, Eric. And looking forward to us breaking down more of these, these points of discussion in the future.

Absolutely. Thank you for having me.