Transcription
Hello and welcome. I am Dr. Dan Kalish, and I am here to talk to you today as part of our mentorship mini-series. These are little series of classes that we do to get you all interested in the mentorship. And today, we're going to talk about financial planning, especially for those of you that are in a career transition, which is just about everybody that we work with, isn't it?
So, I'll tell you a little bit about myself and the Kalish Institute if you're brand new to this. Talk a little bit about our partners and the people that we work with to help you support your business. And then we're going to get into financial planning. For better or worse, so depending on your emotional type, you should either go right now to the, you know, to the kitchen and get a bottle of wine and open it and pour a glass, or a box of Kleenex tissues. You know, this is a very emotional issue. Some people cry, some people get really stressed. I've coached hundreds and hundreds of doctors through this career transition, as we're calling it, and everybody is emotionally charged. So, if you're not emotionally charged in regards to just looking at the topic for tonight, then you're probably in the wrong place, okay? Because there's nothing that gets us emotionally more activated and motivated and demotivated than money and the thought of changing our career, and is it going to work or is it not going to work?
So, I want to give you tonight a reality-based assessment of where our profession stands and what I see in people these days making career transitions. I also have a whole bunch of slides I'm going to talk through, too. And then we'll leave time at the end for questions. You guys can ask questions, okay? So, you can type your questions into the inbox thing there. I'll get to them at the end. And let's get started.
So, a little bit about myself first. I've been in practice since 1992, which is a really long time. I've had small practices, like just by myself. I've had several huge clinics that I've built. We had the naturopath clinic down in San Diego, right on the coast in Del Mar, California. Had eight or nine treatment rooms. I built a full gym in the back of the office. We had personal trainers, nutritionists, psychiatrists, psychologists. We had therapy, we had brainwave mapping, we had two acupuncturists. I had it all. And, um, that was an experience. You know, Healing Center, I built that. I worked prior to that in another Healing Center that was not quite as big, but super busy, also in the San Diego area. I've had small what we call these days micro practices. That means like me and one assistant. And I've run Telehealth practices since 2006, where I'm just basically on the phone talking to patients. So, again, I've seen the gamut of what's out there personally and experienced it personally. And then, you know, 15 or 20 years ago, I started to pretty seriously start coaching doctors on how to set up programs. And that's really what turned into the Kalish Institute. So, I was coaching so many doctors that Maria, my office manager at the time, she was like, "Dan, you can't keep adding doctors to your schedule to coach them on their businesses because we don't have room for patients." I'm like, "Well, what am I going to do?" And she's like, "Why don't you teach a class?" I was like, "I don't know." Which Maria is the one that started this whole thing. So, we created the Kalish Institute as a response to the fact that all these doctors wanted coaching, you know? And that was again back in 2006. And I've learned a lot since then, and I've seen the trends that have gone on since then. So, hopefully, I can enlighten you guys as to what's happening in the current day, since that's really what's of most interest to you. In my private practice, I've worked with all kinds of patients, from famous people to not famous people, from drug addicts to super successful people in the world. Had kind of done a lot of stint, a long stint with alcohol and drug rehab folks, with eating disorders patients. I worked a lot with professional athletes, um, just a whole wide variety of patients. And I've had a lot of different kinds of practices. I had a decade where I was seeing mostly patients for brain programs. So, it's mostly depression and anxiety, just all over the map. And so, I'm really open to what practices you guys may want to build. But the main goal of the Kalish Institute now is to take all the experience that I have, and especially the experience I've had coaching other doctors, and share with you what are successful strategies for building a practice. And we have several different avenues that we pursue for that. In the courses that I teach, we have classes like this tonight where we look at the business side of things. And then we have other courses where we look at patient communication and lab interpretation skills. And I believe that if you have great business skills and a nice business model set up, and you're good at lab interpretation and great outpatient communication, it's guaranteed you're going to have a successful practice, okay?
And just to update you on the current status of events. So, I, we have this mentorship program. We take a small group of doctors every year, and we take them for a year, and we teach them a clinical model and a business model, all wrapped into one. And the group from last year is just graduating now in September. So, I talk to them when they finish their year-long class, and I see, "Hey, what the heck is going on?" You know, one-on-one calls with all these docs. And more than I've ever seen before, they're like, "I don't know, Dr. Kalish, I had two job offers. One in Washington D.C. and one in Boston." I'm like, "Well, I had two job offers?" Like, "Yeah, there's all these clinics that are hiring functional medicine doctors." So, I'm like, "Okay, Joanie, what's the deal? You know, how much are they going to pay you? What are the perks? Like, what are the salaries? What are the, you know, all the..." And it is amazing the amount of work available now for functional medicine doctors. Even if you don't want to start your own clinic, the vast majority, probably 80% plus of our graduates do start their own clinics. But I just want you guys to know that there are so many clinics that are growing out there now that you can actually get a job, job doing functional medicine when someone pays you a salary and you don't even have to open your own doors. So, that was not true five or ten years ago at all. People were not getting two job offers and thinking, "Oh, I don't know, $280,000 in Boston or $240,000 in Washington D.C. Which one am I going to do?" That didn't exist even five years ago, but it exists now. So, you guys should take a deep breath, take a sip of the wine that you got, you know, and and think about, um, how great things are right now for you to transition your career into a functional medicine job that you enjoy. Again, the vast majority of people that we train start their own practices, and we're going to talk a lot about that tonight, so you can get some strategies around how you might even think about doing that, okay? That's the goal for tonight.
Let's take a look here. Oh, and this is the overall structure that we want you to start to conceptualize and think about. Is that there's three areas here. There's "U," that's the practitioner part. And that's like your life, you know, you as a person, you as a human being. I met this French doctor 10 or 15 years ago. He was retired and he had moved to San Diego. It was like in his 80s, and he came in to see me. I don't even know why he came in to see me. It was probably just wanted someone to talk to or something. But anyways, who's pretending he was a patient, but really I was talking to him, and he was giving me advice is what was happening. And he said, "You know, I retired." You gotta imagine this in a French accent, which I won't try to imitate, and very well-dressed, because all men from France in their 80s are just beautifully dressed. So, beautifully dressed guy talking in with a French accent saying, "Well, you know, I've retired a few years ago, and I treated 30,000 patients." And I was like, "Whoa, there's a number." Because it never occurred to me that my career had ended. It'd be a number. He's like, "Yeah, so let's talk a little bit about where you are in your career and what you want to do with your life." And I think his life was filled with regret that he had worked too hard and too long. And I think he was trying to tell me, "Hey, you know, the career is going to be over someday. Your patient practice is going to stop, and you should be sure that you're in good shape and that you are living the life that you want, you know, not only when you retire, but right now while you're practicing." So, you are the most important person in this equation. And we don't want you to burn out because physician burnout, practitioner burnout, is rampant, and we don't want that to happen. So, there's a lot of self-care that has to go into this overall business model because if you fall apart, the business falls apart, and then it's a problem.
P2, or the second of these, are the patients and the patient care. We're not even going to talk about that tonight because you guys are already doing that. You're taking care of patients. You're in the job for a reason. You're passionate about your work. We're kind of assuming that that's already a big focus, probably too big of a focus from a business perspective. And then the third element is the practice and the operations and the logistics and your staff and how all those elements are going to come together. And what we all do as practitioners is focus on the patients almost exclusively, pay as little attention to the practice as we can to keep things going, and then ignore our own health. That's basically what you see. I'm laughing because this describes myself, it describes everybody in integrative and functional medicine, and it certainly describes everybody in conventional medicine that's a primary care doc. So, just as a call out, my good friend Bill Quiel just published his book, "Dying to Save You," by Bill Quiel. And he and I have worked together for several years trying to figure out, "How are we going to help primary care doctors and nurse practitioners deal with the stress that they're under?" So, anyways, if you're in primary care, I'd highly recommend this book. You can buy it off Amazon. It's not that expensive. And see what Bill's perspective is on all this because he and I want to work together to figure out financial models that are sane, that can support you again, whether you're a chiropractor or an acupuncturist or a family practitioner, primary care, whatever it is that you're doing with your career, and how can you transition whatever current model that you're in to one that's sustainable for you and for your, you know, and then successful for your patients, and then profitable for your business so you can get the business ready, right?
So, um, before we get to the next point, I want to mention, if you're not already a client of Rupa, you can scan that QR code there. And Rupa is where pretty much everybody orders all their labs now in the functional and integrated medicine space. So, if you haven't heard of them, they've come along a few years ago and they took the entire lab industry and consolidated it and turned it into like an app, basically. You know, you have to kind of do it. And we used to have like one full-time person that dealt with lab ordering and lab processing and lab reporting and this lab got lost there and where do I get my blood draw and all that. That used to cost me maybe $30,000 or $40,000 a year just to take care of that process in a busy clinic. That's what it's going to take. Rupa's organized all that, put it online, and made it even better than the services that we used to provide. So, if you're not using Rupa yet, I highly suggest you scan that, order a lab from them. You'll get $100 off your first order if you're coming from us. And I think pretty much everyone that we work with now is using Rupa. So, if you're not using them, you're a little behind. Check it out.
Our other partner that we work with quite closely, and I've worked with for many, many years, is Pure Encapsulations. So, I use, you know, 80 or 90% of my practice comes from Pure. Again, you can scan that QR code there, and you get a discount on your first order. And pretty much all the protocols that we teach in the classes that I do are from Pure. And then, if you get to the end of this webinar and you're like, "Well, okay, I think I really need to work on this." We have a class that's extensive called our Business Essentials Bootcamp. You get a discount if you scan that QR code. We're going to be starting it in November. It's one of our most popular, if not our most popular class that we do every year. So, and we don't offer them that often. So, if you want to work on your business, you know, set aside the date starting in November and plan on a couple hours a week of working on your business, three to five hours a week of working on your business while you're in that class. And I'll show you some of the success stories from that course that we've experienced in the past with other doctors, okay? So, those are the three things that we're kind of promoting: Rupa, Pure, and then our Business Essentials Bootcamp coming up in November.
All right, now, where this, let me just kind of lay out the situation. And I've had this phone call, you know, hundreds of times. So, it's a practitioner, and you could be in Des Moines or in Chicago or in Kansas City or in Jupiter, Florida, or in Santa Monica, California. You could be in South Dakota or Oregon, in a big town or a small city. You could have an area that's saturated with functional medicine doctors. You could be the only functional medicine doctor within 500 miles. It really doesn't matter. You're you're somewhere, right? And you're concerned that this may or may not work because I'm in Santa Monica and there's so many functional medicine doctors, or I'm in, you know, Wyoming and there's no functional medicine doctors. Can I just put the whole location thing to rest? So, for your financial success, it matters not at all where you are physically located. We have extremely successful practices in small towns in Oregon where it doesn't look like there's a lot of patients around, but there are. And we have extremely successful practices right in Midtown in New York City where there's a gazillion people and a gazillion doctors. Okay? So, that's usually one of the first worries that people have is, "Oh, I don't know where I am if they're going to work where I am." And that's really not the case.
And then the second thing that worries people is, "Can I get a practice set up or can I grow a practice that's going to replace the existing income that I have?" So, you could be, I don't know, an OB-GYN and you're making $300,000 a year in a certain job, and you want to make sure that as you transition in Dallas to this new functional medicine model, that you can, you know, mimic that same exact income. Or you might be a chiropractor in Cincinnati, I'm thinking of real people right now, by the way, a chiropractor in Cincinnati, you're super successful, you've been in practice for 23 years, but you're a little burned out in the chiropractic thing, and you want to sell your chiropractic practice and start a full-time functional medicine practice. Like, how are all the numbers going to work? How is this going to really pan out? We get a lot of acupuncturists, and they usually want to keep doing acupuncture, but they want to integrate functional medicine into their, you know, acupuncture clinic so they can do both at the same time. So, figuring out the math on that and the financial structure on that. You may want to hold on to the current job that you have until you're sure that the functional medicine medicine thing is going to work out. There's a lot of different conundrums that people face and ask questions towards the end of this, you know, if you have a specific example that you're struggling with that you want some ideas on.
Okay, so the biggest place to start, the most important place to start, is with you. The financial management and you. And we want to avoid, um, you may already be in the situation, any kind of hint of doctor burnout due to overwork. Um, if you're in a currently burned-out position, then you know, maybe a little vague as to how you got there. But what we do see for most functional medicine practices is that doctors end up overworking due to poor business planning. I did a class, a business class, or Business Essentials class, I taught one for a group of about 20 top functional medicine doctors. This is maybe 2017. Mostly women and men in their late 50s to late 60s. And I think only like two or three of them had a retirement plan. The rest of them, their retirement plan was like, I would ask him, "What's your retirement plan?" They put their shoulders up and go, "I don't know." You know? And if you're like 67 and you've been in practice for 30 years and you don't have a lot of money saved and you don't have a retirement plan, or you have not even thought about it yet. I mean, again, some people might be like the old French guy, just work until you're in your 80s. But not everybody can or wants to do that. So, we want to make sure that your business planning is not only keeping you healthy now, but then also giving you an exit ramp. So, when the time comes, you can step back. Maybe you practice part-time. My favorite doctor of all time was this guy, Wes. Wes Bradford. He's a medical doctor. He took our mentorship class, I don't know, 10 or 15 years ago. And he had a full and rich and satisfying career at UCLA as a family, I think it's a family practitioner, but he also taught at the medical school. And then he retired. As many people do. And Wes bought a mobile home and he took my functional medicine class. And after the class, he started driving around the Greater Los Angeles area doing house calls for functional medicine. It was the coolest thing. He, I went to visit him in L.A. just to see what he was doing. He had a, I'm not making this up, he had like an RV that he would drive around and it had all the lab kits and supplements in it. He would just pull into people's driveways. And is this, you know, doctor in his like early 70s who's like the coolest, greatest guy, and doing functional medicine consults in people's houses. That was his retirement plan, you know? So, there's all kinds of different ways you can slide the slices, right?
So, there are some people who can work at this pace of, uh, you know, 50, 80, 100, 120 hours a week. There's one doctor that we worked with who was one of the Mayo Clinic physicians, um, that I worked really closely with. And he was actually working 120 hours a week and not burned out. Very, very few people can achieve that. For most of us, we need to have a structure in place that takes care of ourselves so that we can help other people. You have to sleep every night. We all know that. Everybody talks about that. But you have to actually do it. You need some meditation time. And that could be meditation. Meditation. Like, I don't, I do a Taoist meditation for a couple hours a day. A meditation could be gardening. It could be golfing. It doesn't really matter as long as you're disengaging with the world around you and you're having some time to recuperate. Of course, you have to exercise at least an hour every day. If you're not doing that, your body's going to completely fall apart. You have to cook your own food, prepare your own food. You have to shop. And in our case, we drive to this local farmers, it's not really a farmer's market, but it's like a farm stand where they have lots of vegetables. We got to drive there, get the vegetables, drive back. And that's some time-consuming thing. And then you have to have time for your friends and family. All of this, if you're working 60, 80, 120 hours a week, it's pretty much impossible to fit in the self-care things that you need. And so, eventually, usually around the 10 or 12 year mark, busy functional medicine doctors start to burn out. And we want you to avoid that. So, when we talk about financial planning and you making the right amount of money, it's not so you can buy a yacht or have a private plane. And so you can have the time that you need to take care of yourself and your loved ones and have a a full and rich life even while you're working. So, that when you get to the time when you're older and retiring, you you're not, you know, just spending the first five years of retirement recovering from what you just did to yourself.
Okay, so then the second area here, again, patients and financial management. You want to think about how much you plan to charge, or if you're already in practice, do you need to raise your fees? So, this is usually one of the first conversations we have when we do the one-on-one coaching or we do mentorship type programs with people. Um, I had to say, nine out of ten people that I talk to were undercharging. And so, one of the first things that we do is have them raise their fees to an appropriate rate. That's pretty common. I'd say almost everybody that we talk to is, you know, set their hourly rate too low, quite a bit too low. And once they do the numbers and they start to look at what all the dollars go to and whatnot, you know, they change their minds pretty quickly and put their fees to a place that makes sense. Um, there's also this concept of case value, which is like, what's the value of an individual case? You know, how much does your average patient end up paying you? And having a sense of, you know, in my clinic, it's around, you know, $4,000 to $5,000. So, I know if I'm getting 100 new patients in a year, that's automatically about a half a million dollars of income. No, so you have some math in your head going like that. And I know when I'm tracking this very carefully, which I did for many years, that, you know, we need around 10 new patients a month because a couple months maybe I don't work so much to get 100 new patients a year to generate a half a million dollars in patient fees from the new patients. And then you add in the existing or old patients that are still coming to see you. All of a sudden, you know, you've got a business that's doing maybe a million dollars or a little bit less than that. Okay? So, you should have some easy numbers like that that you can rely on so you can, you know, run projections and understand what's happening.
And then when it comes to financial management, I think there's two basic structures that we see within practices. One is that the practice is doing a complex chronic illness patient load, and that is very time-consuming and not very profitable. So, you have to be careful about how you run those kinds of practices because it's very easy for doctors to burn out when they have a complex chronic patient load. In fact, I think most of those doctors burn out again at the 10 or 12 year mark. Now, there's some patients that have some doctors that have easy practices. I don't know what's easy. Like prenatal care? I mean, that sounds kind of happy, doesn't it? Or working with athletes? You know, oh, we have a guy in the mentorship right now that works with executives, you know, and so how hard is that? And we had a doctor five years ago or so in the mentorship, this is one of my favorites. He worked, he charged, he's a medical doctor, he charged $50,000 per year to be his patient. He had 10 patients, and they were all professional tennis players. He loved his love in his life. He had 10 patients per year. That was his entire patient load. Was 10 people. Obviously, he was very good at what he did, and they paid him $50,000 to be his on, you know, be basically on call 24/7 for them. But he's only on call for 10 people, and they're all professional tennis players. And he was learning how to do functional medicine because he thought it would really accelerate his business model and give him more to offer to his tennis pros. So, there's all kinds of different ways that you can slice this. And the complex chronic illness version of this business is the hardest. And so, we want to make sure if you're involved in that now, or you're planning on doing that, that you set up your financial structure really carefully so you don't burn out. So, complex patients will find you. If you're good at lab interpretation, you will have no problem attracting complex patients. If you want easier patients, and for 10 years I had a practice that was all female hormone related. That was really extremely easy compared to complex chronic illness. You just have to market to people that you want to work with so that you don't, you know, accidentally end up in a practice that's not really what you wanted or what you attended intended to have.
And then, so we got the practitioner, that's you, taking care of yourself. The patients, how you're going to structure things. And then the practice and financial management. That all happens just through looking at your numbers and having a dashboard. Like I said, the dashboard doesn't have to be complicated. My dashboard is so simple. It's a number of new patients a month, consultation fees per month, that would be not new patient visits, you know, follow-up visits, and then supplement sales and lab sales. It takes me like, not even 30 seconds to look at it and see where we're at. And I know at the end of every month exactly where we should be with each of those numbers. And if we're not hitting that, then I hit the panic button and I start to do something to make sure that we revive the practice and keep things going. So, you need a simple dashboard. You can glance at it every week. Every Friday, you look at the dashboard and make sure that you're on track. That kind of thing. And your bookkeeper should be able to prepare that for you quite easily. It should, it not be a complicated thing to do, okay? If you don't have a dashboard, then you're just, it would be like flying an airplane without any of the instruments. I mean, you could probably do it, but it'd be a lot harder, right? To figure out what altitude you're at and how fast you're going and whatnot. So, you really have to have the dashboard.
And then financial planning tools. Most integrative medicine, functional medicine practitioners are not like obsessed by financial planning. And so, if you're not of the personality type to get into financial planning tools, and hopefully you have a spouse or a parent or a child or somebody who's got an MBA or runs a business or ran a business or just likes numbers, that can help you figure out all the financial planning part, okay? Because that's an essential component to making this happen. You have to be able to do all the projections. And I do this several times a year. I just did it, uh, like about a week ago for next year. What do we want the practice to earn? How many patients are we going to need? Where are we going to get them from? What are the marketing strategies to make that happen? What do I want to do? Boost my supplement sales a little bit? When do I want to take vacations? How do the breaks that I take interact with all these numbers? So, making sure that the whole year is planned out. And then you check in, you know, typically once a quarter and make sure that you're hitting your projections. So, like in our practice, we have, um, a spreadsheet that has all our expenses and income listed out for what we want to have. That's kind of like our goals for income and goals for expenses. And then right next to it, there's the spreadsheet for what actually happens. So, it's like goal and then actual, and goal and then actual. Goal for new patients in January, an actual. Goal for staff and salaries and actual. And so, I just glance at that and we can see, are we hitting our projections or not? If the new patient number is 15 and we projected 12 for that month, then I know that we're ahead. If the new, you know, new, if the office salary goal was, you know, $57,000 for that month and it's at $67,000, I'm like, "Oh, wait a minute. We've really got some cost overrun here. We better kind of rain things in. What are we going to do about that? How did that even happen?" Right? Maybe you gave someone a bonus or something happened that, you know, kind of threw your game off. You got to make sure that you're assessing these things on a regular basis. And and year after year after year, you have to do this, right? It doesn't really ever stop.
Okay, so let's talk about Trisha. First of all, she's just one of my favorite people in the whole world. I met her through IFM, and she ended up taking the business class. And so, when I first met her, she, you know, she and I taught up some things together at IFM too, some business stuff. She's a really wonderful woman. If you ever run into Trisha, tell her I said hi. So, Trisha was literally running herself into the ground. Literally running. I'm not saying like metaphorically. Like running so much stress, so much work. What a wonderful doctor she was. Originally trained as a surgeon, and then decided to do integrative functional medicine. And she's just so giving. She's in a small town in Texas that none of the people had a lot of money. So, she was massively undercharging and just had everyone texting her and calling her 24 hours a day and was, I don't even know, she's burned out because she's too strong a woman to get burned out, but she was overwhelmed. Let's just say that. I wouldn't classify her as burned out because she's just a fighter and she'd probably never get burned out, but overwhelmed to the max, okay? And we sat down and just had a discussion. I think there was a lot of crying, probably on both sides, you know, like, "How can you survive in a small Texas town doing this kind of a practice? What are the fees that people can afford? And how can you feel like you're not exploiting your community when you see all your patients every day when you go out in your small town?" You know, how can you hold your head high and be happy about what you're doing? And all the awkward things that happened around money.
All right, so here we do these financial projections. And if you're wondering how you can do this, what goes back to Business Essentials Bootcamp. This is one of the homework assignments for this class. So, if you sign up for the Business Essentials Bootcamp, you're going to be doing this same spreadsheet that Trish did, okay? And here it is. So, this looks at, and we don't have to go through the whole thing just for the sake of time, but bottom line was, let me get my glasses out because I can't see anything anymore. Oh, here you go. Bottom line was she was making $15,900 a month, and she was working all the time, basically, you know, like non-stop, non-non-stop. So, we had her raise her fees, but not to the point where it was inappropriate. And here's basically in her words, filling out the form. So, we also have, uh, uh, also part of this class that I want you all to take, Business Sessions Bootcamp. There's another assignment. The first assignment, actually, is business planning. The second assignment is financial planning, okay? So, this is off the business plan that Trisha filled out. Any specific competitors? What's the competitive advantage? Now, look at her. "I genuinely love these people in the relationship we forge, and how I offer myself to them is different. It is personal, direct, and honest. And this is intentional and genuine, and this is intentional and genuine, not a marketing tool. I created this practice so that I could know my patient." And this makes me want to cry. You guys use my brain, solve complex problems, and make health decisions with a patient rather than for the patient. And without insurance intermediaries, I say that I am their advocate, and I am. Is that like intense? It just gives you this sense of this woman. Ah, she's amazing. I haven't read this in a while. What challenges does your target market face? Look at this. She's under the gun. Texas is not very alternative medicine friendly. However, there's also a fair amount of anti-government sentiment. You know, she's just assessing her target market and really come to terms with who she's working with. What about marketing vehicles? "I have a huge waitlist, months long, and don't need to market." When I do, I will use. So, she had a backlog of patients that wanted to see her. She was working at her full max capacity. She was making $15, $16 grand a month, and it wasn't enough. She's like the major, you know, income provider in her family. She was, it wasn't quite enough to do the whole, "I have a house, I'm putting my kids through college" kind of thing, okay?
Um, here's another quote from Trish. "I needed to address my resistance to selling supplements and just increase the margin I accept. I feel like the mistrust of physicians is largely based in the belief that we can take pharmaceutical kickbacks. If patients think profiting off pharmaceuticals is unethical, then how is profiting off supplements ethical?" So, I am currently the only revenue source, and there's nothing left to upsell as an MD. In other words, she thought that the only way she could make money was by undercharging this huge number of people and not making money off of anything else. And that's why she was struggling because she was just working so many hours. And here's her plan. "Get with a CPA to help me order the data I already provide to show me where I am at compared to last month, last year." This was her assignment. She filled out. Also, to review tax advice. "My only employee is leaving. I need to originally find one." She has to, you know, find a new employee. That was one of her notes. Uh, let's see. "30 days: I did a clear-up duty. 60 days: consult with other MDs about supplement sales. Good for her. Lab markups. Is this legal? Ethical?" Talking to an attorney, figuring all this stuff out, okay? So, is her assignments to herself? And then who owned that assignment? And at the six months mark, at the end of the six months period, she brought her income up to $34k, almost $35k. And we did that by increasing her new patient fees because she was way undercharging, slightly increasing her membership fee, and boom, the numbers doubled. And she started selling supplements because she found a way to do it ethically. And guess what? Everybody that she worked with was dying to buy supplements from her. She more than, well, yeah, a little bit more than doubled her income, okay? Just by doing business planning and financial planning and confronting this mess that she was in. So, it's doable. And if I can do it and have a successful business, and Trish can do it and have a successful business, and hundreds of other people that we've worked with can do it, you can totally do it. This is not like a pie in the sky thing like you see on TV where it's like, "Hey, come to my conference or seminar and I'll teach you how to sell repossessed real estate or something like that." You know, this is not a sketchy kind of thing. This is, oh, I would say almost guaranteed success. Right now, for very tragic reasons, because we had, what was it? I don't know, 10 or 12 chronically ill patients that were circulating among, you know, 10,000, 15,000 functional medicine practices prior to the pandemic. And that number went up by 10, 12, 15, 20, 30 depending on who you read, 30 million. I mean, there's a lot of chronically ill people now. But there's still 10,000, 15,000, you know, functional medicine clinics max that are existing. And so, anyone who's any good at our job these days is just completely overwhelmed. And long COVID is not going away. And the whole chronic illness epidemic is just getting worse every year. So, you don't at all have to worry about the demand for your services. Okay? That problem has completely been taken off the table. You just have to pace yourself and not overwork and keep yourself refreshed so that you have, you know, the sustainability for your practice and you don't, you know, fade out yourself, right?
So, one of the most important things, just from basic business 101 ideas, is to define your niche and an area that you're going to emphasize your business around. It could be pediatrics, it could be geriatrics, it could be all things to everybody, you know, it could be like a broad all children and adults practice. It could be chronic illness. It could be women who want to get pregnant. It could be athletes that want to perform better. It could be executives that want to work harder. It could be Hashimoto's or autoimmune disease, Lyme disease. You name it. You can have any niche you want. But you want to, and it can be a broad niche. It can be a broad general practice. That's a niche too. You can have that as long as it's defined. You're really clear about what it is. And then you want to focus on the right patients to ask for referrals and the right marketing tools to ask for referrals that fit with your niche. And what most practitioners do, almost everybody, is never define their niche and just kind of see who shows up. And I equate that in these classes with, like, imagine if you're opening a restaurant. I mean, most people that open a restaurant would say, "Okay, I'm gonna like, do Mexican food." And that's pretty clear. We're not selling sushi. Or you might say, "Hmm, I'm gonna run a sushi restaurant, but we're not gonna do burritos here." But what we do as practitioners is we just sort of open the restaurant and say, "Well, let's just see who comes in and we'll let them determine what we're going to do." So, one person walks in and says, "Oh, I feel like pizza." You're like, "Okay, I don't really have the pizza stuff, but I'll go figure that out." And then the next person, you know, wants noodles. And then the next person wants a bagel and cream cheese. And that's really not how businesses work. You have to define what you're offering to people. You don't let your customers tell you what to do. And again, it can be a broad thing. It doesn't have to be a super narrow niche. Although, you, every practitioner I've seen with a super narrow niche is super successful. The first one of these people I saw was over 20 years ago. This guy named Dave, and he decided that his niche was going to be H. pylori. And I remember thinking, "That is the stupidest thing I've ever heard." I was just like, "Who has H. pylori? I mean, how could you?" And he had a very successful, huge business just treating H. pylori. That was the only thing that he did. We had a doctor that took my class maybe four or five years ago who's in the Washington D.C. area, and she decided to focus on diabetes. That's it. She's just going to work with diabetics. And super successful in her practice immediately because there's a gazillion diabetics, right? It could be Parkinson's disease. You can really have the niche that you want, what you're passionate about, what you're drawn to. I would not pick a niche because you think, "Oh, there's a lot of people in my area that have this problem." It's just whatever excites you the most. And then people are going to find you for sure. People are going to find you. And once you have that, then all the business models and financial models start to take shape because you know exactly what you're doing. You know, like I said, what the case value is, right? So, the average Parkinson's patient is going to require this much care, and you can start to structure the business and plan the business in a rational way. Um, and you want to see at some point every week, you need to take off your doctor hat. You take the doctor hat off, put it on the table, and put on your business person hat, you know, at least once a week. And start to see your patients not as people who you compassionately want to save, as we just saw Trish so eloquently describe, but as customers in a business, just like you're running a restaurant. Okay? And then you can realize, "Oh, I don't have to treat everyone for everything. I don't have to be an expert at everything. I can kind of refer people out. I can be compassionate and rational at the same time." That's really what this business requires. I'm not saying it's easy to do this, but that's really what it requires to be successful.
So, you also want to be able to forecast. So, you want to learn how to build a profitable clinic model. What that's going to be. And I can tell you the most common mistake that we see, and almost everybody does this, is to have a successful clinic, and you've got plenty of people coming in and plenty of income coming in, but you have a really high overhead. Therefore, the key, once you've got your clinic built up and are successful, is to keep the overhead extremely low. And that is the most difficult thing to do. One of my good friends, I won't mention his real name because this is embarrassing, let's call him Roger. That's not his real name. Roger, an amazing doctor from Ohio. And he told me one time, we were out for dinner, integrative functional medicine doctor in practice for 25 years. And he told me, "You know, Dan, I've never fired a staff member." And I was like, "Roger, what?" He's like, "Yeah, I've never." And we talked about it. He's like, "Yeah, I've got like five or six staff. I don't really need." This guy was so nice that he just kept people around even if they really weren't needed anymore. He just couldn't fire anybody. And you can imagine his overhead was just massive. So, he was working probably at least two days a week just to pay for the staff that he didn't need. We've straightened that situation out, and he ended up with a, what was really a part-time practice. Now he's working like two days a week and probably making about the same amount of income as he did when he had a high overhead clinic. We had another doctor I consulted with at one of the IFM conferences, and she had a half a million dollar business loan that she took out. And she immediately went and rented out an office that was like $15,000 or $20,000 a month. That was empty. Had no people and no patients. And she was running out of money because she had been doing this for like 18 months or something and hadn't really built her clinic. I mean, she got, she created this extremely high overhead system before she had any actual money coming in. So, you got to keep the overhead low. And if you keep the overhead low, again, as I mentioned earlier, the patients are out there. So, you can have plenty of people coming in to see you. That's not going to be a problem. Most common mistake: high overhead. So, you're successful, but you have a huge amount of expenses every month. You serve a large number of patients. You have a huge staff. And then you end up with very low dollar amounts. Okay? And that's not what we want. We want to avoid this. Um, and a lot of times these clinics don't have any clear offerings or model either. They're just kind of all over the place. And you look at their website, and they're offering like two pages worth of different.
Treatments, and you really can't tell what kind of a restaurant they are, right? Because they're selling like pizza, burgers, Chinese food, Japanese food, Indian food, Pakistani food, you know, and Hawaiian food. And it's just like a big mishmash of things you can't really sort out.
So when I was coaching with my business coach in the early years, Lenny Coco, who's retired now, which is sad, but he's living in Hawaii and he's really happy, so that's good. But he was my main coach for a long time, and every session that we would have, three times a month, he would say, "Low overhead." And then I built a high overhead clinic.
And, um, one of the coaching sessions, Lenny said, "You know, low overhead means low overhead." And then it hit me, and I got it. I was like, "Oh, he meant low overhead on his time." And I was thinking low overhead meant, "Oh, you know, I'm paying this light bill and we'll turn the lights off so we save, you know, seven dollars a month on electricity."
Low overhead means you keep your margins between 40 and 60 percent, okay? And that's a really easy piece of math to figure out. If you don't know what a margin is, then it's the profit margin, right? So if you make, let's say, a thousand dollars and 500 of that goes away to overhead or expenses like staff and rent, then your margin is 50. You're keeping 50 percent, and 50 percent is going towards expenses. So a margin, any clinic that's running successfully should be between 40 and 60 percent, okay? And as you are in practice longer, your margins should get better and better and better.
If you're running a Telehealth practice, you could easily beat, uh, you know, 40 percent. You could get your expenses maybe down to 20 percent if you don't have to pay rent and things like that. So in the Telehealth world, things are a little different. But if you're actually running a brick-and-mortar clinic, the margins, keeping the margins between 40 and 60, is right where you want to be, okay?
Uh, then also, uh, for low overhead, you want to use reproducible systems, follow-up systems, technology, obviously, online ordering and text messages that go out automatically to remind patients and stuff. And really, your main expense is always going to be staff. So anytime you can save on staff expenses, you're going to be saving money and lowering your overhead.
And then keeping your inventory really small, or just using Fullscript. I mean, pretty much everybody uses Fullscript now anyways. I wouldn't even bother selling supplements out of your clinic unless your supplement sales volume is really high. But if you're selling a couple grand a month worth of product, it's, it's probably just worth using Fullscript so you don't have to worry about the inventory part.
And then not offering every type of lab test in the world, you know, just having a menu of labs that you recommend so you don't overwhelm your staff or your patients with too many little things here and there. Um, and making sure that you refer patients when, when it's appropriate, refer them out.
So there's financial planning terms that we should all be familiar with, things like revenue and cost of goods, gross profit, net profit, profit margin that I was just mentioning. And a lot of us aren't familiar with these terms. And so, you know, just picking up a good business book, business planning book, and starting to read more about financial planning and business planning can really help.
So I created this formula. Not this formula, I think I inside this one, right? But anyways, the form, this is the force of gravity. Um, I really enjoy studying and reading about Einstein, so I just thought I'd put a slide up that has to it the gravity force. But anyway, so the force of gravity and who knows how this was figured out, the gravitational constant, I don't know how that got figured out either, times the mass of the object, right, times the mass of the other object, divided by the distance between the objects squared. So I don't know, pretty much everybody in physics agrees that this is a real thing. It's a formula, it's sort of a tried and true formula.
So I create a formula for us. This is completely made up, but the idea is to get, get your process thinking, and you should fill out this formula. I strongly recommend you do this. So quality of life is the Q, and it's pretty simple as a formula. It's your income less your expenses divided by your time, the time that you work. So income would be income from all sources. Expenses is every expense you can imagine, including your taxes and all that. And then time is the number of hours that you work.
But the number of hours you work, I'm defining broadly. That includes when you're in front of a patient, when you're filling out forms, when you're online, when you're researching something, when you're doing an insurance thing, any kind of administration. If you're even just sitting there thinking about your clinic, that counts. So any amount of time that you put in, not just patient hours, but all the hours.
And so I've run this equation with hundreds and hundreds of doctors. I've gotten some doctors that are down at like $18 or $20 an hour. So they see patients 30 or 40 hours a week, they got another 30 or 40 hours a week of administrative work and insurance paperwork, and they're making a couple hundred grand a year. And when you look at all the hours they're working and you divide it by a time and all their expenses, you know, it's not uncommon to see doctors making $20 something bucks an hour. More often is maybe $50 an hour or something like that, but it's not a lot for a lot of us, okay?
And so if you see that, let's say you're in a job now and you look at your income, you take away all the expenses, then add up every single minute that you work, even the commuting time, everything, everything that has to do with work, including the commute to work and back, you see all those hours, you see what you're making per hour, then you can start to do some financial planning around how to transition into a functional medicine practice, okay?
So what I mean by that is we'll have, let's say, a typical practitioner making $250, $300 grand a year, something like that, but they're working, you know, 2,000 hours a year. And then once you take away their expenses, you get a clear hourly rate. So then we can look at, okay, if you're going to set up a new functional medicine practice and make this transition, how can we match that hourly rate so you're making the same amount of money per hour or more doing functional medicine as you were in your old job? That's kind of what this whole equation is about, okay?
So let's look at another version of this, a little more detail. So we're looking at income less expenses, you got to include taxes in this too, okay, over hours worked. So if you're bringing in, let's say, your total income is $800 grand a year in your clinic and your expenses are $320,000 a year to run that, and let's say you end up paying $200 grand a year in taxes, you're working a thousand hours a year, you're making $275 an hour, okay? That's the idea.
That you should do this for your own current self, and then you should figure out in your financial planning how you want the math to work, how much per hour do you want to make? And this is a call out for all of you that are a little bit more mature in your practice and don't have a lot of retirement savings yet is that if every year you put, let's say, $150,000 to retirement, you get to keep that money. You can't spend it now, but you put it in a 401k or you put it in a pension plan, you get your CPA to set up your retirement. So that $150k, okay, comes right off of, uh, your total income, and that's going to lower your taxes quite a bit.
So now all of a sudden you're paying $65,000 less in taxes. That's almost half of what you're saving anyways, right? So if you can afford to set up a retirement plan, then you can really crank up your hourly rate just by making that one financial move. Now you're making $340 an hour instead of $275 an hour, and all you did was save $150k and put it in retirement and lower your tax bill.
So that's one of the most effective income enhancing strategies is simply tax planning and things like retirement plans. If you're not putting away, if you don't have a pension plan or a 401k, you know, right after this call, email your CPA and say, "Hey, I want to meet with you and talk about what are the best financial retirement, you know, instruments for me because I want to put the max the way that I can." And I've been doing this, I don't know, since I was 30, 35 maybe, and it's a little bit of a sacrifice every year, you know, maybe I can't get a fancy car or whatever, but whatever the money goes into the retirement fund.
And now that I'm almost 60, I'm pretty comfortable financially having saved all this money. And again, if you put $150k into retirement, almost half of that you're going to save on your taxes. Otherwise, you'd be paying in federal and state taxes. That money would be going out, right? Because it's all tax-free, and then of course, it builds tax-free as well.
So the two biggest strategies that can move the needle quickly would be setting up retirement and pension plans for yourself and putting as much, maxing them out. And then keeping your staff costs low. Those are the two things that move the needle dramatically in that direction. And then in the other direction, on the plus side, is taking your hourly rate and bringing it up.
I don't know, most doctors that I talk to probably end up increasing their hourly rate at least $100 an hour. You know, sometimes people like Trisha are like, down at $150 an hour and goes to $300. So she probably doubled her rate, you know, to what was, you know, acceptable for her area. That's why she doubled the income, right? Obviously, she doubled her hourly rate to make that happen and started to sell some supplements.
So depending on where you are, you know, there's different hourly rates that are appropriate. Um, people may charge $700 an hour in Manhattan, but you're probably not going to get away with that in a small town in Texas.
So a couple other things to mention, then we'll go to questions. All right. One is the poverty mentality that, you know, all of, all of us, including myself in this, have this inherent discomfort with profiting by treating people who are sick and vulnerable. And that's just not a great feeling. You don't feel like you want to be making money and having this luxury life while all these people around you are sick. But you have to create a profitable business, and that's going to allow you then to do the other work in the world that you may want to do.
So in my case, I had a very successful and profitable business. We were bringing in, you know, eight, nine hundred grand a year, maybe a million on a good year. My overhead was like, you know, 40, like it should be. So I was bringing in, you know, a fair amount of cash every year, even after taxes and all that stuff. And what I did was I cut back my hours and I started the kalos institute, started training doctors. And for the first 14 years that I ran the Kalos Institute, it lost money. It lost money every year. And I financed it with my income from the clinic.
So yeah, I worked my ass off three days a week, made all this cash, and put almost all of it. I mean, I saved for retirement, okay? I did that. That always came out. But after that, I put all the rest of the money into building the Kalos Institute and all these classes that I do. Again, we lost money at the Kalos Institute for 14 years in a row. Um, I was just passionate about teaching other doctors how to do this work. So that's what my clinic profitability allowed me to do was help a lot of other doctors. You might be like Bill Quill, maybe you write a book, you know, write yourself a New York Times bestseller with your extra time. Whatever it is that you're going to do to help people, it doesn't have to just be in the clinic.
And there's the concept of, you know, you can be greedy, but there's also just a general social obligation to be profitable so you can continue to stay in business, so you don't burn out, so your staff can have a job, so your community can benefit from what you're doing, right? And so the profitability is not a bad thing. Nobody that we're talking about is buying a jet or a yacht or something, right? We're buying time back and buying the ability to help other people like I have with the training programs, or like you might have with a book or teaching or whatever you want to do.
Before we get to questions, for those of you that joined us late, we have the Business Essentials Bootcamp coming up. You scan that code, you can get a discount on it. It's a couple months of intense business planning and financial planning. Maybe there's a little crying and a little drinking of wine that goes into this because it's an emotional subject, but we really want to get everybody to the point where they can see their financial future and plan it, and they know that they can run a clinic that's profitable.
If you're already in practice, we have a lot of people take this class. They've been in practice for 20 years, and they just need a reset, reboot, fresh look at what they're doing, and streamlining and more efficiency. Usually, the mature practitioners who have been in practice for a while have practices that are kind of bloated and a little out of control, and they need to really take a few months and and and get, you know, back on track to where they should be, okay? So that's coming up soon. And then if you don't have a Rupa account yet, you can scan that and sign up for Rupa.
All right, so let me open it up for questions for a few minutes here. If anyone has typed in a question, let's see what we got. Uh, here. So let me see. I'm reading out the questions here. Okay, so for those of you that are health coaches, or physical therapists, or social workers, or pharmacists, you know, maybe not licensed as a chiropractor, acupuncturist, or medical doctor, or nurse practitioner, but you still want to start a practice. Um, we have, in all these years I've been doing this, let me just think about personal trainers, dentists, health coaches by the gazillions. We have had several electrical engineers take by different classes.
So you can be coming from a variety of different backgrounds. And if you get certified in the right way, you can have a functional medicine practice. You may not call it functional medicine, you may call it functional nutrition. But with the right kind of, uh, you know, certifications in health coaching and whatnot, you can definitely run it legally. And you have to talk to a lawyer about that. We have a really wonderful attorney that advises people on this. His name is Peter Hoppenfeld. Peter Hoppenfeld. And so you have a big legal bill, you get set up so you can do this legitimately. You can do some labs, you can do some supplements. And maybe you're working under the auspices of a practitioner who's licensed, or you're working as a health coach directly. As long as you have the legal structure set up, it's absolutely doable.
Okay, so probably 20 or 30 percent of the people that we work with are not licensed as a doctor, but they're also not treating Lyme disease, right? They're not ordering heavy metal detox tests. Um, they're staying within what's rational and logical and legal for them to do. But most of functional medicine is lifestyle coaching, okay? And the small amount of it is supplement recommendations and lab interpretation. And as long as you stick with the labs that are lifestyle oriented, these are the ones that I teach, like adrenals, microbiome, metabolomics. These are not medical tests. You're not looking for medical problems. And you get Peter Hoppenfeld to set you up legally, you have all the disclaimers, and you see exactly what lane you have to be in and what lane you cannot go in, then you can do this successfully, okay?
Uh, and if you guys have questions about that, again, it's Peter Hoppenfeld is the attorney that does that, or you can take the business boot camp and I can talk to you in more detail in that class. Let's see here. Uh, average you should be charging per hour? Well, that depends on where you are and what, uh, you are, you know, um. So if you're a chiropractor, acupuncturist, medical doctor in an urban area, I'd say the hourly rates are probably at the low end $3350, the high end $550. If you're a health coach or in that position, then the low end rates are probably a hundred, the high end rates are probably $250, something like that.
Uh, oh, and then the question, good question. You can release about programs. Um, there are a lot of very successful people that do three months or six months or one year programs, or they do membership practice as well, where they charge $75 bucks a month or $4,000 a year to do these various things. Um, you can have a really successful clinic that way where you know exactly what's going to happen in the future. So like, there's another doctor I know, um, she's in the Sacramento area, Christine. And she has, I think, around 400 patients, 300, yeah, around 300 patients, and they all pay $4,000 a year to be members. So she knows January 1st that her clinic just brought in $1.2 million dollars. Done. And then they pay for extra services on top of that. That's a great business model if you can pull it off. It takes a very sharp businesswoman to do something like that. And Christine Burke is nothing but a sharp businesswoman, um, way better business skills than I have. And then she's really into it, she loves running the business, and she enjoys it too. It's fun for her.
So if you have really great business skills, you can do a membership practice very successfully. If you're just starting out, your business skills are maybe not, you know, at a 10 on a 0 to 10 scale, then I would stick with hourly rates until you really get your feet wet and you really know what you're doing. All right. Um, but the most, most of the memberships that I see range from $3,000 to $4,500 a year, unless you're doing executives, in which case they can be anywhere from $10 to $20,000 per year per person if you want like an executive one, okay?
So let's see again, setting up group medicine programs and membership programs, talking about that a little bit. Um, so, oh, and the class and the boot camp, we can talk about any business models that you want. We have a lot more time and you could submit questions and we can go over it more specifically. Um, so the business models for setting up a group medicine program and membership programs, you have to calculate everything that you're offering to the person. So we had a doctor a few years ago, wonderful guy, but he was offering a $400 a month membership program, but he was giving people like a thousand dollars a month worth of stuff. So you really have to know your business model, know your expenses inside and out. It's pretty hard to do a membership model from scratch. If you've been in practice for a few years and you know what your expenses are like and you know what people are willing to pay, I think it's much easier to kind of graduate to a membership practice than start with one, unless you're like Christine Burke and you're just like a super smart business person and you can calculate all this stuff, you know, before.
But again, there's another key question here. I would say a functional, if you're good at functional medicine and you know how to interpret labs, uh, you know, I think $300 an hour is at the low, low end. I wouldn't go below three. People start to think that, you know, you know, can I get suspicious? Even if you're in a small town in a community that doesn't have a lot of money, people will travel to see you, you know? Um, I see a little bit more questions on the monthly membership model. So like Trisha, that's what Trisha ended up doing in Texas, right? She had, I think it was like $75 bucks per person per month to join your practice. And then where she made all her money and why she increased her her income so much was because she doubled her hourly rate. She kept the monthly membership low, but that didn't get you anything other than access to her, right? So that's $75 a month just meant that you were one of her patients and that you could then schedule time to pay her hourly fee.
Some of the membership practices I've seen, like Christine Burke's, you know, for the $4,000 a month, you get unlimited health coaching, you get health classes all the time, you get a certain limited amount of time with the doctor, maybe you get some supplements or labs, depending on how people structure it. And so some people structure memberships where you get a preset package every year of lab testing and supplements. But again, you got to know the numbers and math on that. Really quickly, you're going to lose money. So you have to be a little bit careful, right?
Marketing methods that are cost effective. So, uh, uh, marketing methods that are cost effective. So you don't want to spend a lot of money on marketing in general. You want to be doing most of your marketing through education. That's really the safest, best way to do it. And what we see oftentimes is that people are just spending way too much money on marketing. It's just not coming back to them, especially things like social media and buying Facebook ads and stuff like that. It's pretty hard to make those kind of models work, okay? So most of the marketing that we see that's most effective is almost cost-free because it's you doing education, etc.
Let's see. Uh, books that have helped me the most? Well, I don't know. I've read a lot of business books. I would say just pick up business books that have topics that attract you and read one a month, you know? Um, I've read business books on like human psychology. Obviously, you need to read a lot about sales and how to structure businesses. But sales is probably a good place to start, okay?
Are these boot camps offered during the mentorship program? Yeah, so people have, we have a fair number of mentorship students that take the year-long mentorship and also do the Business Essentials boot camp, probably like half, because they want to work on their business both, you know, clinically. The mentorship teaches lab interpretation skills, patient communication skills, and teaches you a business model to use. And then the business class is just straight up number crunching and how to do the numbers part. So they complement each other.
Um, yeah, so public speaking for sure. Internet advertising, I would say, you know, don't do much of it. And even if you're really savvy in that regard, it's pretty hard to make that work. I'm going to run out of time here. I don't think I'm going to get to quite all the questions. Uh, but I hope you guys do join us if you're interested. And if I missed your question, then grab the opportunity to take this class. It's not very expensive. You can scan it and see the price, but it doesn't cost that much. And, um, I hope to see you at the next one of these. Okay, thanks everyone. Bye for now.