I have mentioned many times throughout my articles of the concept of “auto pilot” status in business. Auto pilot status simply means that your practices expenses are being covered 100% by your practice’s revenue. This is an AWESOME milestone to hit when you first start a practice.
When you start your first nurse practitioner practice, you will usually have to pay for everything out of your personal pocket unless you obtain a loan, which I think is a bad idea if you are operating a niche cash practice. Putting your personal money into a business can be stressful, but it is a worthwhile investment. The return on investment (ROI) for a medical practice is very high. You can invest $5,000-$10,000 into starting a practice and potentially generate HUNDREDS OF THOUSANDS of dollars a year from that investment. It is literally the best investment you can make. It will out preform the stock market or real estate more times than not!
Not only will you be investing into the initial startup costs of the practice, but you will also need to be spending your own money on the operating expenses for the first 1-3 months. You will have utilities, rent, marketing, possibly payroll, and supplies to cover. These expenses are generally covered by the practice’s revenue, but during the initial 1-6 months of opening, often times the nurse practitioner entrepreneur will have to cover some of these expenses out of pocket. A very stressful time, but a NECESSARY one! This is what separates the successful entrepreneurs from the failures: those that remain PERSISTENT.
Regardless, you need to account for the first 1-3 months of operating expenses when you are budgeting for your practice.
Initial start up costs + 3 months of operating expenses is a number you need to have in the bank or have an income source to cover them. If you do not, you are setting yourself up for possible failure. Remember that.
The only practice I ever had to use personal money to start was my first business. This was an opioid addiction treatment clinic, or a Suboxone clinic for all intents and purposes. I ended up spending approximately $7,500 (I think, this was 3 years ago) to start this clinic up and keep it operational for the first 3-4 months. I had to pick up extra ER shifts to keep my new practice afloat. It sucked! I was working my tail off and I was making no money.
Finally, around the 3-4th month, I started making money and the expenses were being covered by the practices revenue. By month 4-5, I no longer had to put my personal money into this practice anymore. It was on auto pilot mode!
Now remember, this was my first practice and it was an absolute MESS. I was very unorganized, and I made the mistake of accepting insurance… I had no idea what I was doing because this was my first real business. I learned many valuable lessons from this first practice and now, I can get a practice up and running and profitable very quickly because of the experience. I also only use pre-tax business income to start businesses now instead of personal money, but the same principle of auto pilot exists. I want the particular business to pay for itself within 3 months.
Something great happens when you achieve auto pilot status. The practice begins to run itself. Money comes in, and money goes out. Most of this is automated anymore with credit card processing and automatic bill pay. The practice owner doesn’t even have to think about it, they just need to keep track of it. It reduces the anxiety and stress of starting a business significantly.
For the nurse practitioners out there that are contemplating starting a business or for the ones that want to expand, keep the goal of achieving auto pilot status as one of your top priorities. The best way to do this is by having a high margin and low expense practice.
If you have a lot of expenses with your practice, then it will take longer to achieve auto pilot status. If you have low expenses on the other hand, then you can achieve auto pilot status in a VERY short amount of time. It is that simple.
For example, my medical cannabis clinic has extremely low expenses. We are talking about $1,500 a month at most. I achieved auto pilot status in a matter of 1 month with this practice. My men’s health practice has more expenses because I have a medical assistant on payroll. When I first started it, expenses were approximately $3,500-$4,000 a month. This is still relatively cheap in terms of a medical practice, so I was able to achieve auto pilot status by month 3 without an issue.
I am opening my second men’s health practice (make sure to follow the story HERE) as I type this, and my initial start up costs will be approximately $6,000 and operational expenses will be $5,000 a month (this is higher because I am going to be spending more on marketing). Therefore, I estimate I will be on auto pilot status by month 3 with this practice as well.
It is very important to figure out what your start up and operational expenses are as well as the projected revenue. If you do both of these things, you should be able to get a good idea on when auto pilot status is achievable. This is critically important. It is one of the biggest milestones of your practice!
Once auto pilot is achieved, this is when you begin to make money, which is the whole point of starting a business! Keep expenses low, keep your margins high, provide convenient care, deliver value to your patients, and you will achieve auto pilot status in no time!