April 1, 2020

Financial Management During The COVID-19 Pandemic With Eric Miller

PTO 94 | Financial Management During COVID-19


Private practice owners need to make quick decisions in order to mitigate the negative effects of the COVID-19 pandemic. There isn’t a how-to on this disruption other than to take some logical and quick steps. In this episode, financial planner Eric Miller of Econologics (Private Practice Millionaire) talks about those steps that we need to take now and how to strategically ramp up in the future. Obviously, as the owner, your sole purpose is to keep the business going, so now is the time to take action in order to stay afloat until things turn around, no matter the time frame.


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Financial Management During The COVID-19 Pandemic With Eric Miller

I'm bringing back Eric Miller because we are all worried about money in the middle of the COVID-19 pandemic. I don't know a single owner that hasn't significantly slowed down or shut their doors altogether. The concern immediately goes to not only your employees but also your money and your financials and if you're going to be able to stay afloat when this thing does get back around. Eric, you've been a multiple-time guest. Thanks for joining me again. I appreciate it.

It’s my pleasure.

I've enjoyed the information that you've put out through Econologics, your webinars, the downloads and all that stuff. I figured it'd be great to have a talk with you on the show so we can work this thing out and share some valuable information with the owners.

I know a lot of practice owners have a lot of uncertainties happening. Anything we can do to make them feel a bit more stable in these unstable times.

A lot of times, some guys are more prepared than others financially for an expense like this. It's coming as a shock to all of us. What are some of the first things we need to do right off the bat as we're addressing this as owners?

The first thing you have to do is you have to look at what the condition is that your businesses and your finances are in. The best word is confusion and uncertainty. That is the condition. The way that you handle a confusion is that you have to get rid of all the uncertainties that you have. What I hear most when I'm talking with practice owners is that, “I don't know what I'm going to open. I don't know how I'm going to pay my bills. I don't know how this is going to affect the longevity of my practice.” There are many of those. That's what causes the fear and the anxiety and all the things that you don't want.

One thing I do know about the condition of confusion is that it breeds bad decision making and we don't want that. My advice is let's clear up some of the uncertainties. Get everything out of your head, get it on a piece of paper and try to figure out like, "I need one piece of certainty that I can establish. I know how much I have in my bank accounts. I know how much accounts receivable I have coming. These are my open credit lines." You're trying to get some stability that you can navigate without making bad or rash decisions in this timeframe.

If it's not uncertainty, it's fear, which also can lead to bad decision making. Once you can get your hands on some real data and information that is true, that helps you then make the decision and you've got to start making decisions. You can't wait for the next update. You can't wait for the press briefing. You’ve got to start making some of these sure financial decisions based on the true data that you have to start overcoming the uncertainty and fear and start developing a plan not only for the now but for the future as well.

The way that you handle a confusion is by getting rid of all the uncertainties that you have. Click To Tweet

Another point to that too, because there's information coming out fast, it's a mistake to start trying to look 4 or 6 months in the future. That's going to mess with your head when you do that. You have to say, "What do I have in front of me this week?" and plan out that way. Another week comes, "Here's my battle plan for this week." Because there's always going to be new information that's coming, it would be better to navigate that way. Otherwise, your attitude and your emotional tone level is the key. If you're an action and if you're like, "We're going to do this," you'll be imaginative that you can be creative. If you're in fear, anxiety and all those negative things that creep up, that doesn't spark creativity. Now more than ever, you need to be creative.

Keep your horizon to 1 to 3 weeks ahead of you and deal with it when you get there. I don't want to get too off-topic because I want to talk immediately about what things people need to do. After you've handled some of those things, think about maybe how this company to look in the future. If there are some things I want to change, do you allow time for that?

You're doing both. You study history, no great movement or organization ever made strides when everything was hunky-dory and rich and prosperous. You can make some big strides as an organization when times are in distress like this. What you would need to do would be the exact opposite of what everybody is telling you to do, which is a contract, close down, don't see anybody and don't promote. Those are the things that if you can do the exact opposite of that in some form, then you can become a beacon to your community and your patients and be like, "These guys were willing to provide good data and information and provide a safe place we can still get help." Make no mistake, the help that you provide is much needed in terms of what physical therapy can do for the human body.

It's interesting as people were considering shutting down. The information that I provide to my clients was don't stop promoting. Your message might change and probably should, but don't make your promotion and marketing budget one of the things that you cut. You still want to get the message out. You still want to keep in touch with your patients and your physicians and all your marketing vendors. Change the message if you need to. If you have some extra time, take an opportunity to redesign and rebrand a little bit or something like that but don't stop promoting and marketing. Find another way to do it.

You want to make sure that you're over-communicating not under-communicating. I'm having all my advisers, myself, I'm calling everybody, every client that I have because I want to make sure how they're doing and that they know that we're trying to figure out ways that they can navigate this situation. It's not easy for anybody. You can establish a lot of goodwill with your people and enhance that by doing that.

Another thing that came up in a mastermind group we've taken from physicians, we get referrals much from physicians. How many physicians are getting calls of, "What do you guys need? What can we do for you? Can we come over?" If you have a massage therapist on board or can hire a massage therapist to go over and one-on-one, not in a group, but provide massages to an overworked staff or something like that. What can you do for those physician groups who are having to stop all elective surgeries altogether? What are they doing and how can you help in that situation?

I'm seeing a lot of people that are giving stuff away. You have to do that at this time. We look at profits and revenue. That's important but at this point, you’ve got to be a beacon of help. That means that maybe I'm given a course away or I'm giving something away, a month off, whatever it would be. We want to help you. You have to do that.

When someone comes to you and as you're doing these interviews on shows, what's the first step now to handle things financially?

From a business point of view, the number one responsibility of the owner is to make sure that the organization can stay there. It means that financially speaking, you have to make probably some of the toughest decisions you've ever made in your life. Likely, a lot of practice owners have never been in a situation where you had to furlough and lay off 50%, 60%, 80% of your staff. Unless you have few months of business reserves, there's no way you can carry that payroll when no patient visits are coming in. You have to act fast on that one though. You can't wait because patient visits are dropping percentage-wise, 70%, 60%. They're dropping fast because people are scared. You can't carry that payroll if you don't have the patients coming in. You have to act fast on doing that. It's a tough thing to do, but you’ve got to make sure that you preserve the organization. Work on a skeleton crew. Keep your key people, keep your producers and the people that are going to help you fight your way out of this one.

PTO 94 | Financial Management During COVID-19
Financial Management During COVID-19: Make sure that you're over-communicating, not under-communicating.


Keep your billing people because that's your money lines right there. You need to keep those. Keep some good executives and some key producers that you need. Go down to a skeleton crew and try to produce the basics of what you need that you can keep the organization there. I don't know how many patients visit that is. Each practice would be different, what is the minimal amount of patients that we have to have come in here so that we can keep the organization flowing at least in that respect?

Have you recommended the owners get in touch with their CPAs and rework their break-even number? “What are my bare minimum expenses?” It's probably a good exercise for owners who don't have a lot of accounting knowledge and aren't good with QuickBooks and whatnot, but sit down with the CPA and say, "Walk me through it. What are my bare minimum expenses? What is my salary need to be? If I'm open, how many visits do I need to squeak out to break even and stay afloat?"

That's part of the getting rid of the confusion because you would need to do something like that. That is one of the smartest things you can do, it's going to put your attention on your money. In this time, you need to stay connected as far as who you have on your Rolodex, who I'm talking to you. You're talking to colleagues a lot and your associations. Like the show that you're doing, there is good data is coming out this. People in the news media, you go anywhere else I'm not certain that's necessarily good data, but the associations and your other colleagues, good data is coming from there. Your bookkeeper and your accountant because they're going to know your income and your expenses and they'll help you rework that make-break number. You want to get in touch with your banker because you may need to look at credit lines, see what you have available, see if there are different ways that you can access credit that maybe you didn't know about that you could.

Your financial advisors, if you have types of investments that you may not even realize have some liquidity features to them that you can access. They've made some changes with the Stimulus Bill that you can access qualified plans for some time if you need it. It's time to stay in communication with your financial team and your billing department. What do you have coming in? Whatever is in your business checking account, you have whatever accounts receivable that you're going to have coming in. You should know that and whenever your business credit lines would be. Let's get some certainty on what that is. I know what I'm going to have to do because your reserves and your credit lines are gold.

For me, as you're talking through that, I can see that if I knew I have this much cash available to me, even if it's in a line of credit and my accounts receivable and my checking account and then I know what my bare minimum expense level is, I know how many weeks or months I can ride this out. That's where I get some certainty and that's where I start getting more confident and less fearful because people might have more than what they think they have. They might be looking at their bank account and thinking, "This is only going to get me through two weeks." Whereas if they've done some proper planning and gotten a lot of credit ahead of time, they have access to that. Could people tap into IRAs possibly?

The Stimulus Bill came out and there were some provisions in there that if you were affected by the Coronavirus negatively in some way, shape or form, that you can get access to $100,000 of your qualified plans. Everyone's accounts got hit 40% and you're taking money out.

You don't want to sell low.

I'm not sure that's a smart thing to do. They have all the relief loans and grants that are coming out. I'm going to touch on that because my advice is that the devils are in the details on that. Be careful before you sign your name to something because when credit and free money is made accessible, it usually has titanium strings that are attached to it. I don't want people to start getting loans and grants and money and keep people because you think that you're going to get this money or you may be able to hit the stipulations that they're going to have of requirements before they forgive it. I would caution people to not do that. Get your mini make-break done. Know what your expenses are. Try to see enough patients ride this wave through so that way you don't come out the other end with $100,000, $200,000 of what you already have in debt. That's the problem that we're trying to solve. I don't want that for people.

The condition of confusion breeds bad decision-making. Click To Tweet

What have you heard about people putting in claims with their general business liability, insurance policies or anything like that? Have you heard anything on that end? Whether that it's going to work out for people's favor?

Unfortunately, I have and insurance companies aren't dumb. If you remember the SARS virus that hit, insurance companies went back and rework that business interruption policy that this thing wouldn't necessarily qualify for business interruption insurance. That doesn't mean that if you did have it, you shouldn't take it to file a claim. You should do that anyway because who knows. From what I'm hearing, most people that have that type of insurance, this necessarily wouldn't qualify because they're saying that there has to be actual property damage for something like that to occur. That's hard to quantify. I wish there was better news on that, but I don't think there is.

I like your advice though about being wary of the SBA loans and grants that are out there because you can imagine. You're working with the government and the time and effort that it's going to take for this to happen and to get those funds, I can't believe that it's going to be quick and in a timely manner.

You don't have time to wait. You have to act fast. The speed in which you make decisions and doing it with good data, which is why you want to get out of this uncertainty is paramount. Trying to carry all this expense on your back, it's going to force you to potentially have to dip into your personal reserves. A lot of people don't even have that. It's something I would be much wary against doing something like that.

Number one, get some true data. Put some money together or figure out where you're standing financially and what you have access to financially. Stay in communication with all the important people. That includes fellow professionals and peers. I don't know if you can trust Facebook groups because you could get a lot of fear out of those. You pick and choose the right one. Stay in close touch with your vendors. Don't give up the promotions and make fast decisions.

There was one more point I was going to make. A lot of people have loans and leases and such. Get in communication with them. I'm sure you can get some relief, deferral payments or something like that. Don't be afraid to call them up. Everyone's going through the same thing. Most of them are going to be open to it and say, "I may need 2 or 3 months deferral and let's work together on this." If you don't call them, then that's where you're going to get in trouble.

Look at any of your expenses and feel free to call them. I say this because I know that they're forgiving some of the student loan payments at this time and deferring interest and whatnot. As a landlord, my mindset and the other landlords I'm talking to is I'm still going to send out the invoice until you call me. If they do call me, I don't want to lose your business. I don't want you to go under. There are a couple of things I'm willing to do. If you want to decrease your rent payment and then spread that out over the next twelve months, that's fine. If you want to take this month's rent payment and add it to the end of the lease agreement, that's fine. If you want to draw down from your security deposit that you're already put in and pay that back over time. I'm open to all of those things. If you're coming up on a renegotiation of a lease, now is the time to do that renegotiation and see if you can get some of those free months. If your lease is coming due here, it's the time to call your landlord and say, "Here's my situation. I need some help. I need some relief. Let's start negotiating so I can get some immediate relief and I will pay you back if you help me through this."

It's amazing what will happen if you get in communication because nobody wants to lose tenants. As a landlord, especially if you have businesses in your building, you care what happens to them. That's your lifeblood too as a landlord. You're going to be open to any creative methods, but to your point, if no one calls you, you're like, "Rent is due. I need it." That's a good point.

Outside of salary and payroll, some of your bigger expenses are going to be exactly that. It's going to be rent. It's going to be insurance payments, debt payments that stuff. Some of those can be relieved and taken off your plate.

PTO 94 | Financial Management During COVID-19
Financial Management During COVID-19: Be careful before you sign your name to something because when credit and free money is made accessible, it usually has titanium strings attached to it.


We talked a little bit about this as far as when this thing recovers, how do you handle that point as well?

What would you recommend owners do as they're looking to the future? We've got some of this. I've got a financial plan in place. My idea to throw it in there is that, maybe start reading some books that you hadn't read before about business organization. Getting your mindset right. I'm a big proponent of Think and Grow Rich. Those first four chapters of getting your mind straight and getting an ideal scene in mind. If you've been working in a situation that you haven't truly enjoyed, start creating maybe an ideal scene of, what is this going to look like when I do revamp and how can I make it look the way I want to look in a situation I want to see?

You're getting an opportunity to reset this whole thing.

Take advantage of this pause button.

Right now, it should be, “If I had to do this all over again, what would I do differently?” You're going to have that opportunity, especially if you've had to let people go. You're going to have this opportunity to do good money management if you didn't do that. Now, you see the necessity of having organizational reserves and profits and putting that in as an actual expense. Maybe not having the percentages be out of whack where 80% of all your revenue is going toward staff and benefits. You have an opportunity right here to play the reset button on there. Put in some good business systems that maybe weren't there so that you can grow your organization and expand even more than what it was. Pay attention to that. Wear your owner and executive hat more than being a practitioner.

Our previous interview talked about how you handle things financially as a PT owner. You're talking to the points that we made in the previous show, is making your 10% profit margin and expense line and coming off of the top. Also, make sure that you're getting a decent profit. Some of these guys are working on 8% to 10% profit margins and I'm like, "You can do so much better." Now, is the time. As you started getting into this saying, "How are we going to ramp up and be more productive, profitable and financially sustainable?"

You have to do it on a gradient. You have to make sure that as you're bringing people back slowly that you're not overwhelming the organization with expenses again because that's what got you into trouble in the first place.

You don't open the doors and invite all the employees back in?

They can try to bankrupt you or make your business non-existent, but they can't take away the ability for you to create it again. Click To Tweet

I'm sorry, this is going to be wildly unpopular. I know that and I'll probably get beat up from some people, but you can't do that because, in the reimbursement game, the lag on income is 1 or 2 months. You have to make sure that as you bring people on, you work on a skeleton crew even if they're working double-time seeing patients.

Pay them overtime if you have to.

Don't bring on all the staff too quickly. That way, as your patient load increases, because it's not going to go from, you're doing 500 patients a week and then it goes down to 50. It's not going to go right back up the 500 in a matter of months. It's going to take a little bit of time. You’ve got to make sure you can navigate that. Now is a good time to hit that reset button and say, "We're going to put in 10% for reserves, 5% for a tax fund, another 5% for a business reserve account. I'm going to put these things in right now." That way as I bring people on and I'm going to stick to those percentages and I'm not going to deviate from them because I understand how important my profit is. That's going to do a couple of things. Number one, it's going to put good control of money back in. It's going to allow you to expand the organization and it's going to make the business more valuable down the line because you'll have a profit margin, which as you know when you sell your business, that's largely what it's based upon.

That's the value of your company.

You have an opportunity right here to do that. If you overwhelm the organization with expenses again and bring all your stuff back right away, then you're going to be right back in the same boat that you were.

If any owners are reading out there, if there are people that you didn't like or didn't produce in your company beforehand, take advantage of it and bring back the people that you're excited to see. Not the ones that you're like, "We’ve got to bring so-and-so back because we need to fill that hole." No. There are going to be plenty of people out there looking for work. Find the good ones. If you have an amazing employee, one of the skeleton crew that is live and die with you, ask them about their friends and their network and how you can find more and more A-players because they're going to be there. Find your A-players, let go of the ones that you weren't excited to bring back, to begin with, and you're having issues with. Take advantage of this time. It's a time to not only strategize financially, but it's also a time to strategize with your human resources as well.

This became an employer economy. It was an employee economy because everyone was demanding higher pay, time off, benefits and all of that and it flipped like that. The business owners are back in control here a little bit where they can be. This is not a competition. It's not me against them. It's finding out who is part of your team, who wants to be there and who's there to get a paycheck. To your point, that's key to do that.

This is an opportunity. There are opportunities that abound. Financially, restructuring and reorganizing your financials, but looking at the structure of your company and the people that are in it, your team members and create your dream team. It's time to create a dream team. If you're sitting on your butt and waiting this out, then you're going to be behind the curve. You need to start reaching out to people who you might've wanted to reach out to in the past that weren't available, more than likely they might've been let go at. It's time to start making those connections again. Even if they might be committed to going back to the place they were before, it is not a bad time to reach out.

You can get rid of the negative people without having to get in there and fire them.

PTO 94 | Financial Management During COVID-19
Financial Management During COVID-19: The speed in which you make decisions, and doing it with good data, is paramount to getting out of this uncertainty.


All the stuff that you've talked about, you shared a lot of this on webinars. You have those things on YouTube. You've got a PDF download for people to manage this. I hope they take advantage of the information that you're sharing because it's hugely valuable.

We're trying to put good financial data out there and if I can talk a little bit about the financial plan aspect of this thing going forward. What you're going to do going forward from this because you do have an opportunity to do something different. When there's a crisis, when there's blood in the water, there is an opportunity there for you to take advantage of. When you look at the several years, you look at the things that people have done with their money and what's happened, interest rates and checking and money market accounts have been 0% to 1%. Nobody saved any money because there was no purpose to save money. They made debt accessible and easy to get, "Buy this big house. Buy this car. You can afford the payment. That's all you need." They made the Tax Code confusing, ambiguous for practice owners because it's four million words. How can you confront that? Your accountants don't help you as well.

They made it seem like the stock market was the only place that you could put your money to earn any return against the inflation rate. We call that the default plan. If you didn't have your financial plan, that was your default plan right there. It worked well because if you look at the situation for most business owners, they don't have much liquidity. They have loads of debt. They overpay in their taxes and likely all their 401(k)s and IRAs were in the stock market where they took a 30%, 40% hit. Not only did your business value evaporate overnight, but all of your personal reserves at the same time went down 30% to 40% in value. There has got to be a better way to handle your finances than that. That's why I'm like, "Get a plan that does the exact opposite of that." It's fine having $100,000 sitting in a checking account, earning zero, as long as you have some liquidity there. It's fine to have some money in protected assets that may not make huge returns, but at least you know it is going to be there at some point. It's fine to take advantage of the Tax Code and save yourself $20,000 to $40,000 in taxes a year by being proactive and looking at it. It's time to get a plan that does that.

You're the man that can help us. If people want to get in touch with you, where do they go? 

They can go to EconologicsFinancialAdvisors.com. They can hook me up on LinkedIn at Eric Miller and Facebook. They can go to our page. We do have that Financial Disaster Guide. For your readers too, if they want 15 to 30 minutes appointment or consultation, then I'll certainly extend that offer. Please take advantage of it, in any way we can help even if it's helping you navigate through this time. We'll be willing to do that to talk with you for 15 to 30 minutes with no strings attached.

It would help people for sure. Give them some certainty at least. I'm sure you'll give them a battle plan that they can go off and start working it so they can go from a place of surety and a little bit of faith.

It’s something that they can help with. Our YouTube channel is on EconologicsFinancialAdvisors.com. They can go on our YouTube channel and subscribe. It would be cool.

Thanks for your time as always. It's awesome to have your information, your knowledge and wisdom. I appreciate it. 

I'm glad to help. For those owners again that are having the feeling like their businesses because some of your guys are shut down completely. I've been telling a lot of people this is that they can try to shut you down. They can try to bankrupt you, they can try to make it that your business is non-existent there, but they can't take away the ability for you to create it again. That's a key point for those guys that are shut down. They only lose something if you don't think that you can create it again.

It's going to take some work, but you know how to do it. You've done it before. If you're an entrepreneur, you've been through crises. This isn't the first time. Thanks.

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About Eric Miller

PTO 94 | Financial Management During COVID-19Eric Miller has been in the financial planning industry for over 20 years. He’s a co-owner of Econologics Financial Advisors – awarded an Inc. 5000 honoree for 2019. As the Chief Financial Advisor for the firm, Eric has had the good fortune to have over 10,000 financial conversations with private practice owners in various healthcare industry and helped guide them into a more optimum financial condition using a proven system.


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