Building On What You Started:Responding to Surprises in the Early Life of a Practice

Just four months into running a dermatology practice, unexpected events arose—many with good outcomes.

By Tarik Rodgers, MBA and Tanya E. Reddick Rodgers, MD

In our previous articles, we addressed many of the questions and concerns about starting a practice in (see January 2009 and March 2009 issues. available online at But now that we have run our new practice for four months, it is appropriate to provide a status report on the development of the practice in light of our preparation and establishing efforts. Although things have generally gone far better than we expected, there have been a few bumps in the road and surprises—both good and bad. We have also found that there is a lot of truth to the old adage that "what doesn't break you makes you stronger." Below we will recount some of these unexpected developments that may emerge in the opening months of a new practice.

Staffing. We are fortunate and proud that we have been able to hire people to work for a fair wage in times when many people are desperate to find opportunities. Nevertheless, leading a team of staff members and managing different personalities is a challenge. Moreover, assembling our staff didn't come without a major bump in the road, as one of our largest surprises occurred when our Office Manager resigned immediately, without prior notice, after only two weeks on the job. Unexpected occurences such as this one reinforce the importance of knowing the inner workings of your office. To protect yourself against delays caused by the suddent departure of key staff, you need to know your progress with insurance company credentialing and know where online billing passwords are kept. Try to encourage placement of office documents on a public drive where you can easily have access and eliminate the need for the immediate assistance of your network administrator to gain access to an employee's network passwords. It probably goes without saying that you should always know the status of bank deposits and accounts receivable.

Fortunately for us, the departure of our Office Manager occurred early enough in our start-up process that the inner workings of the business had not become too tangled.

Projection vs. Reality. We thought we had an effectively laid out plan and detailed financials, but something we have learned after building out the office and now remodeling our home is that build-out costs probably rarely hit targets. In our previous article we discussed the creation of your start-up budget. We recommend that you expect to spend approximately 10-20 percent more than the estimated cost for your final floor plan. In a future installment, we will discuss in more detail the decision to lease space vs. buy space. However, if you choose to lease space, be advised that lease build-out allowances offered by the lessor and standard construction bids may not include provisions for electrical and data wiring. The installation of a security system will add additional costs, too. You may need to procure these services on your own and incorporate their costs into you budget!

Take it Up with Payroll. It is no surprise that as a business owner you must collect and pay payroll taxes. However, what we failed to include in our plans was the employer match for Medicare and Social Security contributions above and beyond what is displayed on the paycheck of a normal W-4 employee. Note that this match must be paid at every payroll period with other tax payments. Depending on your salary as a provider and the number of employees that work for you, this may work out to a five-figure number quarterly. We were unaware of this at first, so we paid a pretty hefty sum at the end of three months of doing business. This is an additional business expense that must be included in your Pro Forma as a regular operating expense. And although it did not come as a surprise to us, others should note that sales taxes may also be assessed if you sell taxable goods or services.

Despite occasional challenges things may work out very well for you if you start with a solid plan. We were quite surprised by the warm welcome we received from local primary care physicians who were happy to have an extra dermatologist in the area. We were even more delighted by the welcome received from those providers who offer some traditionally dermatology-related cosmetic services but have still been great referral sources.

Your staff may be as committed as you are. Although, as mentioned previously, we had one staff member leave the practice, we have been more than satisfied with the dynamics between the rest of the group. This may be due to pure luck or more likely to our diligence in and focus on assembling a group with experience, complimentary skill sets and personalities, and a willingness to adopt our vision as a means for achieving success. Actually, our team members have noted that our interview process is quite rigorous and well thought out. We hope our philosophy of growing together has helped us recruit and retain the great team we have. We have committed to investing in our team, first by acting as a leader but still part of the team, and second by offering a good compensation package. Our compensation package includes healthcare benefits, in-house dermatologic services, a fair vacation package, and we have communicated that we will offer bonuses as we begin to operate profitably.

As the founder of a new practice, you will not be the only one soliciting new clients. A new business owner is of great interest to others in the area who wish to sell their services, especially in this economy. This interest could be beneficial when the solicitor represents a laser manufacturer or other product or service in which you may find useful to the development of your business. But, be prepared for visits from many others, from insurance salesman to Costco reps. Don't be afraid to say "no" or even hang up a "no solicitation" sign if needed.

Marketing with results in mind. There are so many ways to market your business. We are proud to say that our marketing activities have proven fruitful in promoting a growth rate that was sharper than expected. We didn't do all the "sexy," high-cost advertising. Our website is but one page for now (, but it gives all the important information someone needs to find us. We also did some things to optimize our website so it can be found with relative ease. Contrary to what many think, you can't just build it—the website—and expect they will come. We never make a marketing decision simply because it is another cool option thrown in front of us, because that kind of thinking may distract us from our other efforts, and either be redundant to other activities or completely ineffective. It was important to us that we hired an office manager that shared our philosophy of synergistic marketing.

Overall, we are quite pleased where we stand 10 months from where we started this journey. We are not quite break-even yet, but we look like we are well on our way. It has been especially gratifying that we have been accepted into a new community and even a new state where we had no patient base or professional relationships. Our situation is quite a beneficial one with an MBA and MD team, but we are sure other relationships can be just as fruitful if dermatologists utilize their networks the ways we described in an earlier article.

Editor's note: The authors welcome comments, questions, and constructive advice. Please e-mail queries to, and the authors will try to comment on them in upcoming articles.


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About Practical Dermatology

Practical Dermatology is the monthly publication that provides coverage of medical care, cosmetic advancements, and practice management for clinicians in the field. With straight-forward, how-to advice from experts in various fields, we strive to enhance quality of care and improve the daily operation of dermatology practices.