Are you ready to bring on an associate who you can dedicate your time, talent and expertise to? Looking to pass the baton, start a succession plan or expand your business?
Let’s face it! Compensation models and the lack of fair exchange within them is the number one reason why associate docs don’t work in health care but particularly chiropractic.
This video is going to teach you seven important considerations when crafting an associate compensation plan to ensure a mutually beneficial experience.
If you’ve already ran the numbers and decided hiring an associate is the right move for you, how do you create a compensation plan?
There are seven important considerations when creating the compensation plan.
Be Inspiring For The Associate
The problem with paying a flat fee or traditional salary is that there’s no incentive for the associate to grow. More creatively, payment plans that are based on percentages are more appropriate because they closely align to the real world and are a better way to inspire your associate.
How are you going to know if it’s inspiring?
If it is, they want to work harder and move forward.
Keep It Simple & Smart
You shouldn’t need an accounting degree to dissect the contract. You want to make it simple and easy to understand and create structures so that the statistics at the end of the month are done within a set period of time.
We recommend keeping it within 5 business days after the end of the month so everything is in check and the associate can be paid.
Keep It Real
The associate situation should mimic the real world, if they were on their own.
Commonly a young doc gets into practice and sees that there are more expenses than there is revenue coming in. But as revenue grows and fixed expenses remain the same, they get a profit margin.
Ensuring the associate model mimics the real world is why we advocate for a percentage split model as a base piece.
Base The % Base Piece On Your Practice
Consider the overhead of your practice! Industry averages in chiropractic are currently at 50-55%.
An easy way to do this is to get accounting statements, look at the revenue and expenses on average over the last couple years and take out all of the variable expenses like dinner, conference trips etc.
After taking off these expenses you will find the true overhead of running your business. That is the percentage of profit that YOU take home.
If your overhead is 45% then your profit is 55% meaning that is the ceiling the associate could ever take home.
Make Sure The Senior Docs Cost Is Covered
Ensure that the senior docs cost of having the associate is covered as soon as possible at least breaking even. You may be thinking “isn’t having an associate all profit”?
Associates will cost your business money before they become profitable. Creating a scalable percentage that makes sure you are getting paid back, or at least break even as quickly as possible. Maybe you start at a 60/40 split for the first $5k in revenue so that the senior doc’s cost are covered.
Make Sure You Are Getting Rewarded
You want to make sure you are going to be getting some profit out of all the blood, sweat and tears you put into it. You’re a hot commodity in the chiropractic community, you’ve been in practice for 10 years (for example)!
It’s a privilege for these young docs to come and work with you. The mentoring, the guidance and potential coaching you may be doing you should be compensated! Ensure the scalability of the percentage allows for you to feel like you are being fairly compensated.
The Model Is Scalable
You want this percentage model to be scalable and dynamic. Set it in one year grids of agreement. As you come into negotiations, things may be changing like the experience of the doc or changing costs of the practice.
There is also the possibility of creating a junior partner buy in but we’ll post more on that later!
For now, we want to make sure you are honouring who you are and making it a win-win situation. The associate experience can be a very rewarding adventure for both parties!
Our Chiropractic Associate Program is designed to help you find out the financial steps. It takes you from why you should have an associate to potential pitfalls to recruiting techniques. We also provide contracts that would cost you thousands if you went through a lawyer!
If you’re in the place to hire an associate and want a great kit to get you started and help avoid startup headaches or financial worries check out our program! It’s a very affordable program designed to help you do it right with a 14 step plan.
Contact us at [email protected] if you want to hear more about this program or see if it’s right for your situation.