Lack of biz plan, marketing know-how hurting clinic
New Mexico Business Weekly - August 3, 2007
nolanrudi.com STATMed’s owner, Dr. Torre Near, found out the hard way that flying without a business and marketing plan can land one in the muck. She is digging her way out this year.
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Dr. Torre Near is prone to crying spells these days.
She's not weeping about global warming, despairing over poverty or fretting about how to end war. It's a lot more urgent and personal than that.
Near is wondering if she'll be able to keep her house, ever be able to pay off $200,000 in credit card debt and whether she'll be able to keep her 19-month-old business afloat.
The business, STATMed, an urgent care clinic in Albuquerque that does not accept insurance, started out as a long-held dream in January of 2006 and has now turned into something of a nightmare. It's not doing as well as Near had hoped, and she is struggling to keep her doors open.
"I haven't made very good business decisions at all," Near says candidly in her clinic office. "This is the hardest thing I've ever done. In order to save my financial life, I might have to go back to work, but that would destroy the business. I might have to borrow money from my family."
In 2006, the business, which provides urgent care and family practice services to walk-in patients, billed $131,000. That wasn't so bad -- except that expenses were $282,000. This year, Near is billing an average of $18,300 a month and is on track to gross about $210,000 for the year. She expects that her expenses will be halved because she has cut way back on her advertising budget.
Despite those gains in business, and even though she is learning from her mistakes, Near is worried about the future. She says her experience offers lessons to anyone who is thinking of starting his or her own business.
First, her missteps.
Near cashed out $200,000 in retirement funds and worked up $200,000 in credit card bills to start the clinic. She was ambitious and signed a five-year lease for a 2,300-square-foot office and she signed a long-term lease at $1,000 a month for X-ray equipment that she can no longer afford to use. She read marketing books, and had an idea about how much she needed to bill, but never developed a formal business plan. She didn't seek traditional financing because she didn't want a formal business plan or to be told what she couldn't do.
Now Near's Albuquerque home is threatened with foreclosure and credit card companies are calling her constantly.
"I thought I knew the market. I thought I needed this big of a place," Near says. "But it's too big for me to afford because I don't have the business I expected. On the other hand, if I had had a little place, no one would have come because it would have looked cheesy, and I would have had to have found a new place if I wanted to expand."
Near's biggest misstep, though, was underestimating how expensive it is to advertise and how difficult it is to spend those advertising dollars wisely.
"If someone had told me that it would cost $100,000 to advertise the first year, I would have just laughed at them," Near says. "As it is, I spent $50,000. I've advertised in the Albuquerque Journal, in the Yellow Pages for $550 a month, daytime radio -- which was $80 a minute -- and on KOAT-TV, where a 15-second ad cost $100 -- and those were the cheap, early-morning hours."
Unfortunately for Near, those ads weren't very effective, and she now is desperately trying to figure out where to spend her limited advertising dollars.
"The marketing people are more than happy to come in and help me for $10,000 a month," she adds. "They say that for $10,000 a month, they could make this practice boom but, when that doesn't happen, they say you didn't advertise right or hit the right markets -- it's never their fault. And when I ask them if they can guarantee to double my practice, they say they can't guarantee anything."
Near says that if she had to start over again, she would seek traditional financing, develop a business plan, not put her retirement or home on the line, and start with a smaller office.
She still doesn't know, though, how she would handle the marketing and advertising aspect of the business, and that is driving her crazy.
"Once people find out about us and come here, they like it. In fact, we've seen about 3,000 patients since we've opened. The trick is getting the word out that we're here."
Near sees her market as people who can't afford or don't want to pay for insurance, people between jobs who have temporarily lost their insurance, people with high-deductible policies and those who just need to see a doctor quickly. She takes patients of all ages and handles all family practice cases.
Near is now spending around $1,000 a month on advertising, focusing on overnight radio where ads cost around $5 a minute.
Despite the startup problems, Near, who has been a doctor for 21 years -- most of them as an emergency room physician in Las Vegas, N.M. -- still thinks her business idea is a good one. STATMed offers urgent and ongoing care services for $65 a visit. She treats coughs, sinus infections, bronchitis, sore throats, ear pains, minor pains, bladder infections, minor cuts and wounds, and does Pap smears. She also provides long-term care for diabetes, high blood pressure, high cholesterol and de-pression.
The key to the business, Near says, is that patients can see her the day they call. Waits are usually no longer than five minutes, and if Near doesn't have the time to see a patient, she won't make the appointment. In ad-dition, the $65 she charges for a basic visit is less than the $90-to-$120 co-payments that patients are charged at an urgent care center.
Lee Logan, program director for the 106.3 The Range FM radio station, used STATMed when he first moved to Albuquerque in January 2006. And now, even though he has health insurance, he still goes to Dr. Near.
"If you have a 10 o'clock appointment, you see her at 10, as opposed to other doctors' offices where you have a 10 o'clock appointment and you get in at 11:30," Logan says. "It all starts with the fact that she is a very good doctor and provides excellent care. She has a ... marvelous point of difference between her and other doctors. You appreciate the fact that you see her when you go in."
Near got the idea for her clinic while treating people in emergency rooms.
"I saw co-payments for urgent care going so high -- $50 to $70 to $80 -- and I knew that a lot of that was just the cost of the insurance itself," Near says. "To process insurance claims, you have to pay someone $20 an hour. I figured if I could eliminate that, we could charge patients what it actually costs to treat them. We believe that if we take the insurance company out of the middle, we can give people excellent medical care at its true cost."
Near will continue with the business until it succeeds or fails. In the meantime, she has this advice for would-be entrepreneurs:
"Just don't underestimate how hard it is to get exposure and how much it costs. A lot of books make it sound like you can do it on the cheap, but you just can't do that."
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