In only 6 months, Dr. Gary Murray, a Memphis,Tennâ€“based cardiologist, cut over $75,000 inbusiness expenses, saved over $100,000 in personalincome tax liability, and increased his personalnet worth by about $250,000. In addition, heexpects to increase his 1-physician, 6-employee practice'sprofits by approximately $250,000 this year.
How did he do it? This past December, Dr. Murrayreplaced his office manager with a business manager.He hired John Bennett, MA, a financial advisor whohad been working with Dr. Murray, to fill the role."It's kind of a unique position," Bennett says. "I'vecome in and established a business financial plan anda personal financial plan."
Bennett, who had worked in the financial servicesindustry since 1995, found the switch refreshing.Working with Dr. Murray allows him to implementhis ideas. "I'm like a financial quarterback," Bennettexplains, "coordinating and facilitating all relationshipsand transactions with private banking, accountants,attorneys, money managers, and real estateagents. I'm so hands-on that I can really be objectiveand effective."
Indeed, Bennett and Dr. Murray seem to be carvingout an interesting and entrepreneurial niche, teamingthe money-making abilities of a cardiology practicewith the business savvy of an investment firm."Dr. Murray is working on his medicine, providingthe best patient care," Bennett says, "and I take careof the business. We've partnered to bring 2 professionstogether that really need each other."
What changes has Bennett made? "A lot of it has todo with restructuring," Bennett says. Perhaps most importantly,he changed the practice from a sole proprietorshipto a professional corporation. He also mergedthe 401(k) and profit sharing plans, set up a defined benefitplan, and reworked Dr. Murray's homeowner's policy.Here are some of Bennett's ideas for physicians whoare looking to earn and save more money:
• Set up a professional corporation—Controllingyour tax liability is key. "You want to capture asmany expenses as you can before you take money asincome," Bennett warns. "If you can cut your tax liabilityin half, you don't have to make a fortune in themarket." A corporation also allows you to makesmarter reinvestments in your practice.
• Set up a defined benefit plan—Bennett mergedDr. Murray's 401(k) and profit sharing plan, and inaddition, set up a defined benefit plan. The result? Dr.Murray has saved $70,000 in taxes and put awaymore than $160,000 (tax-deferred) for his retirement.At the same time, he has provided a great benefit tohis employees, giving them an incentive to stay longterm and grow their own nest egg.
• Reinvest in the business—Because of Bennett'splan, new computers have been purchased, employeeshave better perks, and another cardiologist can be hired.The phone messaging service, once $7000 a year, is nowonly $70 a month. In addition, Dr. Murray now sees 10new patients a week (as opposed to 2 or 3). And a leasesnag, which resulted in $400,000 worth of back debt,will now be paid off much sooner.
• Manage risk and liability—Every physician needsproper auto, life, health, disability, malpractice, andbusiness liability insurance. Other essentials include apersonal umbrella policy and a good estate plan."Physicians often neglect protecting their personal andbusiness assets," Bennett says. "You can manage yourpremiums and costs by using no-load or low-load insurancecompanies or adjusting your deductibles."
• Consider alternative investments—Bennett tells hisclients that "there is a whole other world of investmentchoices outside of your typical stock, bond, and mutualfund portfolio." He believes in diversifying into broaderasset classes, as well as more closely held investmentsthat often have many tax benefits. These might includeoil and natural gas, tax credits, lease programs, preciousmetals, and real estate.
For more information or to contact John Bennett, call 901-767-6765 or e-mail email@example.com.