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    3 ways to manage your second-highest expense

    If you're looking to make your practice more profitable (who isn't?), start with your biggest expenses.

    When it comes to managing expenses in your practice, there are dozens of categories to evaluate: equipment, technology, loan costs and interest rates, sundries, marketing, and on and on they go.

    Many practice owners are quick to shop-out what they believe are the most obvious expenses, but few understand the impact of one of the largest expenses and how it can be dramatically reduced to increase profitability. The highest expense for most practices is payroll, followed by real estate.

    Related article: Be a real estate winner

    Real estate encompasses your monthly rent or mortgage payments, along with the property’s operating expenses, maintenance fees, utilities and janitorial costs. If you consider these top two expenses, payroll and real estate, only one of them is really negotiable.

    With payroll, you can either pay people their value or they usually find another job that will. You may decide that you can cut staff, but if you need people you need to pay them what they deserve or they will eventually leave.

    Real estate however, is 100% negotiable. You have the choice of leasing or owning, as well as being in an office building, retail center, a stand-alone building, or large medical complex with many other providers. You can choose the size of your space, the design and the landlord you want to work with — or to be your own landlord.

    And if you do own, you get to decide whether to buy an existing building, an office condo, or to develop your own building from the ground-up. When negotiating the economic terms of a lease, you get to have a say in the length of lease, the desired concessions including build out period, tenant improvement allowance, free rent, lease rates, annual rate increases and many other provisions.

    Related article: 5 important things to know when renewing your dental office lease

    With this many choices to evaluate — understanding that each one affects the final economic outcome — why is it that so many practices fail to capitalize on their real estate opportunities? The short answer is that most practice owners and administrators simply don’t have the knowledge and expertise in commercial real estate to understand how to make the most of these opportunities. They view real estate as a necessary evil instead of an incredible opportunity to improve profitability, reduce expenses and improve the quality of their patients’ experience. When the correct approach is taken, you may actually look forward to it instead of dreading your real estate negotiation.

    Up next: Three key ideas that will help you make the most of your next real estate transaction.

    Carr Healthcare Realty
    Carr Healthcare Realty is the nation’s leading provider of commercial real estate services for healthcare tenants and buyers. Every ...

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