Wednesday, May 16, 2012/
Kathryn Anderson started up Viva Physiotherapy in order to create the sort of physiotherapy business that she wanted to work in.
Kathryn had to take a loan out against her own mortgage to set up the business, but the risk paid off when Viva Physiotherapy was profitable almost from the day it opened its doors.
Let’s start with how Viva Physiotherapy started.
After working as a physio for a number of years, it became apparent in my late 20s that a lot of physiotherapists become burnt out quite quickly. By the age of 28 or 30, probably half of my friends who were also physiotherapists stopped working as physios, and they basically said the reason was because they were just sick of the whole conveyor belt of treating huge numbers of patients. They were getting physically and mentally burnt out as a result.
About 10 or 15 years ago, physiotherapy started to use a very high turnover style of business model, so that instead of a physio spending a lot of one-on-one time with the patient, they have had maybe two people booked in at once. Physios may have one client on a physiotherapy machine and then run from room to room, which means the physio ends up getting burnt out. But also secondly, and diagnostically, it doesn’t produce a very good result with the actual patient because the physio is too focused on just treating the patient’s pain, getting them out the door, and getting them the next time, rather than actually taking their time to diagnose the problem and give them a long-term solution
I had a few years of working in that style at the start of my career as a physiotherapist and then went on to have a couple of really good jobs where there were some different business models employed. I completed a Masters of Physiotherapy in Perth in 2009 and went for a few job interviews looking for a platform where I could treat with those kinds of ideas, and just couldn’t really find a style of job that worked for me. So I thought if I couldn’t find a clinic I could create it myself. So as a result, at Viva, our business philosophy was always around a high patient contact, high patient care type of model. Instead of having the industry standard of 15- or 20-minute appointments, we have only 30- or 45-minute appointments, and every minute of the appointment is spent one-on-one with the physio. Because of that we have a strong emphasis on proper diagnosis and also medical referral where it’s appropriate.
Do people have to pay more for that, for the way that business model works?
Basically, yes. There’s certain demographics where the short term, cheaper physio appointments certainly work, particularly in areas of lower socio economics and clinics that have a high proportion of Transport Accident Commission and Work Cover, because they will only pay certain rates for their services.
I opened Viva Physiotherapy in the middle of Melbourne’s business district on the basis that if people are going to make the time to come out of the office for an appointment, they would rather pay $70 or $75 for an appointment and have that as a half-an-hour appointment if it’s going to help you, rather than pay $50 for 20 minutes, or 15 minutes.
It means the cost is slightly higher, but from a cost-to-benefit ratio, it’s a much more efficient way of doing things. And it suits the type of the city worker who are our clients who have a lot less time on their hands, but if they’re investing the time in something, the time’s actually worth it.
How did you go about the process of setting up the business?
I sat down with my husband, who is a silent partner in Viva Physiotherapy, and we did an analysis to work out if there was need for the business. We looked at what other competitors there were, figured out how busy they were and also talked to other friends who worked in the city. We figured out that it was quite difficult to get a physiotherapy appointment within a day or two in the city, mostly they would make you wait three or four days. So from that respect there was certainly a market there. After that we registered the business name and found the location for the clinic. Finding a location was fairly easy. I think we came in just towards the end of the global financial crisis, so there was a lot of real estate available, and that came about really quickly.
What about finance?
It was certainly a little bit hard as a small business, or as a new business with no history. We needed $60,000 to begin with, $40,000 of that being for the actual set-up at the clinic, and $20,000 being for the surety on the five-year lease.
My husband and I spoke to the bank that we’d been with personally for about 10 years, and the two barriers there were the rates that they give to small businesses and the lack of confidence the bank displayed. I think the bank offered us an interest rate of about 14% and through the whole process of applying for a business loan, they really never gave us any certainty or confidence that we’d actually get the money, despite that we had a bit more than that figure sitting in our savings account at the time.
It was not a very fun process, so we spoke to a few people who had gone into the business. They recommended taking some equity out of our current mortgage and getting some lawyers to draw up loan documents and then creating a payback, by which the person pays all the interest on the extra supplementary loan and get the money through a home loan essentially. So we decided to finance ourselves that way: we got $20,000 in cash and then $40,000 as a loan.
That’s quite a risk.
Yes, I suppose we did take a risk. But if you can speak to the right lawyer you can get everything done in a very structured way. It is a risk, but there’s physical collateral there, or physical security, so if things go badly at least you’re protected on an individual basis.
How long did it take for Viva Physiotherapy to turn a profit?
In the first week, we made enough money to pay our rent. By the end of the first month we’d made a profit and really from there, it’s grown fairly consistently. The benefit is that physiotherapy is a very simple business model.
At the start, I was the only employee so you have the cost of the clinic plus the rent. If you’re there and you’re willing to give the time, it’s not as complicated as say, buying in loads of stock, or having to import things from overseas and paying out a massive amount of cash and then having to hope that it all comes together in the end.
The fact that it was a very simple business model, and the fact that we worked out that the market was there meant it was a success from the word go. But, at the same time, I’d also like to hope that it was the word-of-mouth about our clinical business model saying the high patient care and the curative approach to injury also made it a success. We did a little bit of advertising, but word-of-mouth probably accounts for 50% of our business now.
What was your revenue in the last year?
Last financial year we turned over $520,000 and Viva Physiotherapy has grown again since then, so I will expect that to be increased this financial year.
And what have been the challenges that you’ve faced since you’ve been running the business?
I think the biggest challenge for anyone that has entrepreneurial tendencies is to be able to act at a similar rate to what you think at. I’ve always got ideas and projects that I want to run with, and it’s actually taking the time to structure them and put them in place, and to make sure they roll out successfully.
I think maybe the personality type of someone who goes down that path is the ideas person, and not necessarily the person who might sit back and do all the hard stuff to get it done. It’s been a really big challenge for me personally, to be disciplined enough to make sure that if I do have an idea, to just take that one idea, and work on it before going on to explore the next one.
As time has gone on the issue has been balancing the clinical work with the behind the scenes business work like marketing. I’ve always taken on a 40 hour per week clinical load and then I do all the business stuff on top of that. It’s good because the business is getting more successful, and there’s more staff bringing in a turnover, but it’s going to be hard to actually decide when it’s time to stop the clinic work and just concentrate more on the business. That’s going to be a really big challenge in the future because I still want to do what my profession is, I still want to do what I love, but I am also excited by the business side of it.
So when do you think you’ll have to make that choice?
I’m pregnant now with my first baby coming along in September and that’ll probably make the choice for me. I’d say right now, if the baby wasn’t coming along. It would be something that would have to happen in the next six months anyway, for the business to continue to grow and to remain successful.
How do you plan to combine work and family, which is something that’s often a particular challenge for businesswomen?
One of my motives behind opening Viva Physiotherapy when I did was that I thought if I could put in a really good, solid two years, my husband and I should be able to set the clinic up so that it actually gives us more of that work and life balance in the future.
Looking at my plans now, I feel incredibly lucky that, after I take four or six months off after the baby comes, I can easily choose to go back to four hours per week. Being the business owner, I can choose when those hours are and do them at a time that suits me. Financially what it means is that we’ve put in a very tough and hard two years, but it also means then that we have a little more buffer, when it does come time.
You spoke before about it being a good time to rent a property in the CBD at the end of the financial crisis. What other impacts have the financial crisis had upon your business?
It’s been interesting because I spent a few years living and working in London where the financial crisis has been really hard; not only from a business perspective but also in people’s actions and choices, and the way they spend their money.
It’s been interesting coming back to Australia around that time and finding that, even though some people have been feeling the pinch, it seems the Australian psyche didn’t really change. So we still had disposable income that, say, people in London didn’t have. As a result, it meant that Viva Physiotherapy was able to be successful from the start because people still had disposable income and were prepared to spend it on health and wellbeing. So we were fortunate in that way.
You’ve just expanded your business by opening a Pilates studio. Can you tell me about that?
So we were fortunate enough to find that the office space beside us had become available, and so starting the Pilates studio was something that I’d been thinking about doing for a while, and the time was possibly accelerated because of the office space becoming available.
The biggest reason that we wanted to open the studio is because Viva Physiotherapy comes from that curative, rebuilding approach. I wanted to be able to provide a platform for people to continue with that line of rehab under the Viva Physiotherapy roof. As a result, instead of what we used to do – getting the person in, diagnosing their injury, giving them a rehabilitation program and sending it to their personal trainer or getting them into a local Pilates studio – with us having a studio ourselves it meant that we could provide that side of the care so that they were getting more specific care and better results, and better outcomes as a result.
What are your plans for the future? Do you plan to expand further?
From a personal perspective, I always went into it saying that all I wanted was for the business to function at a very high level and operate fairly self-sufficiently. Based on my original idea, I really just want to round out the space that we’ve got and improve the types of services that we have there. I don’t really have any grand plans for expanding, as I feel like having more clinics just complicates your life, as much as it would probably make you a richer person, there’s the simplicity of having just the one clinic.
Also, in some of the other clinics that I’ve worked at in the past, where they have a long expansion plan, they spend four or five years working on the high level of service and quality in their first clinic, but then as the clinic is replicated the service level is always lost to lower quality. As a result, the one-clinic model is always what I wanted to do and I just wanted to make sure that was done really well.
Where is the physiotherapy industry heading?
I think one of the biggest changes in the next probably year or two is going to be the private health rebate, so it’ll be interesting when private health levies start to change. Different people make different decisions with regards to whether to keep private health insurance or not, or whether to keep extras or not.
There’s a move going through Parliament at the moment for the private health 30% to be means tested: what it may mean is that our demographic in the city is affected by that. That could be a risk to our industry.
From a clinical side of things though, I think physiotherapy is now starting to adapt to the change of the times pretty well. I think a few years ago we were probably kind of stuck in the rut of the medical world, relying very heavily on things like doctors’ referrals for clinics to run, because doctors’ referrals are very important.
I think as people become more pro-active in the way that they manage their health; a person will now take themselves to the physiotherapist rather than wait to be told by a doctor that they need a physio. That creates an extraordinary amount of opportunity for physios, it means that there’s a much, much bigger market to tap into than there was for practitioners who had a clinic 20 or 30 years ago.