Planning for and positioning a solo RN first assistant practice

AORN Journal, Nov, 2004 by Joyce DeFrancesco

Editor's note: This is the second in a series of articles about starting an RN first assistant practice. The first article appeared in the October 2004 issue of the AORN Journal.

Deciding to go into business for oneself is only the first step in setting up an independent RN first assistant (RNFA) practice. It is important for entrepreneurs to begin on a sound financial footing and build the reputation of the business so that it will sustain itself financially in the future. This article provides a basic introduction to the financial, budgeting, and organizational aspects an RNFA must consider when starting a practice. It also offers advice on positioning the business in the marketplace by creating an image that will give it an edge over its competitors.

FINANCES AND BUDGETING

Starting an independent practice can be one of the biggest financial investments in an RNFA's professional life. Outlining start-up expenses is a daunting task, and it can discourage aspiring entrepreneurs from doing work they love, exercising their independence, and achieving their goals--all the reasons they wanted to strike out on their own in the first place. Nothing will sink a new business faster than unanticipated expenses and insufficient funds. By understanding the cost of starting and maintaining a practice, an RNFA will be able to ensure that he or she has enough resources to finance the first year.

It is important to distinguish between things a practice really needs and things that are nice to have. Expenses that attract clients and win their business or help an RNFA deliver services that meet or exceed clients' expectations are reasonable expenses. To start, an entrepreneurial RNFA should plot out all aspects of the practice by listing all the expenses he or she can think of and then ask for input from family members, friends, and colleagues. Table 1 offers a list of categories that an RNFA should consider when establishing a budget.

The RNFA should distinguish among one-time start-up expenses (eg, telephone installation, furniture); periodic expenses (eg, postage, promotional expenses); and monthly operating expenses (eg, salary, lease payments). Initial budget estimates do not have to be perfect. It is difficult to anticipate every expense, but budgeting will become more accurate over time.

An accountant can provide important input into the budgeting process and can help identify any expense categories that may have been overlooked. An accountant also can help the RNFA with a number of banking and tax decisions he or she will have to make. What sort of bank accounts should be set up for the business--checking, money market, interest bearing, or high performance?

How will the RNFA pay his or her salary--weekly, bi-weekly or monthly? Will he or she contribute to an individual retirement account? Will he or she pay payroll taxes and social security monthly or quarterly? What expenses can be attributed to the business?

The RNFA will want to prepare financial statements, including a balance sheet, income statement, and cash flow statement. A balance sheet provides an overall representation of how the business stands financially at a given time. It often is prepared at the end of the month or every three, six, or 12 months. The balance sheet summarizes the net worth of the business (ie, value of items owned by the business, such as equipment or property) that is retained by the owners as equity or annual earnings. The net worth of the business is obtained by listing the value of all the business assets (eg, equipment, property, furniture) and subtracting the business liabilities (eg, payroll, accounts payable, short- and long-term notes payable, taxes).

An income statement, also known as a profit and loss statement, is a summary of the business income after expenses are paid. Income is the monies obtained from services provided. Business expenses, such as postage, rent, printing, supplies, travel, and membership fees, are subtracted from the income to provide an overall picture of the business' transactions on a monthly basis.

A cash flow statement is simply an accounting of how much cash flows into and out of the business. A cash flow statement is helpful for projecting a monthly budget and alerting the RNFA to potential cash shortfalls.

The RNFA must know the day-today and month-to-month costs of running the practice and the business' break-even point (ie, when revenues equal expenses). Does the RNFA have enough capital to start the practice? If not, can capital be obtained from friends and relatives or will the RNFA need to apply for a bank loan? Again, an accountant can be helpful in answering these questions.

ORGANIZATION

Organizing a business includes such aspects as setting up an office, determining a business schedule, and handling paperwork. Developing a business plan can help tie all these elements together and give an RNFA a blueprint to follow to get the practice started and keep it going.

OFFICE SPACE. One of the biggest decisions an RNFA must make is whether to run the practice out of his or her home or use a separate location. A separate office will help the RNFA focus on the business without distractions, as well as prevent the business from imposing on his or her personal life 24 hours a day. The disadvantage of having an outside office is that because the RNFA's "face" in the professional world is the business' literature and services rather than a retail storefront, a separate office can be an unnecessary expense. In addition, according to the Internal Revenue Service, a home office can be claimed as a business expense, as long as that part of the home is used exclusively and on a regular basis as the principle place of business or trade.' To determine whether and how much to deduct for use of a home office, an RNFA should consult a tax advisor or accountant.