April 20th, 2020


The Fed’s Paycheck Protection Program Funds Are Gone. What Do You Do Now?

That was fast: as of April 16th, the initial $349 billion in funds for the Paycheck Protection Program (PPP) have either already been disbursed or are earmarked to fund approved or pending approved loans. Whether your practice will receive PPP funding is going to depend on where in the loan application process you are.

  • Applied and Approved: If you have applied and have received approval notification, you are most likely ok and should still receive your funds—you’ll just want to confirm with your lender about timing. If you applied through a larger bank you may want to plan for the funds delivery to be somewhat delayed, as so far, the practices we know of that have already received funds went through smaller banks or credit unions.
  • Applied but waiting for approval: If you have applied but have not yet heard back on an approval you may still be fine. Understandably you might feel a bit nervous, so it would be a good idea to reach out to your lender to request a status update.
  • In the process of applying: If you have not yet applied or were in process of applying, you probably should still complete an application with your lender incase additional funds are allocated to the PPP by Congress. The Small Business Administration is not accepting additional applications as of April 16th due to being tapped out of the program’s allocated funds. However, it is likely that Congress will approve more money. When those funds will become available and how much is still up in the air.

There may also be additional programs created for small business financial assistance from the Federal Reserve or other institutions—but again, this is yet to be determined. And a word of caution: as in any time of crisis, you should watch for scams and fraudulent claims and rely only on trusted sources such as official government websites or information from your trusted lender.

What to do while you wait

Regardless of your application status, there are other steps you can take right now to help your practice weather this event. After the safety and well-being of your team, your clients, and your patients, your priority is to support the fiscal viability of your practice. Things will be financially tight, difficult decisions will need to be made, and there will still be uncertainty—but you can use a few basic tools to help you get through long-term. The key is to know two essential numbers: your recent daily average revenue and your estimated daily average breakeven for current cost levels. You’ll also want to track the major expense centers and revenue levels that may cause those two numbers to change.

Daily Average Revenue (DAR): You can calculate the DAR number by leveraging the daily stats tab on your iVET360 Pulse dashboard. If you don’t have a dashboard yet, we invite you to take advantage of our free 3-month offer to use this tool to help track your practice financials. You will want to take the revenue total for the practice for the last 7-14 operational days and divide that revenue total by the number of operational days. Example: $50,000 in revenue over the last 14 days equals a DAR of $3,571.

Daily Average Breakeven: There are many ways to calculate this, but if you already have this number figured out, great—use that. If you have a way you like better in calculating this number, use that instead.

If you don’t already have that number, we recommend the following steps for simplicity and speed—but do keep in mind that this will not be an exact figure. However, it can provide you with a general idea of what you need to be producing in revenue to maintain your existing cost levels.

Step 1: Take your 2019 calendar year expense total, this should include any expense the practice had in the year on the P&L statement such as cost of goods, labor, benefits, employer payroll taxes, rent, repairs, utilities, office supplies, professional dues, professional services fees (accountant, lawyer, consultant), merchant services fees, collection fees, interest, and non-operational or other expenses. This should be the total of your practice’s expenses on the P&L statement for all of 2019.

Step 2: Estimate the cost savings total you have or are about to implement and calculate the total savings for them for 12 months. This can include staff cost reductions, order level cost savings, rent deferments, or any other cost savings you have put into place recently to adapt to the changing economic landscape.

Step 3: Estimate any expenses you have already added above 2019 in 2020. These can be things like new monthly loan payments, higher rent, staff raises, or anything that is an increased cost your practice has taken on in your day to day expenses that was not in 2019.

Step 4:  Take the total expenses from 2019 minus the total of the estimated cost savings you are expecting annualized for 12 months, and add any cost increases you have already taken on in 2020 over 2019. This will be the annual break even estimate.

Step 5: Take the annual breakeven estimate and divide it by the total number of operational days in the year for your practice. This will give you your daily breakeven estimate.

Operational days estimates:

·        Open 7-days a week: 366 days (leap year) minus your observed holidays.

·        Open Mon-Sat full days: 314 days minus your observed holidays.

·        Open Mon-Fri and ½ day Sat: 288 days minus your observed holidays.

·        Open Mon-Fri full days: 262 days minus your observed holidays.

Example: $1.5 Million in total 2019 costs on the P&L – $200,000 in estimated annual costs savings (~$16,700/mo.) + $15,000 in estimated new costs in 2020 = $1,315,000 in estimated annual costs. $1,315,000 /288 annualized operational days = $4,465 daily average break even.

What to do with these numbers

Once you have calculated these two numbers you will want to understand if your breakeven cost estimate is above or below your recent DAR. If it is above, you will need to consider adjusting your cost levels to help the practice financially weather this event longer.

If breakeven costs are below the DAR, you can focus on continuing to track these two numbers versus each other. If you implement additional cost management measures you will want to redo the breakeven calculation with your additional cost adjustment estimates added in. Repeat this analysis as revenue average or cost adjustments are made.

To help alert you on where cost management measures may be needed, we also recommend focusing on tracking your two primary costs centers in the practice that can be most immediately impacted. Those two areas are cost of goods orders and labor expenses. We’ve made our tracking tools available for free to help you keep a pulse on these two areas to better understand if one or both need attention to improve cost results, and stay at or under your breakeven avg target.

Whether you have assistance funds to help the practice through this unprecedented event or not, focusing on your controllable costs and having a target number to measure against on a daily basis can give you the information and data-driven evidence you need to keep your practice financially healthy.