Dr. Allen Miner (00:01.302)
Everyone, Dr. Allen Miner from UAC with our month's master class. And we're going to be talking to Dr. Josiah Fitzsimmons today here in just a minute. But we got some housekeeping first to take care of. First, next month here in September, we have our New York event, Ultimate Intention coming up. It's our biggest event of the year. think we're just about sold out on our room block. We have Gary Vaynerchuk's
COO is speaking to the group along with some awesome presentations from people inside the group and also our board has come up with a mastermind, a workshop we're going through in the theme of the event that is really going to be phenomenal. also Friday night we're actually rented a beautiful space and looking over the city.
where we're going to do the event that night into a cocktail hour jazz band. So, and then the next day, Saturday, we're overlooking Central Park from the hotel. It's going to be, I think, our best event in a while. So, first, before we get in with Josiah, our sponsor for today's masterclass is Aspen Laser and Theralite. You guys all know Mark, Mark Murdock. Here's the commercial. Is your current laser falling short and treating tough patient issues? Aspen Laser and Theralite. Have the solutions you need for quicker, longer lasting results.
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Dr. Josiah Fitzsimmons (01:32.172)
you
Dr. Allen Miner (01:52.887)
1827. All right, Dr. Josiah, know, you're a, I love you, man, because you've been in UAC for as long as I can remember. You don't always come to a lot of stuff. And interestingly enough to me, you kind of reinvent yourself and then pop up. And then I don't see Josiah for a while. And then he reinvents himself and reinvents not quite the right word because you're still doing all the things you were doing before. But you know, you're growing your empire.
And so Josiah, know, UAC, think the people we attract the most are, you're a great example of this. They're people who show up who've built a successful clinic. They've hired coaches. They figured out what they want to do and they've accomplished that. And now they're kind of looking around saying, well, now what? So many people come into UAC at that point, like, all right, I built a successful clinic. What's next? Do I build it even bigger? Do I do other clinics? Do I do something else?
And I've watched you evolve Josiah through building, you know, a massive clinic and then evolving into Lucro, which is this really interesting accounting business that you do, we can get into. now the last one you've gotten into real estate and some investment on that side of things, sort of as a syndicate kind of a thing. So we'll get into that. The theme of New York and where you're going to tee this up, Josiah is
It's ultimate intention, but it's around the intention of innovation. And so where I really want to dive into you today is areas in any of these businesses where you've really gone out of the box and innovated something. And I know a lot of times I've seen you do both. I've seen you follow other people's blueprint and learn and apply that. But I also know at the level of success you've had Josiah, you don't just stay in that lane. You tend to then probably pivot a little bit, innovate.
I mean, I don't remember every time the number's bigger if your clinic's at five million or eight million. I always hear some large number. You know, that's not what you're learning from those coaching groups. I had a similar thing back in my day. I grew to a thousand a week and all the coaching I had kind of really fell apart at a thousand a week. And that's how I ended up in UAC. I was trying to find a group of people and I knew it really wasn't coaching. So innovation, that's what we're drilling down into New York.
Dr. Allen Miner (04:13.634)
What's the first thing that popped in your mind in your empire when I talk about like really your best innovation story where you just did something different and it really worked out well?
Dr. Josiah Fitzsimmons (04:23.348)
man, yeah, that's a great question. You brought real estate up. For me, that was a big revelation of not paying taxes. I haven't paid taxes in quite a few years. I don't remember the last time I paid taxes, maybe 2018, maybe my second year in practice.
And so yeah, that's that there's definitely evolutions and innovations along the way. And I think that's something that I've always tried to figure out. What is that next number one thing? The one I really want to focus on for today's call, I think is going to ring home the most for everybody listening is what I call I call it the number one stat in the entire chiropractic profession that no one tracks. And this was a revelation for me in my own clinic, you know, because I'm trying to
Dr. Allen Miner (05:09.39)
Thank
Dr. Josiah Fitzsimmons (05:14.146)
the most out of my team members and I'm trying to fill their schedule up and team members that I had at the time were coming back and saying we can't keep up you know like you're you're putting more on the schedule than we can do you know and I'm like I was just like you know like you came Dr. Allen from a high-volume you know clinic and I was like I'm like what are you talking about you know there's no way I was like I want you to go back and I want you to report back to me you know I would say how long does each appointment take
Dr. Allen Miner (05:28.883)
Okay.
Dr. Allen Miner (05:36.204)
.
Dr. Josiah Fitzsimmons (05:43.968)
You know how many hours are you working? How many hours are you available of your working for seeing patients? And then like I said for each of the different appointment types that you see how long should those take?
So I had them all do this process where they calculated how many of every appointment type, you know, they could see you know, how long each appointment type took and then how many available hours they had and so I came up when I coined it the percentage of what is your percentage of schedule that's filled and so to my disdain and horror I realized we're only about 40 % filled
and my team members thought they were 200 % filled. And so.
Dr. Allen Miner (06:28.845)
I've had that same issue. It's gut wrenching as an owner, isn't it? And like, I'm so busy and you're like going through your lens, you're not even starting to get a little bit busy. But that happens a lot. I don't think you're touching on something. If anybody's had associates, you know, I was the guy bent over adjusting 750 while my associates were seeing 250, 300. And back then I thought I'm going to show them how by outworking them. And then you realize they never.
They probably just went, look at this sucker, we're going to sit back. He does all, but I remember having that frustration. that's interesting. I don't know if I've ever really heard anybody put a number or quantify that.
Dr. Josiah Fitzsimmons (07:09.612)
Yeah, so now it's actually one of the number one, if potentially maybe, I would say the number one stat in our clinic that we report on on a weekly basis. So we call it percentage of schedule filled. And so first of all, what you do need to do is calculate what your capacity is first. And so this is where everyone listening to this right now, I would say pull out a pen, pull out a piece of paper, like let's do the work right now so you can have some immediate action.
Dr. Allen Miner (07:34.573)
Do you break it into categories? Because right away we have adjustment, we know our adjusting volume, we know our new patient volume. I'd imagine if you had complexity like other therapies that you might have some layers to this.
Dr. Josiah Fitzsimmons (07:47.982)
Exactly. Every appointment type should have its own capacity. so capacity is really coming down to the length of the time for that appointment, the team members available, the rooms available, and then potentially any equipment that might be necessary or hours that your office is open. So you have these different bottlenecks or parameters. So the easiest way, I always say is just like, don't change anything. Don't change your team members, your hours, your space, your equipment, anything right now. All we need to do is just figure out your baseline. What are you currently doing?
the easiest one for most doctors is new patients. So that's what I would say. Let's just start with that one. You know, for example, you know, most doctors I say, well, hey, how first of all, how long does it take to see a new patient? You know, most doctors are going to say 30 minutes up to 60 minutes, you know, depending on the office. And so let's just make it easy math. You know, they're open 20 hours a week. They can see one new patient an hour, you know, 20 new patients a week, you know, would be the weekly
Capacity for new patients, know in this in this example and so there's 4.3 weeks in a month 20 times 4.3 is 86 so that's the new patients, you know capacity is 86 new patients a month and so then I would say well What are you currently averaging number of new patients per month? You know overlook at last 6 to 12 months. And so we I've done this calculation now with all of our clients
Dr. Allen Miner (08:49.036)
you
Dr. Josiah Fitzsimmons (09:14.67)
on multiple webinars probably over a thousand doctors that have done this calculation across all appointment types the average we found in the chiropractic profession is 20 % filled and So in that example right there, like I said, let's say there have 20 new patients a month. Well, their capacity is 86 20 divided by 86 is 23 percent of schedule filled
Dr. Allen Miner (09:29.129)
Yeah.
Dr. Josiah Fitzsimmons (09:41.55)
And so you can do this across all your different appointment types, but I highly encourage everyone on this call. I said, what is the number? Like I always is the way I think about it for new patients. Let's just say you have a thought. So a lot of people don't even know. But I say, Hey, you have a thousand people standing at your front door all next week, just waiting to get in for a new patient. You don't change your hours, your staff work anymore than you currently are. How many of them could you actually let through the front door next week and process, you know, as an initial day one new patient in your office?
What is that number, you know times by 4.3? That's your capacity and then what's your historical average? And so like I said across all appointment types you can do this on you know first figuring out your hours your availability those bottlenecks like I talked about just a few seconds ago How long does the appointment take and so the average we found is about 20 % So what that means is whether you have a 20 % full schedule a 50 % full schedule 100 % full schedule, you know Allen does your rent change? Does your utility bill change?
Dr. Allen Miner (10:41.024)
One of the best, my favorite things about a chiropractic practice is is such fixed. Our overhead is so fixed compared to most other brick and mortars other than what, face paper? Once everything's in place, you know, there's not much variable expense. it's always a funny question when you talk about margin too, because it's like, well, it depends if your overhead's 30,000 a month and you're not making that versus if you're making 100,000. Like margin's kind of an interesting concept.
Dr. Josiah Fitzsimmons (10:41.038)
Does your payroll change? Yeah.
Dr. Allen Miner (11:07.093)
profit margin in chiropractic because you have this fixed operating expense to run the business.
Dr. Josiah Fitzsimmons (11:13.358)
100 % so it's like hey if if you're at 20 % full or 100 % full and most all your expenses don't change Let's say in this example except the cost to acquire new patients You know, then that should be your number one goal of your business is to maximize your schedule So I have a very very basic framework if you want to scale, know Like I've scaled my clinic to you know, hopefully be about eight million dollars this year in our one location in Iowa You know, my basic framework is this
maximize your schedule Expand and repeat and that's really all it comes down to it when I say expand is it team? Is it ours? Most of the time is that I mean I got to five and a half million in an 1800 square foot space So, you know, usually it's not space. It's either better team members more team members Increasing your hours, you know, but really from the front end to understand. Well, how much can I spend to maximize your schedule?
That's where a lot we got start going into some of that financial data that we help you with lucro. But do you know your lifetime value of your client? Do know your profit margin? You know, you know, and then what is your percentage of schedule filled? And so those are that's like the most basic framework for scaling is knowing these like very primitive stats.
Dr. Allen Miner (12:20.189)
How about...
Dr. Allen Miner (12:27.668)
Josiah, we're going to come back to real estate because you can't tee up this group talking about not paying tax and then not coming. But before we get to that, talk about how you leveraged other services to increase price point, you know, because you didn't.
I don't know what you started. I'm guessing you probably charged 40, 50, 60 bucks in adjustment when you first opened your doors. 30. I don't know if you did family plans. I think you came out of the Amp. You came out of the Amp crew, They're kind of famous for big family plans, lower margin stuff. Did you start there?
Dr. Josiah Fitzsimmons (12:55.31)
Mm-hmm.
Dr. Josiah Fitzsimmons (13:00.268)
Yeah.
Dr. Josiah Fitzsimmons (13:05.71)
We started off we were about $45 a visit. Yeah now we're about for adjustments. Now we're about 75 for an adjustment
Dr. Allen Miner (13:13.098)
Yeah, I've been saying that on social media that Fred Barge used to say price of a stamp 78 cents, $78. And I'll tell you now that the price of staff has gone up so much. It's the single biggest metric. That's amazing. I mean, chiropractors are still 30, 40, $50. They have not moved with inflation. Starbucks has jumped 50 % in the last couple of years and chiropractors not held pace with that and take a basic 150 person a week clinic and
go from $50 to $75 on your adjustment. So you're in line with inflation and that stamp principle. That's a couple hundred thousand dollars at the bottom line. All of a you can afford to pay the better CA, hire the A player associate doc. And it's interesting fighting that. let's, yeah, please.
Dr. Josiah Fitzsimmons (13:54.648)
Yeah.
Dr. Josiah Fitzsimmons (14:00.526)
Well real quick real quick on that. want to give my this is my like mental thing that I figured out with increasing prices This is like this actually changed my headspace around increasing prices is Exactly like he does not it doesn't cost anymore to deliver a $50 adjustment or a $60 adjustment or a hundred dollar adjustment There's no additional expenses to deliver a higher cost adjustment And so the easiest way that I really like blew my mind when I realized this
Is that just take your profit margin for example, that's the easy way I like thinking about let's say you're charging $50 a visit and you have a 20 % profit margin Okay, so you make it $10 a visit if you go from $50 Okay to $60 a visit You literally just doubled the profitability of your entire Business, you know, obviously let's say mostly adjusting but company or clinic, you know from increasing in $10 and you're adjusting price
Dr. Allen Miner (14:37.097)
10 bucks.
Dr. Allen Miner (14:43.836)
Double.
Dr. Josiah Fitzsimmons (14:56.492)
you literally can double the profitability of your entire company. So that's my hack is if you increase your price by your profit margin, then you double the rep, you double the profit of your company.
Dr. Allen Miner (14:56.68)
Yeah.
Dr. Allen Miner (15:09.683)
So let's, before we move on to the other services to move margin even higher, which I want to get into, but first, I think, you know, one of the common pushbacks I hear, and it's a mindset thing, I've heard it from some UAC people, like, well, I live in a small community, they can't afford, it's always the first answer. You know, three of our clinics are in Albuquerque, we're closer to a hundred dollars a visit. And it's one of the lowest economic areas in the country.
And so for us, it was, we did it through value stack and differentiation. We started to add on home. We didn't want to put on ancillary other services. So we started, you know, including Pete's Martoni's neck nest pillow and Tabor Smith's spinal hygiene product and, supplements from Joe Esposito and, and, from Steve Junopoulos. And we started adding courses.
and workshops and so we created this stack so it wasn't just a corrective, you know, wasn't just an adjustment like the joint which is 19 bucks if you're on a plan. It was an entire package to change your spine and that helped us move our price point and we didn't have to deliver all that stuff in the clinic. They went home with it. So that was our approach and you know.
And then we just really doubled down on differentiating ourselves in the community as we were much more thorough. We specialize in back and neck pain cases that aren't resolved with typical means. And so we're going to get in and really do a corrective process. How did you handle when you first did one of your first bumps from 40 to whatever it was? Did you just say screw it and do it? Did you have some of that fear about will people pay it? Can you speak into that? Because I do think a lot of people get in their head about the community not being able to pay it.
They're paying double for Starbucks. Starbucks doesn't get in their head about it. Why do we as chiropractors and how do we work around that?
Dr. Josiah Fitzsimmons (17:06.872)
Yeah, I think it is. That's where the whole issue is, is between the between the two years, you know, no one better than I anytime we've ever increased the prices, we've never had. We've never had any issues except the staff members who have the issue between their ears. Those are the only people that have the issues, the patients, the practice members have no, you know, awareness. I mean, especially in the last, you know, since COVID, what I've told everybody is this is the greatest time in the history of the world to increase your prices, you know.
Dr. Allen Miner (17:14.694)
I'll see you there.
Dr. Allen Miner (17:29.265)
Yeah.
Dr. Josiah Fitzsimmons (17:35.278)
If you haven't done it, if you don't take advantage of it now, there's never going to be a more opportune time to do it. yeah, mean, that's get it past your own head, you know, and everyone else is going to have no issues with it. But the cool thing is, again, going back to math, you know, I'm a big math nerd and let's just say you have a 40 % profit margin on a $50 adjustment. So you got to go from $50 adjustment to $70 adjustment. That will double the profitability of your entire business.
Dr. Allen Miner (17:35.705)
Absolutely.
Dr. Allen Miner (17:46.054)
What?
Dr. Josiah Fitzsimmons (18:04.974)
it's like if that doubles the entire profitability then half of your you would have to have your sign-up rate or retention rate cut in half and You would still be at the exact same level that you're at then which you would obviously need have far less Expenses, know from a team and management standpoint if you say half half the volume So it's like the likelihood is even if you have a 10 % 20 % You know drop, you know and sign-up rate You know or retention. You're still going to be 80 90 percent
Dr. Allen Miner (18:15.333)
No.
Dr. Josiah Fitzsimmons (18:34.062)
further ahead than you are currently.
Dr. Allen Miner (18:35.787)
Not to mention, Dr. Desai, it just feels better. Especially if you're, for me, was when I was on Ben Over the Table knowing I was making $70, $80 versus $30, $40. It just made me feel better, more confident than, you know, we used to do those family plans and, you know, packing families in. And when you break down the cost per adjustment, we were losing five bucks a visit. And we did that. And when we first raised those rates,
Dr. Josiah Fitzsimmons (18:49.976)
I'm
Dr. Allen Miner (19:03.59)
it felt better knowing, I'm getting paid what I deserve and for being over a table. And the converse of that as an owner or founder is I'm paying my team members what they deserve for delivering the service.
Dr. Josiah Fitzsimmons (19:14.968)
Yeah, no, I love the profit stop loss calculation of just taking your profit divided by the number of visits that you have and really understanding like how much you're making per visit from a profitability standpoint. And that's really at the end of the day, like that's you're maybe charging 50, but if you're only making 10 because of all your expenses, that's all you're making 10 bucks on delivering that adjustment. So it's like really understanding your true value, you know, what we provide. And I always tell people it's Jesus and chiropractors. We're the top miracle workers.
In the history of the world, mean, who tells what profession gets told that they're a miracle worker more often than a chiropractor? I don't think there's anything out there that's anywhere close to the amount of times chiropractors have been told they're miracle workers. So it's like, if we provide them the greatest value possible, then the greatest value is worth a lot.
Dr. Allen Miner (19:50.15)
Yeah. I'm worried.
Dr. Allen Miner (20:05.713)
I think you're right. Here's a little trick for those struggling to, I forget who I heard say this, but tell people, hey, we're raising our rates to this, but because you've been with me, I'm going to grandfather you in for the next three months before we raise it. And that's always helpful because then people feel like you gave them something. This applies a little more to people charging as they go or on smaller plans. But you know, it's like, look, got cost is higher.
Everything is more expensive. People understand that instantly. So we got to raise our rates up to here. But because you've been with me, we're going to give you 90 days at the old rate before we grandfather you in. And that really has helped smooth out some of the docs that we've placed associates for who are struggling with this concept just to have a little runway where they're giving their regulars, their loyal customers a little something in return. Takes them off the hook. Now, I'm going change gears though. Remember the theme here, innovation.
the intention to innovate. I'd say figuring out how to, and I know you, Josiah, you're conservative. So I know if you're not paying taxes, you're not, there's some weird stuff out there that, you know, we've all investigated with easements and what's the one with insurance. I was blank on the term where you insure yourself basically. Captive insurance.
You know, that's like the number one flag to ask the IRS to come audit you is set up a captive insurance policy. So I don't think you're doing that stuff. I know I fell into this when I was buying buildings in New Mexico for all our businesses that I started doing cost segregation studies and lo and behold, it was offsetting income.
Dr. Josiah Fitzsimmons (21:34.914)
Yep.
Dr. Allen Miner (21:49.86)
I think that might be part of your strategy here, but it's not exactly what you're doing. So let's get into the real estate side of it. What have you been doing to avoid taxes and have you innovated there to keep more money in your pocket?
Dr. Josiah Fitzsimmons (22:00.462)
Yeah, I would say you kind of hit the nail on the head with kind of my evolution. You know, I grew up low income, nicest car my family had was $500. We had take pop cans out of our neighbors trash in the back alley. We had turn in for nickels for recycling to help pay the bills. And so, you know, I had no concept of taxes until after my first year in practice at over a million dollars. And I understand what I got to pay in taxes. I'm like, wait, what?
All right, there's got to be a better way and so I actually have a I can probably get you a link but I created entire Detailed spreadsheet handout that I get you a link for everybody if they want where I kind of map out all the different tax strategies That I utilize but there's really obviously some very basic ones that if you're not taking advantage of like the Augusta rule and paying your kids and Some of these very very basic ones. You got to do those
First and foremost, so that's always my number one thing is if you're not doing the basic easy, you know ones You got to do those then you get into what you were just talking about Allen, which is these fringe IRS dirty dozen, you know tax strategies actually paid a tax attorney $25,000 for a three-hour meeting To learn all these different tax strategies and I saved a lot of money But what I learned is exactly like you said I tried some of these strategies initially
where I didn't know any better and then I realized, oh man, these are a little fringe, I might get audited, I gotta keep paying, there's a lot of maintenance and expenses that these guys are making all this money off of me on the back end that I'm also paying for. So was like, am I really saving?
Dr. Allen Miner (23:42.544)
That was also that frustrated me on that stuff because it was always like all right You got to put up more money to get a little back It put the money you put it wasn't like you're buying an asset It was like you're just well you're going to send to the government so you might as well say it never that never sat right with me So I'm on the same page with you
Dr. Josiah Fitzsimmons (23:50.007)
Yep.
Dr. Josiah Fitzsimmons (23:57.838)
100 % okay. Yeah, so you're on 100 % so then so the the turning point what for me was I've always been you know Very always trying to learn constantly growing is really like my number one core value And so anytime I meet somebody that's doing something in any area of life, know, know I can learn from everybody but I had this guy that I met that was a local real estate developer and also hey man, can I just get? Coffee with you. I love to like understand how this works and
He starts going in and on and not about his business. I was like just shoot me straight Like how much are you make like what's your ROI on like the investing in real estate? And he's like, you know like three four percent and I was like Commercial yeah real estate development and I was like
Dr. Allen Miner (24:39.191)
Was he a commercial guy or a residential? Yeah, like big, like schools and like kind of public funded stuff or more private stuff.
Dr. Josiah Fitzsimmons (24:47.214)
More private. Yeah, so he would do he would build out like house he built hospitals and Dental clinics and like commercial retail strips
Dr. Allen Miner (24:50.764)
Okay.
Dr. Allen Miner (25:01.057)
Yeah, their margins are three, four, five, if they're killing it, they might do 6%.
Dr. Josiah Fitzsimmons (25:05.356)
Yeah, and I was like I was like that's awful like I and I started looking into residential real estate and I'm like, okay I got to put a hundred thousand dollars down unless I said the time for a five hundred thousand dollar house and after expenses I'm going to make like two hundred and twenty dollars a month in profit is like the math I did and I was like two hundred and twenty dollars a month in profit like the whole year I'm going to make like twenty five hundred dollars on my hundred thousand. Yeah, like two point five percent
Dr. Allen Miner (25:27.821)
You
Dr. Josiah Fitzsimmons (25:35.33)
You cash on cash return. I was like I was like this doesn't make any sense. I was like there's got to be Something I'm missing like there's got to be some hidden like the other benefits to these real estate guys because it's like you then you hear Grant Cardone and here's all these other people like real estate so number one thing that wealthy people do and I was and I just like didn't get it I just that I was looking at the ROI. I'm like man. This is
Dr. Allen Miner (25:58.198)
Yeah.
Dr. Josiah Fitzsimmons (26:01.89)
Something is not clicking and sounds like I got to figure this out You know, I'm very you know like I got to ask questions and flush it out and just keep figuring it out until I actually Understand because there's these guys are super smart and they're doing something that I don't understand and I need to understand what it is and so I Go deeper and deeper and deeper. That's really what I realized and you kind of brought it up Was the really the number one value in real estate is? depreciation especially for business owners like us or we have
Dr. Allen Miner (26:26.936)
Yeah.
Dr. Josiah Fitzsimmons (26:29.964)
you know, high profit margin, you know, clinics, and we have this high amount of cash at the end of the year that we got to pay 30, 40, 50 % taxes on. How do we reduce that as best as possible while getting an asset in a long-term strategy simultaneously? so, you know, Allen, sounds like you have some good experience on this, but depreciation, you know, easiest way I, you know, tell, kind of explain the whole process is, is this, you buy a million dollar property,
You know, typically a loan to value of 80 20, let's just say, for example, so you got to put 20 % down to purchase a property, $200,000 to buy your million dollar property. Well, you can you depreciate not just the 200,000 you put on you put you depreciate the full cost of what you pay. So a million dollars. Well, typically, you know, a building is going to depreciate over an extended time period, you know, from 27 to 39 and a half years.
So on a million dollars might only be getting, you know, $30,000 or worth of depreciation that first year. And then you have taxes, you know, as a portion of that. So then you're only maybe saving 5,000 bucks, but with a cost segregation study, typically you can accelerate about 30 to 40 % of the cost of the building in the first year. So let's just say.
Dr. Allen Miner (27:29.01)
I found one.
Dr. Josiah Fitzsimmons (27:52.558)
It's 30 % for easy math 30 % of a million is 300,000 and then let's just say your net tax effective rate is 40 % you know then 40 % of 300,000 would be a hundred and twenty thousand you put two hundred thousand dollars down you just saved a hundred and twenty thousand dollars in taxes, so you just got a 60 % ROI
your $200,000 investment in the first year and So that's what I when I really realized it's like, okay If I put money in the stock, maybe I'm getting eight ten percent if I can put this in real estate get a sixty percent return on my money in the first year You know, I was going to pay one twenty thousand taxes about about two hundred thousand dollar building So now I'm thinking the building only cost me eighty thousand dollars to buy a million dollar property So now I'm you know buying way more properties for the same exact money that was going to give to the government
I'm giving putting into a building and a hard asset that I have now obviously you need to have tenants, you know to cover your debt but The biggest other missing factor that I that you need to really understand about this. That's why I have about 60 Airbnb's Especially if you're first getting into real estate, there's difference called passive and active in real estate And so when you're passive in real estate, there's a passive loss limit of only $25,000
Dr. Allen Miner (28:51.205)
Yep.
Dr. Josiah Fitzsimmons (29:18.83)
to considered an active real estate professional, you need to do 500 hours a year in real estate. And so if you only have a couple of properties, you're not going to be able to substantiate that, and be a full-time CEO, chiropractor, doctor running another business. So a lot of people either have their spouse more involved with the real estate to be active in real estate or with a short-term rental or an Airbnb. What the law says is if the average night stay of the property is less than seven days,
Dr. Allen Miner (29:46.209)
Let me rapid fire some questions at you there. First, how do they...
Dr. Josiah Fitzsimmons (29:48.258)
then you only need 100 hours a year to be considered an active real estate professional. And so then you can get those massive depreciation write-offs with short-term rentals a lot easier. And so that's just the first level that you got depreciation.
Dr. Josiah Fitzsimmons (30:06.017)
Okay
Dr. Allen Miner (30:08.481)
100 hours, how's that quantified? Is that you driving to the property to fix it, preparing taxes? How loose or specific are they in quantifying that?
Dr. Josiah Fitzsimmons (30:12.983)
Yeah, any?
Dr. Josiah Fitzsimmons (30:16.684)
Yeah, any is anything that you could document thinking about talking about looking on loop net Zillow, know, anything that you could document if audited, you just have to present, you know, what do you do for those hundred hours?
Dr. Allen Miner (30:33.159)
And do you have to file that somewhere to get certified as a real estate expert or you just kind of can claim? No. How about here's where I've had hiccups. I've owned a few residential properties. I did not enjoy it. Particularly I owned them during COVID. I was managing themselves for what you said earlier. I got the depreciation, but the margin sucks so bad that.
Dr. Josiah Fitzsimmons (30:38.572)
No, literally just a box you check on the tax return.
Dr. Allen Miner (30:59.2)
I'd give up what little profit margin I had if I would have had it professionally managed. So I would manage it, but I didn't like kicking people out. What I love about owning all my own buildings is I'm a tenant. So now we're paying rent back and then if we can rent a few of the other spaces, just feels, I don't know, in my mind, I'm paying the rent somewhere. I'd rather pay it back to my real estate company. But I will tell you, some of these buildings we've had now 10, 15 years.
Man, I freaking hate paying for stucco and new HVAC units and it's part of the game, know, repaying for asphalt. So I'm curious that you have a much greater volume of real estate. Do you just hire a company and suck up the margin on it? Do you have a company internally that manages all, especially if you're doing Airbnb, you've got cleaning crews, you've got maintenance crews, you've got to have it posted, pictures. There's a lot of work into that. Can talk about that side of it?
Dr. Josiah Fitzsimmons (31:55.35)
Yeah, yeah, no, I would I mean Allen anyone listening I would I would just really encourage you to like yeah to change your Mindset on the real estate. So what I when I talk about real estate, I feel like there's four main values that you're getting out of it and what you're talking about Which most people think the most about is the cash flow and that to me is by far by far the least valuable of Only real estate and so you have to you have to have that mindset first
You're not trying to buy this real estate so can pay your bills and put food on the table You know, that's not your goal of owning real estate. It's maybe I could maybe even argue I could probably name for other things. It might have been you number fifth most Valuable reason of owning real estate. So that number is zero. I'm totally cool
Dr. Allen Miner (32:35.551)
I think what happens...
Oh, think that's good to hear you say. think what's interesting is I'm on the backside of it where I got all the cost seg maxed out after the five or seven years. You know, so it's like I kind of lost the front end like, man, that was awesome not paying taxes. That was a few years ago. now, you know, now they're in. I will give you a caveat. These properties are appreciating more of my net worth is in the worth of those properties going up for 10, 15 years than everything else. So I don't want to minimize it, but
Thank you for adjusting that cashflow side of it, because you do, that's where it's just always a little demotivating looking at how little cashflow these properties throw off. So I appreciate your reframe on, got it, that's fifth down the line on benefits. Stop making that higher up.
Dr. Josiah Fitzsimmons (33:24.962)
Yeah, yeah, so what I want to talk about. Yeah, is you just brought up is a appreciation So here's the thing that that absolutely blew my mind when I first understood appreciation better So you look Google it the last hundred years real estate on average is like four point nine seven percent annual appreciation but here's the big big difference is You buy again. Let's go back to this million dollar property that you put two hundred thousand dollars on
When it says it's appreciating 5 % it's not you're not getting 5 % on your 200,000 like you do in a stock market and you put in 200,000 you're hoping to go up a 5 10 % Right, you're getting 5 % appreciation on the purchase price. So you buy a million dollar property now Let's say one year later is what 1 million 50,000 and you put $200,000 in you know 50,000 divided by 200,000 you just got 25 % return on your money
Just on appreciation now. It's unrealized right until you sell the property or you refi it You know pull that money back out, but you're literally like I let's say year one you're getting six. Yeah
Dr. Allen Miner (34:29.79)
And again, let's pause because people miss this. That 25 % is the combo of how much the value of the property went up plus the money you kept in your pocket that you didn't have to send off in taxes. That's how you're getting the 25%. Am I correct on there?
Dr. Josiah Fitzsimmons (34:45.87)
No, no, no, no, no, no. That's just the appreciation value. The depreciation value could be 60 % ROI in the first year. So you have depreciation plus appreciation, then now you're at 85 % year one ROI with those two. And this is with zero cash flow.
Dr. Allen Miner (35:02.174)
So, Rockets are the 25 % again then. So, you bought it for a million, it's 150,000 a year later.
Dr. Josiah Fitzsimmons (35:10.958)
Yep, so you bought it for a million. So now so it went up fifty thousand dollars, but you only put two hundred thousand dollars down So you got fifty thousand dollars on a two hundred thousand dollar investment fifty thousand divided by two hundred thousand is 25 percent
Dr. Allen Miner (35:21.958)
I got you. Got you.
Dr. Allen Miner (35:26.35)
using other people's money. Gotcha.
Dr. Josiah Fitzsimmons (35:28.436)
Exactly OPP. Yeah, so So now you've got 25 % just like I said on the appreciation of the property, right? And so this is where Appreciation of the property or finding undervalued so Residential property goes up based on this, you know comps in the market other properties You know that's going to set a based on an appraisal. That's how your property is going to go up in value over time commercial
is all based on what's called cap rate and it's all based on how much money you're getting net operating income for the property of the building. And so you can actually dramatically massively alter the impact of the valuation of a commercial property by like we're just talking about earlier, increasing prices, increasing rent rates, changing.
The status of a property like we bought a hotel the small town ten thousand person town. We bought this hotel six hundred and ninety five thousand dollar for a 35 unit hotel remember I'm in Iowa right and we go and we're like, hey, we're going to turn this into Apartment complex with studio apartments. So we spend about ten thousand dollars on each apartment to upgrade them and put little stoves and little kitchenettes and microwaves
And from buying it to doing that process took about five months. We took it to the bank and said hey We're going to be able to reach these rooms for X. We expect this amount of occupancy They valued that property five months after we bought it for 695 thousand. They valued at two point two million dollars
Dr. Allen Miner (37:07.197)
Did you pull any money out or did you leave it in and roll it?
Dr. Josiah Fitzsimmons (37:10.638)
So then yeah, so we bought it in cash originally and then we went and we got a loan at $2.2 million, you know, at that one, I believe was 75 % LTV. So we got about $1.6 million loan, paid ourselves back to 700,000 and then we just got $900,000 in tax free money. You know, we could go put down and go buy a, you know, $4.5 million property.
Dr. Allen Miner (37:31.631)
As it's alone. So how about the management of it? The back end? How are you handling that? Because you do have to handle all those leases, those renters. Did you start your own company? Are you outsourcing it to somebody? How are you handling that side of it?
Dr. Josiah Fitzsimmons (37:45.742)
Yeah, I outsource all that. I mean, that's not my expertise. I don't want to be in the property management business whatsoever. yeah, mean, would, again, you might be able to get a few margin here and there fixing your own toilets and doing some of those things, but I don't think that's worth it. think my time is much better spent scaling my other companies. like I said, if you really have that mindset, I said, depreciation number one, appreciation number two.
Third one, you know is equity pay down, you know, someone else is paying your debt for you, right? So not only is here's a thing people don't realize do it the building is Appreciating and then you're also simultaneously paying the debt down someone else is paying the debt for you So your equity like you're just talking about Allen is increasing in two different directions right And so yeah
Dr. Allen Miner (38:32.073)
Mm-hmm.
How about, have you partnered with people on these, construction experts to minimize your workload, like if you're going to do a remodel? We did that with my wife's dance studio. Kind of a similar deal where we bought it, redid it, the valuation on it tripled, we were able to pull some money out of it.
In that case, we managed it ourselves, but I can appreciate if you start doing this with some scale, it'd be nice to have a partner or maybe at least a trusted contractor, but how have you managed that side of doing these projects so you're not becoming a contractor?
Dr. Josiah Fitzsimmons (39:13.694)
No, it's a great question. You're 100 % right. The number one issue you're going to run into with trying to do real estate is deal flow. And so if you're trying to find properties, you know, in between patients at the end of the night on the weekends, you know, they've already been picked through by a thousand real estate agents or other professionals and so forth like that. And so you're not going to get, you know, very good deals, you know, especially value add deals. Like that hotel property, like I bought that was completely off market. So
Dr. Allen Miner (39:40.784)
Yeah.
Dr. Josiah Fitzsimmons (39:40.814)
The way I've done it is I realized that very early on. first I started looking, I'm like, I figured out real fast after like two months. I'm like, nope, I can't do this. I don't have the time. I don't have the expertise. You know, analyze all these different properties. need somebody to collaborate with. And so that's how I found is I have a commercial guy that does all the deals, finds them all, negotiates them all. He's a real estate agent. gets a commission. And then I also partner with them 50 50 on all those deals.
If a deal good enough for him, it's good enough for me. And then I have the exact same thing.
Dr. Allen Miner (40:13.316)
So you both put in, you guys both put in equal cash on them too? That's great, I like that.
Dr. Josiah Fitzsimmons (40:17.55)
Exactly. Yep, and then I have the same exact setup with the residential guy as well So it's like the benefit for that for that these guys that I work with like I said Is there you know, they have someone they can do twice as many deals They're also making commission on every purchase and on every sale so they can get those they're doubling that working with me as well So it's been a really good win-win relationship or you know, I found people that I really trust and it's like
Like we bought a feedlot, it can hold 4,000 cattle. And my partner found the deal, it was a sheriff sale. He's like, I gotta go bid on this thing. could go up to 700,000. I gotta buy it in cash. Do you trust me to make the right decision?
Dr. Allen Miner (41:02.523)
That's cash on the courthouse kind of a deal. Those are fun.
Dr. Josiah Fitzsimmons (41:06.762)
Yeah, yeah. And I was like, I trust you. So it's like, he couldn't have done the deal without me. You I wouldn't have ever done that deal without his knowledge. You know, so, you know, so I mean, those partners are easy, harder to find than, know, is, but I mean, that's really been my kind of secret sauce on finding the deal.
Dr. Allen Miner (41:24.442)
that did you find him through your chiropractic practice or outside of it? It's amazing how many of those people in my world came from practice. Yeah, it's an unset strength of having a chiropractic practice is who you meet in the community. yeah, I've got some great stories about some of my investors and partners walking in the door as patients becoming friends and learning from them. And nobody talks about quantifying that side of the value of being in practice.
Dr. Josiah Fitzsimmons (41:31.01)
Yeah, both through my clinic. Yeah, both through my clinic. Yeah.
Dr. Josiah Fitzsimmons (41:52.737)
Mmm, that's good.
Dr. Allen Miner (41:53.241)
And it's something I miss sitting in an office away from it now. I don't get that kind of deal flows. Not the right word because you use it. It's sort of almost deal flow in a different way of just being in your community on a regular basis to getting to know people. Yeah, there you go. Which is I that ran long, but we love your brain, love talking with you and I know a lot of people. I suspect you're to get hit up by a lot of people in UAC, but you've always been so gracious with your time so.
Dr. Josiah Fitzsimmons (42:05.58)
Relationship Capital.
Dr. Allen Miner (42:21.357)
Anything else you'd like to if somebody is interested in Lucro by the way, just to give you a plug for your time. If you're not doing your accounting through Josiah, what's cool about it? I mean, you could probably give a better plug Josiah, but sometimes because you didn't tell me any of this is a better plug. What I love about Lucro is you're aggregating data from lots of clinics, so it's very affordable to do bookkeeping. That's what you do for a clinic, but you know benchmarks. So when you plug people into your spreadsheets and formulas, they can start to see how their numbers are comparing to
all of your other clients and how is their spending on payroll? How is their marketing spending? What's their profit margin? I think you're able to give some insights as a clinic owner and because of your group of clinics, your database of clinics you work with, that your typical bookkeeper's never going to be able to bring to the table.
Dr. Josiah Fitzsimmons (43:11.18)
Yeah, exactly. mean, that's really what I realized as I was trying to grow is like, need to understand my numbers and my data to make clear, confident, you know, decisions with certainty.
And my books are always behind. Even when I got them, I didn't know what I was looking at. So I was like, I got to solve this solution for myself. And then I had all these other doctors say, how did you scale your clinic? You know, the seven, $8 million just a few years out of school. And I was like, well, I would had extreme confidence with my decisions because I understood where to spend my money, what was working, what wasn't working, can make pivots, you know, and grow. I think that's, you know, especially as chiropractors were very intentional with our hearts, our hands. But a lot of times we missed a lot of the data and the number analysis. Like you said, yet.
Super low cost for 450 a month. We do your books every single week of your report every single month of action steps You should take based off your financial data and then like you said our big vision is help advance the profession right now We have about 500 million in annual clinic revenue in our software just launched last year will be over a billion dollars I'm sure of it in no time We're onboarding a lot of big franchises and coaching organizations that are making us a required vendor for 40 locations 250 locations one we're finalizing
right now and so that's going to really give amazing insights so you can compare your clinic to all the top performers in the country, what vendors are they utilizing, you know, how are they scaling their organizations and all the numbers to really make you know confident decisions like a true CEO should.
Dr. Allen Miner (44:38.196)
Yep, I love it. Lucro.com, is that where they find you?
Dr. Josiah Fitzsimmons (44:41.452)
More lucro.com.
Dr. Allen Miner (44:42.914)
more lucro. L-U-C-R-O. All right.
Dr. Josiah Fitzsimmons (44:45.998)
You got it. Yeah. It means profit in Italian. So that's the goal, to help increase the profitability of clinics by understanding their data and in the long run, enterprise value if you want to sell your clinic as well.
Dr. Allen Miner (44:50.363)
I love it.
Dr. Allen Miner (44:59.191)
Yep. Awesome, Dr. Josiah. Love and appreciate you, brother. Thanks for your time, Great work. See ya.
