Business Talk - Bank on it

Anthony Lombardi
July 18, 2013
Written by
The tale of Ferdinand
In the late 1800s, there was a German boy named Ferdinand who had a gift for fixing things – so much so that when he was 18 he became a mechanical engineer. Later on, he had an opportunity to further his education at a trade university but he did not have the money to pay for tuition. However, his talent did not go unnoticed and because he was guaranteed a job once he graduated, a German bank loaned him the money and he was able to complete school. As soon as he graduated, the German government hired him to design and build cars and his employers were very happy with his performance.

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While money for chiropractic education can be easy to come by, money for graduates starting a practice can often be difficult to secure.
 
Then, following the Second World War, Ferdinand’s thinking changed: he decided he wanted to build his own car. He would stay late at work after his shift was done to work on his project and soon he developed what he called a sportscar. He was very happy with what he had produced but he needed more money to produce more. So, Ferdinand went back to the bank that had lent him the money years before to pay for school.

He approached the bank – in fact he approached three different banks. All of the banks rejected his proposal for a loan. They said: “Ferdinand you do not have any assets and you have put yourself into debt to build this sportscar. No one will buy this car.”

Ferdinand replied, “Years ago when I was a student I had no assets and a debt but you still gave me a loan – what’s the difference now?”

Disappointed and frustrated, Ferdinand returned home with his sportscar and to his old job, until one day a business man spotted his sportscar parked in the factory.

“Ferdinand, who owns that car?” the man asked.

“I built that car, it is mine sir,” Ferdinand proudly replied. The man wanted to purchase it. In fact, so many people wanted to buy his sportscar that he had to start taking orders. But to fund the projects, he demanded people pay full price in advance – and they did.

Cashflow was no longer a problem, so Ferdinand actually wrote letters to the banks updating them on his success and thanking them for rejecting him. Over the 17 years that followed, 78,000 cars were ordered for Ferdinand Porsche’s staff to produce.

The chiropractor’s catch-22
“Banks lend money to chiropractic students who have no money and no assets so that they can graduate and practise. But when they graduate and try to start a practice, banks reject them because they have no money and no assets.”

The banking experience of Ferdinand Porsche is a familiar one to anyone starting a small business. But, after reviewing the surveys I had presented to chiropractors and chiropractic students in the last six months, some ideas came to me. I had a better understanding about what chiropractors were looking for, so I approached a few small to medium-sized financial institutions in Canada and the United States, and I described to them the obstacles chiropractors and newly graduating chiropractors face today. Using consumer and psychology research, I demonstrated the measurable benefits banks could receive if they invested in a new graduate looking to start their own practice.

For instance, the latest consumer research shows that if service providers such as banks, stores, restaurants, car dealerships and small businesses engage the consumer at significant life-altering stages of their life such as the birth of a child, marriage, retirement or graduation from school – those consumers will habitually use that service or product for their entire lives. For example, in the 1990s, a team of researchers led by a UCLA professor named Alan Andreasen undertook a study of peoples’ purchases, for example, soap, toothpaste, trash bags and toilet paper. They learned that most shoppers paid almost no attention to how they bought these products, that the purchases occurred habitually and without any complex decision-making. This meant it was hard for marketers, despite their displays and coupons and product promotions, to persuade shoppers to change.

Interestingly, when some customers were going through a major life event, such as graduating from college or getting a new job, their shopping habits became flexible in ways that were predictable. The study found that when someone marries, he or she is more likely to start buying a new type of coffee. When a couple move into a new house, they’re more apt to purchase a different kind of cereal. When they divorce, there’s an increased chance they’ll start buying different brands of beer and when they start their first job after graduating from school, they will likely choose their lifelong bank.

The proposal
“Ask and you shall receive.”

As I suggested above, I am currently consulting with a number of small to medium-sized financial institutions in order to demonstrate how applying psychology research with common consumer patterns can help banks realize the long-term value of investing in new graduates from chiropractic school. To recap, research shows: 1. People change their consumer patterns during significant life changing times, such as graduating from school. 2. People base their future purchases on their current habits rather than change what they are comfortable with. It follows that people will go to their current bank for a mortgage, RRSP, RESP, GIC or mutual funds rather than search elsewhere.

In my surveys, many students mentioned “no money” as an obstacle to starting a practice whether their own or in another facility. I propose that if graduating chiropractic students present a business plan to financial institutions, then the bank should lend them $10,000 on a line of credit regardless of their debt coming out of school (this debt is an average of $105,000 US). $10,000 is enough to buy some basics to build with moving forward.

Why would banks do this?

In my discussions with the banks, I demonstrated that these students eventually, as they age, will have mortgages, RESPs, RRSPs and investments. Further, even if they fail at chiropractic, they are sufficiently educated to land work in a different field so that insures a long-term customer. Thankfully a growing number of financial institutions agree with me. Beginning later this year, select banks in Canada along with banks in certain states in the United States, will launch a pilot project which would provide those new chiropractic graduates who submit a viable business plan with a $10,000 business line of credit for start-up costs in their new practice.

Opportunity
“To whom much is given, much is expected.”

The success story of Ferdinand Porsche almost didn’t happen, because the financial institutions failed to give him the opportunity to succeed. Recently however, it is clear that many financial institutions have been making a concerted effort to make things more manageable for the small business owner, including the chiropracticor. In a recent interview, Dave Schurman, executive vice-president and CEO of First Ontario Credit Union, was quoted as saying: “We are hoping to move the financial services industry forward with modern solutions that are of more value for small businesses to manage cash flow and thrive.” Moreover, it seems that the message is quite similar south of our border, as Kara Kaiser, regional president of BMO Harris Bank in Wisconsin, explained: “Small business growth is a key to driving our economy forward and our teams are constantly working with customers to identify financial solutions to help them realize their aspirations.”

Naturally, this approach will be attracting attention from chiropractors and chiropractic students on both sides of the Canada/U.S. border. The idea of lending modest sums of money to graduated health professionals creates excitement, hope and the enthusiasm that is needed to build a successful chiropractic practice. The financial institutions that will be piloting this lending program will be formally announced soon – so, let’s keep our eyes and our ears open!

In the meantime, feel free to contact me with any questions you may have on approaching financial institutions or building business plans for your practice. I can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .


Anthony LOMBARDI, DC, is a private consultant to athletes in the NFL, CFL and NHL, and founder of the Hamilton Back Clinic, a multidisciplinary clinic. He teaches his fundamental EXSTORE Assessment System and practice building workshops to various health professionals. For more information, visit www.exstore.ca.

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