Written by Sarah Lim, CA Lic# 0M52397
Starting a Successful Private Practice – Laying the Foundation
Opening up your own practice can be a long and laborious process but the long-term rewarding benefits can enrich your life. Some examples of these benefits include enhanced physician-patient relationships and the freedom to practice guided by your own personal and professional goals. Building a solid foundation in the early planning stages will prepare you for a successful practice in the future. The necessary steps to start building this foundation are described below.
DEVELOP A VISION OF WHAT YOUR PRIVATE PRACTICE WILL LOOK LIKE
Your vision of your practice should begin by determining whether you will want to start a new practice from the ground up or purchase an existing practice. This decision will help guide the future decisions that will need to be made regarding your practice. The benefits of each method are listed below.
BENEFITS OF PURCHASING AN EXISTING PRACTICE – search state & county medical societies, specialty associations, and hospitals in your target area for physicians in your specialty who are retiring or relocating
· The patient base has already been established and you know that your location is acceptable to these patients
· The current staff will likely continue with your practice (if you so wish)
· The medical & office equipment, computer system, and patient histories are already in place
· Knowing that the location is acceptable to the existing patients
· Since everything has already been established, there is less stress and fewer unknowns
BENEFITS OF STARTING FROM SCRATCH
· Location may be more convenient for you and/or your patients
· Most everything will be new including furniture and exam rooms
· Some funding might be available for remodeling by the lessor
· Usually less costly than purchasing an existing practice
HIRE A TEAM OF BUSINESS & PHYSICIAN CONSULTANTS YOU TRUST
Having a team of expert consultants will help reduce stress and increase profitability. Three key players (and their functions) on your planning team should be:
· Accountant – setting up the entity, business license and incorporation filings, tracking expenses, short & long-term financial planning, etc.
· Attorney/Legal Advisor – Negotiating agreements, drafting contracts, advise on corporate structure, etc.
· Practice Startup Consultant – Hiring & training staff, selecting proper equipment, negotiating with vendors, overseeing credentialing and planning process, etc.
DEVELOP A BUSINESS PLAN AND PRO FORMA
A business plan not only serves as a roadmap for the structure of your new practice but is also necessary if you need to secure a loan. The following are important pieces of information you should include in your business plan:
· Your mission statement – What is your personal and professional driving force for opening up your practice?
· Your profile of an ideal patient
· Description of services provided
· Short and long-term goals of this practice
In order to secure start-up financing, lenders will need to see a pro forma financial statement that shows an overview of anticipated expenses, debt, and revenue to lenders. Important information that should be included are:
· What will be your projected expenses for at least the first 3 years
· Where will your revenue come from?
· How are comparable medical practices doing financially?
· Your budgets, including anticipated costs during planning, opening, and continuation of your practice, for office space purchase or lease, electronic health record & practice management systems, office & medical equipment, supplies, and furnishings, staffing, liability coverages, etc.
Although actual costs vary from practice to practice, it is estimated that you can expect to spend at least $100,000 on equipment and start-up costs. In addition to traditional banks, other funding options for physicians include:
· Applying for a loan with the Small Business Administration
· Private investors
· Financial support through hospital foundations to cover expenses like rent and supplies
· Lending advice and options through Nerdwallet.com