As a young fellow or a seasoned practitioner, opening your own medical practice is a compelling aspiration that you want to make a reality. Make no mistake: being a great doctor is not enough to create a successful business. Today’s medical practice owners must blend business know-how with their medical expertise to champion a profitable organisation around their unique vision.
Your first step? Writing a medical practice business plan. Why? Because this living, breathing document will serve as the blueprint for your next few years.
If you want to thrive, grow, and offer exceptional care for your patients, the journey begins with a healthcare business plan like we’re about to outline. Here’s what’s involved.
First and foremost, a profitable business plan evolves.
Your medical practice business plan is more than notes on a spare piece of paper. It’s a roadmap of the goals and strategies you’ll need to turn your idea into a reality – and importantly, a long-term success.
The plan isn’t something to hash out and leave to gather dust, it is a document that will evolve as your practice does. Getting it right will safeguard your business against unexpected expenses and challenges that can cripple an otherwise unprepared young practice.
“Just like paying the bills, making appointments or managing staff within the practice, planning should be part of a continuous business system.”
— Adam Basheer, Managing Director, Fit 4 Market
Naturally, there is a significant financial component to any business plan, as demonstrating your profitability is what will help you secure funding from banks and potential investors. The document should clearly illustrate why anyone should invest in your practice over and above others. In addition, your business plan will educate all stakeholders as to your long-term goals for growth.
What makes a winning medical practice business plan? Start with these essentials.
1. Put success in sight
Every viable medical practice begins as goals outlined in a business plan. This part is exciting as you’re about to set the parameters for how you’re going to build a profitable practice.
To start, map out a simple forecasting model. For example:
- How many patients will visit your practice per week?
- What is your fee per consult?
- What’s your desired weekly income?
- Your number of referrers and referrals per month?
- How many doctors and support staff will you have?
Nathan Marris, relationship manager at Medfin Finance says, “Contracting doctors pay about 30% of their income to the practice owner to cover administration, staffing, and other costs.”
Knowing this, it simply makes economic sense to have to a few practitioners working with you. Conversely, if your practice only has room for one or two doctors at most, you’re potentially going to limit future income. “Finding the right balance can be a challenge,” says Nathan.
It pays to research. Set your goals and parameters on what’s realistic based on what’s happening around you.
- Can you conduct research on the volume of practices nearby?
- What are their fees?
- What’s the health of the local population?
- Are there particular chronic diseases afflicting the demographic?
Knowing where demand lies will help you decide which specialists you’ll hire for your practice.
Now you know what you’re aiming for, identify the key strategies and infrastructure that will enable you to achieve these goals. Consider the technology you’ll use to efficiently run the day-to-day. Adopting a system that scales as you do is the best investment for securing your path to success and avoiding common growing pains. We recommend cloud-based systems that are able to evolve and innovate as your practice grows – and furthermore, don’t require the ongoing investment of an IT support person.
With your financial goals mapped out and costs estimated, you will then be able to forecast your projected profit margins. A skillful business owner is proactive in their approach. They have a process for gathering any relevant data, analysing it, planning, forecasting the coming years and, importantly, tracking their progress moving forward. Your practice’s profit margin will be industry-specific, so establish a rough guide for your first few years of business, and tend to this figure as your business grows.
2. Expect the unexpected
As a new business owner, you’ll also need to address financial questions such as:
- What costs will your practice incur in getting off the ground?
- What are your outgoings versus prospective incomings?
- What does a profitable practice look like exactly?
To determine this, calculate all expenses, including initial expenses like medical equipment, technology and furniture, as well as any ongoing costs, such as staff salaries, licensing money management software and practice management software, monthly mortgage repayments or rent, and medical indemnity insurance.
To be financially intelligent, become attuned to potential challenges and opportunities regarding your practice. Think about things like whether your location has high foot traffic, as this will result in greater awareness of your practice in the local community. By the same token, a high-traffic locale might also incur substantial rent which can impact cash flow in the initial stages of your practice.
3. Map the marketplace
Your aspirations for your practice are no doubt to deliver high-quality, cost-efficient and smart healthcare. To do so, you’ll need to closely consider what the marketplace is doing on a local, national and international level. A 2018 Deloitte study on global healthcare sector issues outlined that, “public and private health systems have been experiencing revenue pressures, rising costs and stagnating or declining margins.”
This is expected to continue due to increasing demand, infrastructure upgrades and therapeutic and technology advancements which strain resources.
It’s true that certain locations are easier to achieve success in than others. In an overcrowded marketplace, one must consider how to stand apart from the competition. Savvy business owners are able to see what’s missing, pinpoint demand, and create a compelling argument for why patients ought to visit their practice instead of someone else’s.
“I wanted somewhere local with easy access throughout the day, and I also wanted room to expand. I was confident that the people who work here would appreciate having a medical practice close by. As I’d done a lot of research I felt comfortable taking on the loan.”
— Dr Prema Joseph
4. Put patients first (most of all)
In the present healthcare environment, the value-based care model is being favoured for increasing efficiency and relieving pressure on a practice’s bottom line.
"A successful transition to value-based care requires that market players and consumers move beyond transaction-based treatment to the holistic health of populations." – Deloitte
To achieve this goal and provide better care, many practices have begun reducing the range of services they provide, since a broader offering is not cost-effective nor does it deliver the quality of care patients expect. Instead, the practice will work closely with a network of trusted partners to deliver what’s called ‘high-value care’.
A patient-centric care model sees patients as owners of their medical data and active partners in their health. This means they’re engaged in their healthcare journey, and through the use of patient-first technology, different care providers are able to unite in a connected care ecosystem. These ‘patient portals’ simplify onboarding, minimise inefficiencies, streamline information flow, and minimise unpaid invoices – everything needed to improve profitability.
Packaging your plan for getting buy-in.
Finally, once you've filled out your medical practice business plan template, write a brief overview (otherwise known as an executive summary) of the key points featured in it. Position this at the beginning of your plan, so readers can absorb the key points of your private practice business plan before reading it in full. This concise distillation of your overall strategy ensures potential investors and stakeholders who are challenged for time can absorb the core plan quickly and easily.
Over to you
Successful business owners are constantly working on their healthcare business plan. Invest time and care into creating and updating yours, as it will form the basis of your strategy for the upcoming years.
Once you’ve developed your business plan, your practice will be better poised to approach banks and potential investors for financing. Your plan will even distil the succinct business mission that inspires your team. If you’re still in early stages, it will simply serve as a roadmap for the vision and growth of your practice.
The formative years of your career is the prime time to establish yourself as a leader in your field and set yourself up for long term success. For more must-have insights, download our complimentary guide.
Clinic to Cloud does not provide tax, legal or accounting advice. This material is for informational purposes only and is not a substitute for independent professional advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. See the Clinic to Cloud Disclaimer for further information.