Opening a private medical practice is a lifelong dream for some physicians, but in reality, the number of practice owners is dwindling. According to the American Medical Association, more than 76 percent of physicians were private practice owners in 1983. By 2016, that share had fallen to around 47 percent. While there are many factors contributing to this decrease in private ownership, it underscores the need for new owners to set out with a solid plan in hand.
A strong, informed business plan is essential for any type of new venture to set realistic expectations of what the first years will bring. While crafting a plan may seem daunting, it's important for aspiring practice owners to understand how their business will function before opening its doors.
1. Establish Your Purpose
If the goal of your business plan is to secure funding, it will need to be robust and detailed. If you've already secured private funding, your plan can be more succinct, but it still needs to prove that you've done your research and have a vision for your practice's viability.
Start with a pro forma — which Business News Daily describes as a "lighter version of a full-blown business plan" — that includes a list of financial needs, a monthly operating budget and the practice's projected income. The financial needs on a gynecology practice's pro forma might include everything from rent, imaging systems and office supplies to salaries and utilities.
2. Find a Template
Potential investors may request this information in a particular format, but there's no need to start from scratch. Forbes lists a few key elements to include, such as:
- Company/practice description: Your mission, patient population and any achievements so far.
- Marketing plan: How will you spread the word to potential patients?
- Operational plan: What will your facilities look like? What technology will you need?
The Small Business Administration breaks down each section into more detail for readers who are new to the concept of a business plan.
3. Do Your Market Research
Aside from knowing the cost of rent and the current reimbursement rates for specific procedures your practice will offer, market research is one of the most important aspects of a business plan.
How far away is the closest competitor? How many potential patients live within the geographic area? What are the community's care needs? Answering these questions may redirect a plan entirely, but it will also prepare you to launch a successful business.
4. Don't Rush
According to Harvard Business Review (HBR), writing the business plan is not the first step to owning a business: Entrepreneurs who waited 6 to 12 months between deciding to start a business and creating a plan were more successful than those who drafted a plan immediately. This may be because creating a business plan before doing any research could lead to a plan based more on aspirations than reality.
HBR suggests 3 months as the optimal amount of time to devote to writing the business plan. Ninety days may seem like a long wait, but considering that most physicians are practicing elsewhere or finishing up a residency during this period, the time will fly by.
5. Keep Updating
If a practice has acquired funding and started enrolling patients, it's not time to file the initial plan away yet. Keep an eye on the original financial projections to ensure a practice stays on target. If a practice decides to outsource billing or upgrade ultrasound equipment after a few years, those changes should be incorporated into the plan. Every owner should know how to read profit/loss statements and understand how the practice is performing so that any necessary changes can be made sooner rather than later.
A thorough business plan can help any physician step into the world of private medical practice ownership with a real shot at success. There will be surprises, but having a guidance document in place can help you set realistic expectations and course-correct along the way.
