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Why are Health Care Professionals Starting their Own Practices?
The United States healthcare system has experienced unprecedented strain on account of the COVID-19 pandemic. Our current healthcare system has never been tasked with taking on such a prolific disease. In response to the strain on large hospitals and healthcare organizations, medical professionals across the nation have begun showing increased interest in starting their own private medical practices.
However, starting one’s own medical practice is not easy. This is because having a private medical practice not only requires medical know-how but also business know-how, something most doctors lack. If you did a pre-med program for your undergraduate degree and then went to medical school, odds are you didn’t have any courses on general techniques in business, such as marketing, finance, accounting, and more. As such, doctors may know how to treat an infectious disease or cancer, but most don’t know a lot about smoothing out cash flow and financial forecasting.
The good news is that all of these skills can be learned, and if you can make it through medical school, odds are you are bright enough to learn some basic accounting skills and make a solid business plan. Finance isn’t the easiest thing in the world, but it isn’t neurosurgery.
In this post, we’ll go over some key steps for drafting a good strategic plan. This will give you a good starting point as you look to do more research on how you can start your own medical practice.
Business Plan versus Strategic Plan
Business plans and strategic plans sound very similar, and many people think they are the same thing. This is an understandable mistake. However, the two types of plans are different. A business plan is designed for a short period of time, usually laying out your business’ path for a years time or less. You will use a business plan to get your business up and running, as it will define your starting operational plans, how you will obtain funding, and what your services are.
A strategic plan, on the other hand, is a plan of action for your business for a longer timeframe typically in the realm of three to five years, however, it can be longer. These plans are much more comprehensive, and they are designed to be both flexible and dynamic so that they can adjust and mold as your business changes over time. In essence, it sets flexible goals and initiatives for your business to work towards.
In this article, we will be covering how to make a business plan for your medical practice, however, there is some crossover between the two different strategic planning methods, and we will identify this crossover when it arises.
#1: Business Plan: Mission Statement and Executive Summary
The first step is writing a business plan is crafting your mission statement. Missions statements can be as long as three or four sentences, but you should try to keep them from going on forever. Think about what it is you are trying to provide and how you want to provide that service to your customers. Think about whether there is a unique aspect to your practice. Now see how you can convey this in the most direct way possible.
An example of a mission statement would be: Our goal as medical practitioners is to provide our patients, young and old alike, with world-class, cutting-edge dermatology care in a hospitable and family-centered environment that places an emphasis of overall well-being and quality of life.
Then talk about where you will be located, who your leadership team will consist of, what qualifications you and your leadership team have, and how you are uniquely suited to take on this business plan. If you have a board of directors, talk about who this will consist of, and what each of them bring to the team. If you are looking to obtain financing, this will be a key element of your business plan, as you will need to introduce everyone involved in the business and why they are suited for the roles and tasks they will be taking on.
#2: Business Plan: Company and Product/Services Descriptions
Obviously, you will need to describe in depth what exactly your business will be doing. Talk about each of the services you offer and compare and contrast them with how similar services are provided across the healthcare industry. What health problems are you solving with your business? How does your team have an advantage over other teams? Are your doctors long-time experts in their field? Have they been providing gold-standard service for decades in the industry? What does your healthcare practice bring to the table that other practices do not?
As a healthcare provider, your services may not be that much different than other providers, so you don’t need to worry too much about being incredibly unique. However, at the same time, you do want to identify some aspects that set your business apart. As mentioned above, that can be because of your business’ location or because of certain industry-leading professionals you have on your staff, or even something else.
Remember, you should be writing this document in a way that is easy to understand and compelling to any reader, irregardless of what sort of background they have. Your plan shouldn’t be filled with lots of complex medical terminology, because a banker almost certainly won’t understand it.
#3: Business Plan: Market Analysis
Market analysis is key for both your personal understanding of whether or not your business will be viable in the area you would like to operate as well as for showing potential investors and/or lenders whether or not your business will be able to thrive. It is your chance to build a compelling argument based on real data and facts as to why your business can and will be successful.
You can perform market analysis yourself by utilizing common data sets and doing your own surveys and research or by hiring a firm.
A good example of market analysis would be calling around to local healthcare providers who offer the same services as you plan to offer. Let’s say you are going to open a dermatology practice. Dermatology happens to be one of the most in demand fields in the United States, and there is a general shortage of dermatologists nationwide. A good way to conduct market research would be to call other local providers as a prospective patient and ask them for the waiting time for an appointment. If the wait time for dermatologists in the area is, say, 3 months, then opening your own practice could be a great idea, since obviously there is a lot of patient volume in the area and patients appear to be underserved.
Other aspects of the market you should focus on identifying include the demographics in the area and how those demographics align with the healthcare services you are providing. For example, some practices typically see a large senior patient volume since the illnesses and/or conditions they treat are typically issues humans face later in life. If you were looking to open up such a practice, and the data clearly showed that the vast majority of patients at similar practices are seniors, it wouldn’t make much sense to open the practice in an area that is home to mostly millennials. Doing so would severely limit the population from which you can draw new patients. Instead, you would want to find a location that closely aligns with your target demographic.
Thus, the question you should both ask and answer in your business plan is: who is your ideal patient? Do the demographics suggest that there is a large volume of individuals in the area who align with this “ideal patient”?
If you could show such data to an investor or lender, they would be much more inclined to provide you with the funds you are seeking. As such, market analysis is on of the fundamental components of any strong business plan, and you should plan to spend a lot of time on researching and developing an argument for why your business makes sense.
#4: Business Plan: Required Equipment and Initial Outlay
One of the biggest challenges of opening a medical office is the initial outlay that is required to fund the business opportunity. The health services industry is highly reliant on modern technology, and, depending on the healthcare services you provide, you will need to purchase a lot of equipment and machinery upfront. This will require a great deal of financing from the outset.
As part of your planning process, you will need to outline exactly what equipment you will need, what services this equipment will allow you to perform, and how much the equipment costs. This is an essential part of your business planning and you should aim to make this part of your plan as accurate as possible, since a great deal of the initial funding you apply for will be used to purchase these items.
For example, if you are an orthodontist, you may need an mouth x-ray machine. There are many different options for such a machine, so you will need to identify early on what machine is best for your budget and your practice.
Remember, your priority should be how you can best provide quality patient care, so don’t try to save money by buying a machine that won’t fulfill all the needs of your healthcare organization. Having to go back later and buy a more costly machine since the one you initially purchased didn’t perform all the functions you needed could end up being a massive financial burden for your burgeoning medical firm.
#5: Business Plan: Marketing Strategy
Opening an office won’t be enough to get patients. Regardless of what type of medical practice you open, whether its a primary care office or a specialized niche, you will need to engage in marketing efforts. As such, a good business plan will also have a marketing plan within it. This marketing plan will serve as a roadmap for how you will approach attracting new patients and building a strong client base.
One of the great aspects about the medical field is that there is an endless array of knowledge that you
can talk and post about on social media. Many medical practitioners think that they don’t need to be on social media, since they are not building a brand like a clothing company would be. This is a huge mistake. Social media is one of the best ways to communicate with patients. In fact, social media makes it really easy to keep your patients engaged and make them realize that you care about their well-being.
Consider sending out e-newsletters about the latest products or developments in the field. Maybe host a webinar or two each month to discuss certain medical practices relevant to your area of patient care. Keep patients up to date about everything that is happening with your practice. Offer discounts for first time patients, and notify your patients whenever new team members come on board, particularly if you add a new doctor to your medical team. Build a strong website that is easy to navigate and provides information on the services your offer and the healthcare providers that work with your firm. Make sure it is easy for prospective and new patients to learn about the doctors they will be seeing in advance of making and arriving at their appointment. The more you can do to put your patients’ minds are ease the better, especially in the medical industry.
A great example of keeping a strong line of communication with patients can come from the ongoing COVID-19 pandemic. Medical offices still want to be able to provide care for their patients, especially those who really need it. However, at the same time, they want to make sure that their practice is safe for both the medical professionals in the office and the patients coming to receive care. Whatever course of action medical offices have decided to take, those with strong lines of communication with their patients have been able to effectively keep them up to date on the situation. Whether that is sending over instructions for wearing masks inside the office, or informing patients how they can reschedule appointments that were canceled for a later date, being able to reach your patients is crucial. The more lines of communication you have (i.e. Facebook, E-Mail, and even Twitter), the better.
These may seem like pretty basic tasks, which they are, but many healthcare organizations leave these tactics out of their business model. Don’t make the same mistake. A proper marketing strategy can mean the difference between success and failure, especially for a new business, in any field.
#6: Business Plan: SWOT Analysis
No business is perfect, and there is always room for improvement. The SWOT analysis is the aspect of
your business plan that will best enable you to identify what is referred to as SWOT: your business’ strengths, weaknesses, opportunities, and threats.
Your business’ strengths and weaknesses are internal concepts, and you should work to identify what your business can do well from the outset and what your business will need to work on and focus on down the line. This is key for developing a business strategy, since it will enable you to set goals for what you want to work on and improve over the coming months and years. A SWOT analysis will help when you design a long-term strategic plan, since it will provide you with a set of clear objectives to work at. You will be able to build your strategic plan around these different objectives so that you have a clear idea of what you need to work on and what you want to accomplish in the coming years.
Your business’ opportunities and threats are external factors. Opportunities are, as the word implies, the opportunities your business has in the marketplace to capture market share and to provide quality care to patients that isn’t available elsewhere. What are other business’ in your area of healthcare failing to provide? Whatever areas or aspects you identify are what we would call opportunities for your business. Threats, conversely, are what aspects of other businesses will hurt yours.
A basic example of SWOT analysis would be as follows:
Strength: As a new business, you will be buying all new equipment for your office. This means you will have access to a number of state-of-the-art medical services that many other providers do not yet have access to. This will help set you apart from your competitors and represents an incredible strength for your business.
Weakness: Your team of doctors is relatively inexperienced, since they only recently finished medical school. As such, they don’t have a long-standing reputation of success and quality care to lean on. In such a situation, you would want to spend some time thinking about how you can address this weakness to sooth the minds of potential new patients. Maybe some of your doctors are award winning and graduated first in their class. Anything you can do to show that you truly have a team of world-class professionals working in your office will help set you apart and mitigate this weakness.
Opportunity: Offices providing similar care in the area have been plagued by incredibly long appointment waiting times. Many patients are waiting as long as three or more months just to be able to see a doctor. Your business, which has three practicing doctors, has the ability to take on a substantial number of patients without having wait times of more than a month. This would be a classic case of an underserved market, and it would be considered a great opportunity for your business.
Threat: Maybe there is a provider that takes a certain insurance that is common in your area. This would be a threat to your patient base, especially if patients begin switching over to that insurance. Thus, you would want to act on this and see if you could start taking that particular insurance.
Overall, the SWOT plan is what is going to allow you to analyze the fundamental attributes of your business and how they compare and contrast to other providers in the area.
#7: Business Plan: Financial Projections
Financial projections are going to be key for obtaining outside funding. You should therefore spend a great deal of time working on the financial projections of your business so that they are accurate and consistent. This includes projections for your balance sheet, your cash flows, your revenues and profits, and more.
Typically, these financial forecasts will align strongly with an overarching long-term strategic plan, since you will typically what to make financial forecasts for at least three years out. This is where there is overlap between your business plan and strategic plan, as we previously mentioned.
Use graphs and models if possible, as this will help reader visualize the data.
Financial modeling is a skill that has to be acquired, and it will require knowledge of accounting and other business tools. In order to learn it, you will need to expend a concerted amount of effort learning about accounting and finance.
If you do not believe you are up to the task or believe that you do not have time to learn about the different intricacies of financial forecasting (which if you are a doctor could very well be the case), consider seeking some outside assistance. Remember, this will be one of the most important aspects of your business plan that investors and lenders will look at, because it will help them to determine whether or not you will be able to meet your obligations to them.
#8: Business Plan: Appendix
The appendix of your business plan is where you will provide all the supplementary information you have that does not fit into the natural flow of the business plan. This is where you will want to put the resumés of the different doctors that will be working in your office. You can also put any letters of recommendation, awards, licenses, and permits as evidence.
You will also want to include your credit history and any other relevant financial information in the appendix.
It can also help to reference certain documents in the appendix in the actual body of text of business plan. This way, you can integrate the documents you have provided into the natural flow of the document, and it will add to the argument being made for your business by the business plan.
#9: Look at Other Business Plans
One of the best ways to learn about how to craft a cohesive and compelling business plan is to read other successful business plans. This will give you an idea of what sort of information you want to present and how you should present the information. It will also give you a sense of the wording and language used, as well as the argumentation and persuasion methods utilized.
After reading an example business plan, you should ask yourself question like, would I personally invest in this business? What about this business plan made me think this business is or is not a good idea? How did the market research add to my overall conception of the business plan? How does this business plan differ from other business plans I have read, and are these difference beneficial or negative?
It is essentially impossible just to write a business plan without having read other ones.
You can find samples of business plans, both real and made-up, all over the internet. The United States Small Business Administration (SBA) in particular has two made-up examples that can help provide you with a good starting place for writing your own plan.
#10: Have Others Look Over Your Plan
Before you submit your plan to a lender or an investor, you should have people you know look over the document. A great person to show it to would be your accountant or someone you know that has both a business mindset and a general understanding of business tools like accounting and finance. Friends and family can also be of great assistance. After having someone read your plan, find out if they thought your plan was convincing and compelling. Tell them you want their honest opinion.
The idea of starting ones own medical practice can be daunting. As we previously noted, many doctors do not have a great deal of experience with business tools and methodologies, particularly with regards to accounting and finance. However, the good news is that if you are planning on opening a medical office, then you are most likely a doctor, and if you are a doctor, you definitely have more than ample intellectual capabilities for solving these problems. Plus, you can always get outside assistance. Most accounting firms can provide basic to advanced financial and accounting assistance, and, since reputable firms will have been around the block more than once, they will have plenty of past experience to help inform your particular venture.
The other great thing is that there are plenty of financing opportunities available to doctors looking to start their own practice. So make sure to do some research and learn about all the different options you have.
At the end of the day, just because you build a business plan does not mean you have to open your own business. So if you are seriously considering going into practice of your own, a business plan will enable you to organize your thoughts, collect data, and analyze the entirety of the your proposition. This will allow you to make the best possible decision as to whether or not opening your own practice is right for you.
Remember, your business plan will be the foundation of your business in its first year. The more time, effort, and research you put into it, the stronger the foundation you will have to build upon.