Opening your own private medical practice puts you in the driver’s seat of your professional and financial future.
Not only can you gain more flexibility than you’d ever be offered at a hospital or medical center, but you have the opportunity to shape the workplace culture — and choose the colleagues, teammates, and partners you’d like to work with. What’s more, a thriving medical practice is a valuable asset that can increase greatly in value throughout your life and contribute to a financially secure retirement.
When you’re just launching a practice, estate planning is likely the last thing on your mind. Creating a tentative plan now can ensure your practice — and your personal financial legacy — is taken care of, should you need to step down from the business.
Like any business, though, opening a private practice means taking on risk. The choices you’ll make early on will impact the short- and long-term viability of your practice, and careful planning is key to making strategic decisions that benefit your practice long-term.
In the following pages, we’ll share insights into how to work strategically as you prepare to open your private practice. You’ll learn how to create a well-rounded business plan that maps out your path to financial success, the financial solutions you need to manage expenses and cash flow, and which steps to take to build your operations and attract your first patients.
Step 1: Develop Your Business Strategy
Just like any successful business venture, launching a medical practice begins with careful planning. You’ll start your journey off on the right foot by creating a business plan: a detailed document, usually 15 to 30 pages, that outlines the strategy for the launch and operation of your practice and serves as your road map for the future.
“A business plan tells us the who, what, where, why, and how of your practice, which is the most important part of the story,” explains Kevin Wills, CPA, Senior Vice President, Healthcare Territory Practice Manager at PNC. “It also helps your strategic partners provide coaching early on, and share insights on what has worked for other medical practice startups.”
What to Include in your Business Plan
Each business plan, like each practice, is unique. However, your plan should generally discuss each of the elements listed below.
This two- to three-page summary provides a brief overview of the key points in your report. It should provide enough context for external parties — such as financial institutions and potential investors — to understand your business strategy and financing needs.
Although the executive summary is included at the beginning of the plan, it should generally be the last thing you write.
Key legal information about the practice. This includes the business entity, or business structure — for example, a Limited Liability Company (LLC) or professional corporation — along with the name(s) of the practice owner(s).
Outline the market opportunity behind opening your practice: The unmet need for your services, as well as how your practice will have the expertise and skills needed to fulfill those needs.
Make note of the competition in your target market, your strengths and weaknesses relative to competitors, and most importantly, what makes your practice different.
Describe the patients to whom you’ll provide medical services, including relevant demographic information (e.g. age, household income, consumer preferences). These data may inform your pricing structure, as well as how you market and brand your practice.
Summarize the services your practice will offer, including the proposed fee structure for each service. Include in-office and telehealth services, as well as services provided by nurse practitioners or other healthcare providers within your practice.
Outline, in detail, the logistics of your practice operation — the resources, partnerships, and other assets you’ll need to run the practice. This may include:
- Licenses, certifications, and insurance you'll need to run the practice and practice medicine.
- Equipment and supplies, as well as a list of suppliers and details of your supply chain.
- Computer hardware, software, and other IT requirements, including compliant software for electronic health records (EHRs)
The human resources you’ll need to run the practice. This includes you, your partners, nurses and nurse practitioners, office managers, receptionists, and additional office staff.
It should also include your team of external advisors — for example, your healthcare-specific CPA, attorney, marketing consultant, and more.
Marketing and Sales Plan
Your plan for attracting and retaining new patients. Outline the types of marketing you’ll participate in, the timeline for your launch’s marketing campaign, and how you’ll measure your results.
A detailed view of your practice’s forecasted financial plans, including your path to profitability. A strong financial plan helps assure lenders and investors that you’ll run a profitable practice, and it helps you determine your financing needs.
Any additional documents — such as detailed cash flow statements and projections, or copies of key documents — to support any of the above sections
Create a Strong Financial Plan
Taking time to sort out the financial fundamentals early can help price competitively for your services and map out your path to profitability. This helps ensure lenders you have solid financials backing your plan, and it also helps protect your investment by anticipating financing or cash flow issues early.
Your financial plan should detail your upfront and ongoing costs — including renovation and build costs, your lease or mortgage, payroll expenses, and more — as well as your anticipated fee structure. It should also contain financial projections that map out your path to profitability and outline the capital you’ll need to launch and run your practice.
Lean on Your Advisors for Help
The money you spend on expertise is well worth the investment, as it can avoid costly mistakes later on. Work with an industry-specific CPA to create your financial projects, or have them create the financial plan for you to ensure accurate and comprehensive projections.
“If you don’t have strong forecasts, there’s a good chance you’ll have sleepless nights wondering how you’ll cover payroll next week,” he says. “Startups burn cash at the beginning, and a CPA can help you ensure the amount of capital you request from the bank matches the needs identified in your financial projections.”
Step 2: Meet Your Practice’s Financial Needs
Starting your own private practice means wearing many hats — and, sometimes, it means you’re the practice’s Chief Financial Officer.
Solid financials help ensure you have the money you need to build and launch your practice, as well as cover your ongoing expenses in the weeks, months, and years after opening. While there’s no one-size-fits-all approach to healthcare business banking, understanding your options is the first step toward finding solutions that will meet your needs.
Start with the Fundamentals: Business Bank Accounts
A business checking account is an often-overlooked part of a practice’s financial strategy, but it’s important to set it up as quickly as possible. “You’ll be paying a boatload of expenses from your checking account, and you want to make sure it’s easy to keep track of your transactions,” says Wills. “In addition, you need a routing and account number for insurance providers to send payments to.”
While it’s not essential, you may also opt to meet with a personal financial advisor to reassess your personal banking needs. Becoming an entrepreneur may impact your personal financial plan — for example, your plan for retirement — so take this opportunity to ensure you have the financial tools you need to prepare for the future.
Re-evaluating your disability, critical illness and life insurance coverage to ensure it still meets your needs, and work with your attorney to create a plan for your estate that takes the practice into account.
Choosing the Right Practice Location
Location has a profound impact on your ability to reach your target market, and a strong location is a key consideration for lenders reviewing your financing applications. Conduct market research to ensure the location has an unmet need for your services, and consult your attorney to ensure the location doesn’t violate an existing non-compete agreement.
Look for a location with ample parking and easy access to public transit so patients can travel to your office easily, and consider proximity to other key amenities, such as pharmacies, to help ensure a convenient patient experience.
Consider the demographics of the neighborhood, particularly if you plan to offer walk-in services. Look to the future of the area, as well. Establishing your practice in an up-and-coming neighborhood may allow you to reduce your real estate costs without sacrificing long-term success.
Secure Financing for Your Practice
Unless you’re funding the practice yourself, chances are you’ll need financing — such as loans or lines of credit — to start your medical practice.
As you evaluate potential lenders, it’s important to work with a bank that has experience supporting a practice launch who can help you execute your CPA’s financial plan, says Wills. A seasoned bank with healthcare experience can help you inventory the capital you’re bringing to the table, such as your personal investment in the practice, and suggest lending solutions to fill the gaps.
Crucially, they can also ensure you have enough working capital — a cash “cushion” — to cover ongoing expenses as you launch and scale your practice.
Select the Right Payment Solution
The rise of high-deductible insurance plans has placed more responsibility on patients to pay for their healthcare — and made convenient payment solutions more important than ever. “Practices often have to send two or more invoices to get paid,” says Wills. “But most people are not purposely ignoring your invoices, and they’re happy to pay on time if you make it easy for them.”
Choose a payment solution that meets patients where they are and allows for a range of payment options. While some patients may still prefer to pay in-office with a check, cash, debit, or credit card, others may opt to pay you online, he explains. A payment solution that allows patients to pay via your website, or through a secure patient portal, has become a must-have for practices today.
Gen Z and Millennials, in particular, also gravitate toward emerging digital payment options, including digital wallets and text-to-pay. As a result, practices catering to younger demographics may opt for merchant services that include these innovative options to make it easy for tech-savvy patients to pay on time.
3 Strategies to Get Paid on Time:
- Add a prominent “Pay Now” button to your website so patients can easily see where to make a payment online.
- Send automated payment reminders via phone, email, or text, with instructions on how to make a payment.
- Be transparent about fees, when possible, so patients can budget for the cost of their visit ahead of time.
No matter which solutions you select, or which banks you work with, keep security top of mind. Ask providers about the security and anti-fraud measures included in their services, and how your practice’s — and your patients’ — financial or payment information will be protected.
Step 3: Position Your Practice for Growth
With your strategy in place and financial plan in order, you’re ready to execute your business plan. The moves you make early on can shape the culture of your practice, influencing the experience of your employees, as well as your patients.
Making the right decisions creates a strong culture that keeps employees happy, saving you time and money associated with rollover. It also creates a positive patient experience, so you can meet the needs of today’s patients and establish a loyal clientele.
Assemble Your Team
The receptionists, office managers, nurses, and other team members that make up your staff are pivotal to your success. “You can invest hundreds of thousands of dollars into your practice — but if you don’t have a workforce, you can’t open the doors,” says Wills. “Create a staffing plan and start looking early to maximize the chances of finding the talent you need and minimizing your recruitment costs.”
How to Find Qualified Talent
Start by reaching out to colleagues in your personal and professional networks to let them know you’re looking for talent. Ask if they’re looking for new opportunities, and for referrals within their networks.
You’ll likely also need to look for candidates outside your network. As you conduct your talent search, you’ll increase your chances of finding the right candidate by casting a wide net and inviting talent from all walks of life to apply.
Focus your qualifications on just a few true "must haves" that candidates need to start the job on day one. From there, take a “values-first” approach and ask questions that will help you determine if candidates share your vision for the practice, value a commitment to patient care, and have a willingness and ability to learn “nice to have” skills on the job.
How to Attract Talent in a Competitive Labor Market
These 3 strategies can help your practice stand out.
Offer flexible working arrangements, including the option to work remotely, when possible.
Create competitive benefits packages by asking candidates which benefits matter most and curating your offerings accordingly.
Highlight the practice culture in job postings and interviews to attract like-minded talent.
Where to Source Talent:
* Online job boards
* Including those that serve underrepresented groups (e.g. women)
* Social listings (e.g. LinkedIn)
* Industry conferences
* Local business networking groups
* Personal network
* Referrals from colleagues
* Referrals from an existing team
Attract Patients With an Effective Marketing Plan
While you may inherit some patients — or bring some patients along with you to private practice — you’ll need a marketing plan to build a robust patient funnel. “Physicians today face a competitive environment, regardless of their specialty,” says Wills. “You need marketing and branding that sets you apart from the three practices down the street and communicates why patients should come to you.”
Choose the Appropriate Marketing Channels
Most marketing plans involve a mix of channels, including digital and print media. However, that doesn’t mean you need to do it all. Instead, select a handful of channels likely to resonate most with your target market. For example, if your ideal patient is active on social media, investing in social media ads makes sense for your marketing strategy.
Most practices generally opt for some mix of offline/print and digital marketing — such as sending out a promotional mailer at practice launch, investing in search and social media ads, and keeping in touch with patients and prospects via email.
Examples of Marketing Channels
- Social Media
- Online Ads (e.g. search ads)
- Magazine/Newspaper Ads
How to Measure Your Marketing Results
Strategic decision-making starts with data, and it’s important to measure the results of your marketing plan. There are several ways to measure the performance of your marketing strategy.
However, consider tracking the following metrics for each campaign as a starting point:
|Cost to Acquire a Patient (CAP)
|Lifetime Value of a Patient (LVP)
|What it is:
|How much you spend to attract a new customer. Lower is generally better.
|The average revenue you’ll generate from each patient. Higher is generally better.
|How to calculate it:
|CAP = Marketing campaign cost / number of new patients
|LVP = (Average revenue per visit) x (Average number of visits)
Measuring the CAP and LVP for your total marketing campaign can provide high-level insights into the success of your campaign. However, consider tracking the CAP and LVP for individual marketing channels as well. This allows you to learn which channels are most cost-effective for attracting patients, as well as which channels attract the highest-value patients, so you can identify which channels have the greatest ROI — and which channels are underperforming.
Establish Your Online Presence
No matter which channels you choose to emphasize in your marketing plan, it’s important to have the basics covered and create an online presence for your brand.
Create a practice website that includes key details — such as your location, the services you provide, and the types of insurance you accept — so prospects can find you online. If you plan to accept payments via your website, make sure you work with with a payment provider that supports e-commerce and makes it easy for website visitors to know where to pay.
If you plan to use them, create social media profiles with branding consistent with your website. Finally, fill out your Google My Business profile, and register with online directories or platforms that connect patients with doctors.
Enhance the Patient Experience with Technology
Ultimately, no team can provide the tailored, “always-on” experience that today’s patients expect, so it’s important to invest in technology that enhances the patient experience.
As a baseline, practices should offer online appointment scheduling so patients can book anytime, anywhere. In addition, consider digitizing patient intake forms for easy data collection, deploying chatbots to handle simple customer service inquiries, and choosing a booking platform with automated appointment reminders to avoid missed appointments.
Look for opportunities to automate backend processes, such as billing and collections. Investing in the right tech can help your team work to their full potential, as they offload manual processes and focus on the most meaningful work. And, as your practice grows, automation allows you to expand your capabilities while keeping your team lean.
Find Partners Who Will Help Your Practice Grow
Savvy entrepreneurs rely on a community of partners to find the expertise they need to get ahead — and building out your network will help your practice grow. Trusted partners bring fresh insights to hone and refine your business strategy, and they can connect you to the resources you need to reach your goals.
We’re Here to Help Move Your Practice Forward
With more than 25 years of experience supporting physicians and other healthcare providers, PNC’s team of 100+ Healthcare Business Banking professionals has the expertise to support your launch and growth.
We can help you:
- Bank online, with accounts that suit your personal and business banking needs.
- Accept patient payments quickly and conveniently, including through your practice website.
- Find the financing you need to launch or expand your private medical practice.
- Manage your cash flow to maximize your practice’s financial performance and facilitate forecasting.
- Attract top talent by enhancing your benefits packages to include financial wellness benefits, at no additional cost.
Visit us online - Solutions for Healthcare Professionals - to learn how we can support your practice from launch to expansion — and beyond.