Doctors Setting Up In or Rejuvenating a Practice
A practice buy-in is an extensive process with its own checklists and valuation methods. But a buy-in pales in comparison to the choices you plan out when you’re starting from scratch.
I don’t particularly like the term ‘business plan’ just for legacy reasons. But, starting out in practice does require some thinking – too much thinking to hold in memory – so things do need to be written down.
You can actually put down in writing your idea or ‘dream’ first off, as your mission or vision, or values – the terminology doesn’t matter much, but writing it down gives you a very good starting point.
After that, there’s some key sections needed in most plans:
· An Income Growth Plan: starts with things like whether you’ll run an ad in Medical Specialists (for specialists), or simply choosing a PHO (for primary care). Where will the patients come from? What other advertising will be needed? Will you need a website? What type? How much will that cost? These questions and more are all answered in this section.
· A Cashflow plan: this should fit on one page and include a contingency sum. It should include provision for accurately estimated start-up and fit-out costs, take into account your estimated fees, patient attraction and retention rates, and show the month by month effect on your ‘bottom line’ including the maximum draw on working capital – so you know exactly the amount of funds you’ll need in hand initially to get yourself to and beyond ‘breakeven’ when your practice will start self-sustaining for growth and giving you a cash return. That’s the ‘spare’ cash that flows through to your personal Lifetime Wealth Management Plan which we also help you through. Unlike a cardiac monitor, its not the movement in the line so much as the lack of it - but the trend over time is still important.
· Structure Choices and Recommendation: in NZ, because of our tax legislation’s anti-avoidance provisions, it’s much better to ‘start the way you intend to continue’. There’s a matrix of options, and how the entities interact with each other is just as important as what type they are - get expert advice from a specialist accountant that’s exactly tailored to your situation.
· Infrastructure or Operations plan: location, staff, equipment, fitout… this part of the plan is mainly a checklist aggregated from the other parts of the plan.
· Risk Management – what if things don’t go according to plan? Insurances are included here.
· And, there’s many other sections which are only relevant and included in specific situations.
· Then, the most important, final section (we actually put it up the front): To-Do plan: dates, responsibilities (no more than three tasks per person per time), the expected effect, evidence for completion, and classifications that bring forward the dependent tasks as the initial ones get done with a follow up system to track progress and update the plan as applicable – it’s a ‘living’ document while it’s being actioned.
You can see how all these plan dovetail together into one: for instance if you are thinking to have a partner, that will affect each of the plans. Your estimated fees comparison will affect your growth rate; and so on.
Doctor Financials have extensive experience in guiding medical practitioners through each of the stages efficiently and effectively: http://www.doctorfinancials.co.nz/