If you think business plans are for CPAs, not MDs….think again

Writing a Medical Practice Business Plan

If you need to write a business plan, you are probably:
• Planning to open a private practice
• Planning to expand your practice significantly
• Planning a major investment in space or equipment
• Planning one of the above related to an ancillary business

And…you need money from a bank or an investor or support from a partner such as a hospital. If you’re not involved in one of these activities, you may need a strategic planning process but you probably don’t need a formal business plan. (Strategic planning is a topic we’ll cover in a later article.)

Okay, so what if you do need a business plan? First, check with whoever is requesting the plan to be sure you understand what they really want. If your bank is looking for financial statements and a projection, you and your accountant or controller or practice manager can probably produce the information internally. If, on the other hand, the request is for a bona fide business plan, you will have to plan and execute differently. It’s very typical for banks that are working with the SBA (small business administration) to require a business plan; it’s pretty much a given if you’re working with any kind of investor.

A business plan needs to include:

• Description of your current practice or business if you are expanding or proposing to build on current revenue or experience
• Description of the market you are going to serve, why they care about your product or service and what your competitive advantage is over others offering the same or similar products or services.
• Description of exactly what you propose to do, how much money you need and how you will use it
• Description of how you are going to operate the business including facilities, personnel, equipment, advisors
• Description of how you are going to market and sell your product and service including pricing and sales projections.
• Complete financials, i.e., sales projections, profit and loss statement, cash flow statement, balance sheet

Do not turn the business plan writing project over to your CPA or your lawyer. They are not the right people to do this work but they do need to be members of the team that it takes to put together the information. Chances are, you are not the right person either, unless you have taken some higher level business training and you have the time and mindset to pull everything together. Your practice manager is the most likely person to write the business plan but frankly, unless he or she has done it before and is very comfortable with the process, you will be better served by bringing in a writer who develops business plans as part of their consulting work.

You need a professional with healthcare experience who can help you work through all of the issues related to your project such as the ownership structure (along with your attorney), the market demographics, operations planning (along with your administrator), target market identification and competitive analysis, marketing approach and revenue projections, costs and uses of funds (along with your financial advisor). That professional can turn your project into a compelling story that sells your financial partner on the merits of the project, the market need and competitive edge, the mitigation of risks, the financial solvency and returns and the ability to execute successfully.

While it is very difficult to know how much a business plan should cost to have written, there are some parameters you can use. A simple plan to start a practice should be at the low end of any range. Practice expansion takes more time because you have to start by assimilating all of the existing information and building on it in a fashion that makes sense with the historical pattern. If you are creating a new kind of business where the market is less defined or there is unusual reimbursement issues involved, expect to pay more. The same holds true if you are planning to create some sort of “roll up” business where you create multiple sites and manage them in some central way because the plan will require several sets of financials.

Avoid using Internet business plan writing mills. They are cheap but you get what you pay for. It is possible, however, to work with someone in an online relationship and that is frequently less expensive because the consultant may be located in a lower cost area with prices to reflect that and they don’t have bricks and mortar overhead costs. You might also get a recommendation from your attorney, your accountant, through your local Chamber of Commerce, Rotary or county Medical Society. You don’t necessarily need the services of a major healthcare consulting or accounting group; you will pay too much money and may be relegated to third level associates.

When you find a potential consultant, negotiation is fair. If your practice manager will do some of the work or your accountant will prepare the financials, ask for a fee reduction.

Final piece of advice, don’t hire someone and walk away. You will be sitting in front of the funder to make the case for your project. You need to know how the plan was put together, be a party to the assumptions and be comfortable with financial projections.

Susan Brissette
SB Cass Associates
East Nassau, New York