Medical school and residencies prepare doctors to provide quality patient care but not to create a medical practice business plan. Yet a business plan is a key part of reaching new patients and supporting existing ones.
An effective medical practice business plan will:
- Establish a roadmap for your practice
- Estimate your revenue and expenses
- Evaluate the competition
Creating a thorough business plan may feel like an onerous roadblock to moving forward. However, plotting your direction in advance will keep you on track later on, and will set you up to effectively serve your patients.
Why you need a business plan for your medical practice
Whether you plan to start your own practice or take over someone else’s, a robust business plan is necessary. When you develop a comprehensive business plan full of intention, clear thought processes, and fine details, you demonstrate your commitment to your practice, community, and discipline.
A solid business plan effectively positions you to prevent surprises that could completely derail your practice and reputation.
If you plan to seek investors or business partners for your practice, a thorough business plan demonstrates that you have both a vision and the empirical data and financial goals required to back it up. It also establishes and communicates the direction you intend to take your practice.
If you do not plan to seek outside investors, your medical practice business plan is still a key tool for the most important investor: you. Working through the 8 parts of a plan will help you evaluate the landscape, establish your foundation, and move forward with your practice.
That said, writing your business plan is not the same as establishing your budget. However, you will need to create a detailed budget so you can incorporate some of that information into your comprehensive business plan.
“Your medical practice business plan is a key tool for the most important investor: you. ”
What is involved in developing a healthcare business plan?
As you develop your medical practice business plan, think of how you approach diagnosing a patient: a systematic process. While it may vary by practitioner, you typically:
- Get to know your patient
- Ask about symptoms and history
- Dig deeper into factors that are relevant to the current issue
- Collect data from tests
- Develop an initial diagnosis
- Seek additional counsel when appropriate
- Revisit the diagnosis if needed
- Discuss the findings and prognosis with your patient
- Schedule treatment and follow-up
The business plan creation process is similar.
Translating the process to your medical practice’s business plan
Getting to know your patient translates into defining your mission and vision. What do you want to accomplish? What is your role in your community?
Asking about symptoms and history will lead you to gather relevant documents, certifications, and professional memberships; research other local practitioners; and investigate why your practice’s focus is needed. Just as you need to know how the body’s systems fit together, you need to know how your practice will fit into the market.
Digging deeper into factors relevant to the current issue involves getting into the numbers. Evaluate:
- Your selected location
- Fee structure
- Insurance company partners, if any
- Target patient volume
- Staffing needs
- Services, whether legal, financial, or practice growth
- Equipment, medical, and office
- Maintenance and upkeep cost estimates
- Ongoing costs, including rent or property taxes
Collecting data requires gathering facts. Avoid using more lucrative or optimistic numbers. Build your plan based on conservative estimates to set your practice up for success. Determine what benchmarks to establish and measure success.
Develop an initial diagnosis by evaluating whether you’ve made inaccurate assumptions or missed key components. Revisit areas you need to and gather new information.
Seek additional counsel in this process. Your legal and financial advisors are an important resource as you create your plan, not just as you execute it. You may also consult your staff about parts of your plan in which they have expertise. Finally, partnering practitioners should agree with the plan’s approach and direction.
Revisit the diagnosis. Consider the input and adjust your assumptions, numbers, and benchmarks.
Discuss the diagnosis and prognosis with your investor(s). In this step, share your completed business plan with the individual(s) with whom you are working.
Set a follow-up plan to evaluate your progress after certain periods of time.
Your business plan document
It’s one thing to theoretically know how to approach your medical practice business plan and another to sit down and create it. This 8-section outline will give you an idea of the crucial parts of your document.
Make a copy of this sample business plan template that you can customize and use for your practice.
In the executive summary, summarize your business model. Incorporate the information you developed while getting to know your practice. Include an overview of information such as the practice location, services, target patient, local demographics overview, any relevant business history associated with the practice, and your mission and vision for your practice and its community impact. This is also where you will define any existing barriers to moving forward.
Your executive summary i an understanding and compelling argument for why the community needs your services. It will highlight how you will fill a need that is not met in the current environment.
This is the section that will get you invited to the investor’s table, as it were. It is the bait on the hook of your argument.
Pro tip: Save the executive summary for last. Once you have the information from the other areas you will research and develop, it will quickly come together.
Detailed business model
Define your services and how you’ll manage prospects who fall within and outside those services. Specify your hours of operation. Define and describe your physical office space. If you intend to offer telemedicine, describe how. Define the number of staff you’ll employ, their roles, and how you plan to add staff as your practice grows. Detail the equipment you’ll use and why it’s essential.
Determine which vendors you’ll use for a variety of functions, including office cleaning; non-office hours emergency call management; office, medical, and exam equipment and furniture; office and medical supplies, software; marketing; and physical and digital security.
Comprehensive market research and positioning
Provide hard data on the demographics of your local geographic area and how they support your practice. For example, do enough people in your area need your services? What is the median income in the area, and how has that influenced your target fee structure?
Define your insurance partners, how their fee structures align with yours, and how competitive your proposed fees are.
Outline your local competition, how you can be sure there is enough market availability for your new practice, and why your practice is positioned for success above your competition.
Detailed staffing model
Even if you plan to be the only provider in your practice, you will still need a plan to answer calls, file insurance claims, maintain files, manage billing, process payroll, and order supplies, among a host of other tasks to keep your practice running smoothly.
In this section of your medical practice business plan, list what positions you will fill and how many people you will need in each. Include compensation, along with any budgeted overtime, as well as benefits and tax considerations. Also, note when you will target hiring each throughout the year.
Projected 12-month income and budget
Show the math regarding how many patients you will serve for each service you will offer, your projected fee for each service, and your anticipated overhead expenses.
Your overhead will include items such as:
- Staffing expenses based on the total number of staff and projected salaries.
- All office-related expenses for equipment, supplies, maintenance, utilities, software, marketing, staff recruitment, and temporary services.
- Anticipated vendor expenses such as off-hours call service, telehealth subscriptions, lab processing fees, janitorial services, etc.
- Maintaining licensure, subscribing to professional journals, and attending conferences to stay current.
Make sure to account for one-time or short-term expenses, such as an extra administrative position to cover a known busy month, as well as for ongoing expenses.
Potential risks and mitigation
What risks can you anticipate as you open your practice? This is the section where you will think of worst-case scenarios and what you would do were they to become a reality.
Consider scenarios such as:
- A patient sues you. The United States is a very litigious society. What sort of malpractice insurance or bonds do you need to obtain?
- A staff member gets injured at work. In addition to the mandatory worker’s comp, how else would you support them? And what does your insurance cover?
- You get injured at work. How can you protect the longevity of your well-being and that of your practice?
- Another global pandemic hits. How will you staff and maintain patient treatment protocols, what specialized supplies will you need to purchase, what type of insurance rate hikes could you anticipate based on the last pandemic’s model, etc.
- A natural disaster hits. Depending on your geography, are you likely to experience a flood, fire, earthquake, tornado, hurricane, or blizzard? Are there emergency supplies you can keep on hand? Are there specific ways you can shore up your facility to make it more stable — and when would you make those changes? What specialized insurance do you need to purchase?
Talk to a seasoned physician who can provide some mentorship. Ask what they’ve faced during their years of practice and what you need to know to be prepared. Then take that information into meetings with your lawyer and insurance broker.
In your project implementation plan, outline the steps you need to take to open your practice, what milestones you will hit, and an associated date for each major and sub-task. Whether you use formal project management software or create a project plan in a spreadsheet or other document, include that detailed information in this section.
You’re just opening or growing your practice — why would you plan to leave it? Plans change, retirement becomes attractive, large conglomerates buy smaller practices, or a host of other scenarios could happen.
Just as you worked through the risks section, there is value in thinking ahead to determine your plan when you are ready for something different. Will you sell your practice? How will you transition your patients? What will happen with valuable equipment and supplies? Identifying these items and addressing what you feel will be the best way to step away from what you are currently creating will make the process more manageable later.
How detailed is an effective business plan?
You know what process to use and the broad sections to include in your business plan, but how detailed should you get?
While you don’t want your business plan development goal to be a target length, a solid business plan typically ends up being somewhere between 30 to 40 pages. This information will include graphs and charts that demonstrate your demographic research, specific equipment needs for positive community impact, budget numbers, etc.
Your business summary and exit strategy sections should not exceed 20% of your overall business plan. Both will provide a high-level overview; neither is the section where you will get into excruciating details.
However, the other 6 sections of your business plan will get into the fine details. Each section should provide narrative information as well as specific numbers that are itemized by topic and category.
Keep your business plan alive
Even though your medical practice business plan can provide information for potential investors, partners, and financiers, it is ultimately your mirror of what you want your business to become. This should be a living document you update and change as your priorities and focus evolve.
As you move forward and grow your practice, set yourself up for a larger vision. Adding 3- and 5-year projections to your 12-month business plan will help refine your sense of your purpose and direction.
By creating a medical practice business plan, you create confidence in not only your ability to attract patients, but also your ability to run the business that serves them long term.