Start It Up: Finance — Mastering the Numbers Game
Crafting a budget for your new practice is difficult; here’s how to do it right.
By Laurie Hyland Robertson About This Series Have you been pondering striking out on your own, making the leap from employed associate to practice owner? Or are you just starting out in practice, and wondering if it’s worth going even deeper into debt to start your own venture rather than getting “a job”?
Whatever your situation, Physicians Practice is here to help with our comprehensive six-part guide to starting a medical practice. In addition to the pre-opening day planning advice you may have seen in other such guides, we’ll delve deeper into the key milestones you’ll need to meet for success long after you cut the ribbon.
Assuming you’ve lent some serious thought to your practice philosophy and dream location, as we described in Part One of this series on launching a practice (“Start It Up: Planning”), the next step is constructing the financial model. To form the underpinnings of this crucial bit of strategizing, all you need are reliable expense and revenue projections, plus a solid budget, for the first couple of years after opening. Piece of cake!
OK, we admit this task is not easy. But you must pay sufficient heed to the financial side or risk losing everything. It’s your practice, your money — and your job, says consultant Keith Borglum. “You can’t abdicate financial controls … to a staff person. The physician doesn’t have to learn to be an accountant, but they have to be able to read the reports intelligently.” On the bright side, says Borglum, “It’s a lot easier than learning medicine.”
Durable data
Too little financing is a death sentence for any new business, especially one whose major commodity is dependent on — and in most cases entirely limited to — its owner’s time. As a key part of your business plan, you’ll want pro forma statements listing best, worst, and average-case scenarios for a realistic mix of patients in your geographic area and specialty. These documents should cover at least two years and would typically include startup expenses, revenue and charge analyses, a fee schedule, and a break-even analysis. Continued...
