Seminars

Out of the Classroom and into the Boss’s Chair: How Graduates Can Start Their Own Practice

 

It’s graduation season once again. During this time of year, thousands of college students walk down the aisle to receive their diploma, and celebrate their accomplishment of acquiring their degree of study. In 2015, the number of medical school graduates in the United States alone was 18,705 (KFF.org).

Many new graduates in the medical profession dream of owning their own practice one day, but can their dream come true sooner rather than later? We will be discussing what it takes for a recent graduate to be their own boss and to have their own practice.

Define Your Goals
You will first want to think of what your goals are in terms of owning a practice. Finding your dream practice is made of three primary subjective and objective criteria: The style of practice, the region or area, and the immediate profit generated.

First, decide where you want to live. Try to keep the area as broad as possible to improve your selection. A smaller geographic location will substantially lengthen your search time.

Second, consider what style of practice would best fit you. Retail settings will have higher rents, require Sunday and evening hours, street signage or visibility, and have much more walk-by traffic. Medical offices will have lower rents, little or no signage and much less walk-by traffic. As a new graduate, you may be more comfortable developing a fixer-upper or start-up practice (and will be easier to finance; more on this soon), rather than purchasing a large turnkey office.

Third, figure out what your income requirements are. Most offices have an adjusted net of about 1/3 of gross. Multiply your minimum earnings required by 3 to determine the minimum annual gross revenue.

You will also want to think about long-term goals, such as building revenue, buying real estate, or eventually owning more than one practice. Some of these decisions will be determined by the type of role you want to play in your business. Do you want to be a hands-on doctor that continues to see patients the majority of the time, or take on more of a managerial role and run the business side?

Develop a Business Plan
In developing a business plan, you will want to think about your budget and what type of practice you can afford and sustain. Once you know what type of practice you want, you will need to plan a budget that reflects the cost of that certain practice.

Start-up costs should always be included in a budget. Start-up costs can include but are not limited to buildouts, renovations, remodeling, purchase of equipment, advertising, and hiring of staff. You will need to determine if you can afford these costs before your practice is open for business.

You will also need to figure out how long it will take before your practice becomes profitable. It may take a while for your business to start generating revenue. Can you cover monthly expenses and other costs until then? A financial planner will be able to help you accurately determine your projected profit and loss.

Getting Financial Help
When buying a practice for the first time, you are most likely going to need financial assistance. Specialty lenders offer up to 100% financing for certain practices as well as start-up opportunities. For a practice purchase, a lender will provide 10 year terms, usually with a fixed interest rate. Some even offer deferred payment for the first few months.

There are a few basic criteria lenders look at for practice purchases:

Are there enough adjusted profits reported from the practice to pay for your living expenses (after any spousal income) and to repay the loan (plus a cushion)?

Do you have a good credit score? It’s less about how much you owe (i.e. student loans) and more about how you pay your obligations. Late payments, short sales, and foreclosures are deal killers.

How long have you been licensed? Lenders generally require you be licensed for at least two years. This might be one of the biggest obstacles for new graduates, since they may have just received their license. Take that time and build good practice skills, along with developing good financial habits.

Last but not least, get pre-qualified. Being pre-qualified will let others know you are a serious buyer, and will help move the purchasing process along.

Ideal Practice Owner Characteristics
Owning and running a practice is not for everybody. It takes a lot of work and willpower to start and maintain a business. One characteristic that can help determine if you are ready to own your own practice is your ability to overcome obstacles.

As a business owner, you will run into many problems and roadblocks that medical school didn’t prepare you for. You might know exactly how to diagnose a patient’s problem, but you may not know the first step to take if the phone system suddenly shuts down during peak business hours, or how to diplomatically handle a disagreement between two employees. Being able to overcome obstacles that comes with owning a practice is key to keeping it successful overall.

Preparing for Ownership
When it’s time to purchase your practice, talk to friends and colleagues who have started their own practice for insight and advice. However, remember that not all situations will be the same for you as they were for others. Also, contact a consultant or broker to get the process started. These professionals will help guide you through the steps needed to ensure a successful purchase.

So if you are someone who is about to graduate and enter the world of medical professionals, keep this information in mind when thinking about the prospect of being your own boss.

This entry was posted in Buying, Selling & Partnering, Financial Planning & Wealth Building, Financial Topics, Loans & Financing, Medical Practices, Optometry Practices, Veterinary Practices. Bookmark the permalink.

Comments are closed.