Starting a private practice
Deciding to open a private practice is an extremely exciting next step in your career. Numerous processes are involved with starting your own healthcare business, and you want to make sure that you are aware of and prepared for each of these. After all, whilst the benefits that come out of operating a successful business are hard to ignore, you need to ensure you’re educated on certain challenges - the most significant of which is related to finances. Starting a private practice is expensive; there is a whole range of start-up costs, many of which, you may not even be aware of. The very first step to opening a healthcare business is having a clear understanding of relevant costs. From here, you will know whether you need to save a little bit more, seek out a loan, or even go into business with another healthcare professional. Although the specific costs for every business will differ depending on its size, services and location, we’ve developed an approximate guide that outlines the types of fees you can expect.
Benefits of running your own private practice
Whilst the challenges facing business owners can be difficult to manage, the wide array of benefits that come out of running your own private practice often counteract these. Although the specific factors that lead to practitioners starting their own business will differ, we’ve compiled a list of some of the most influential reasons to start a healthcare practice:
Financial growth: As a business owner, you will have a much higher earning potential. Because you are in charge of the growth of your business, you can aim higher and earn more, leading to increased opportunities for your professional life.
Decision making: Being a business owner means you have the last word in decisions. Although this is a big responsibility, it also means you can push yourself and your team in the direction you want to go. This may mean implementing new equipment and technology, streamlining finances, using telehealth options, or even just determining the vision for your business. Working underneath someone can limit your professional opportunities and development, so owning your own practice is the perfect way to make a positive difference in the way you want to.
Respectful and trusting environment: Everyone wants to work in an environment that fosters respect and trust, and as a business owner, this is something you can push for. You will have the ability to set your own standards and goals and strive to achieve these. Not only will this improve relationships with colleagues and coworkers, but it can also lead to establishing loyal relationships with clients, and a reputable business.
How much money does it take to start a healthcare business?
Now to the important part: how much money does it actually cost to start a healthcare business? It’s important to remember that before you start earning any revenue, you are going to be spending money. As such, you need to ensure you have budgeted correctly and can fund not only the start-up fees but also the first few months of business.
Website costs
Building a website is one of the very first costs you will incur. Given the current dominance of technology, you must have an engaging and well-developed website. After all, this is usually the first thing that prospective patients will check. Typically, the development of a website will cost somewhere between $150-300 USD if you design it yourself, or $3000-9000 USD if you outsource it, depending on the size of your business.
Legal/accounting costs
Accounting and law regulation requirements are necessary components for starting any healthcare practice. It may be a good idea to hire a lawyer to draft client and staff contracts for you and create HIPAA forms. This will cost between $2000-15000 USD.
Filing fees
Every startup business needs to be incorporated before it opens its doors to clients or customers. Depending on the state that your business is in and your type of incorporation, you should expect to pay around $50 -550 USD.
Office build out/décor
Budgeting for an office build out and decor may seem like an area where you can save, but you should remember that having an aesthetic, clean and professional space will have a big impact on patient impressions. If you are a sole practitioner, you will only need to decorate one space, which will cost between $2000-3000 USD. However, if you are opening a group practice, there will be numerous examination rooms and shared spaces to be organized, which can cost up to $25000 USD.
Marketing expenses
Marketing is the backbone of bringing in new clients and consequently, improving revenue at any business. You should allocate between $2000 - 5000 USD a month on marketing expenses, although the specific monthly cost will depend on what your needs are at that time.
Legal/accounting/consulting
Legal, accounting, and consulting will require ongoing costs. Again, this will depend on the specific requirements of your business at different times, but it is a good idea to allocate around $1000 USD per month for these areas.
Rent/office supplies
Rent payments will always be due, regardless of how your business is going, whether you have clients, or even if there is a global pandemic. The actual cost of rent varies significantly depending on location and size so we can't provide you with an estimate, but just ensure that you always have float money readily available!
Software
Software is an integral component of every healthcare business. If you are running a small practice, software fees are typically around $300 USD a month, but this can increase to $1000 as your business grows.
Administrative staff
Hiring administration for your private practice is a decision that will depend on how big your business is. When you begin, you will most likely be able to handle administrative tasks on your own, or with a part-time employee. However, if your business expands, you will need to hire more admin staff, costing between $15-25 USD/hour.
Cost of sales/services Rendered
Paying your clinical staff falls under services rendered. Their income will depend on their qualifications and whether you pay them hourly, but you should always subtract this from your total gross income before calculating revenue and expenses.
Case study: Estimated cost to build a therapy business
To have a look at a possible sum total of start-up costs, let’s have a look at a hypothetical therapy business. This is basically a fee checklist for a counseling business startup (all calculated in USD) that will indicate to you how much money you’ll need to save or loan.
- Registering the business: $750
- Setting up and launching a website: $600
- Legal expenses and accounting services, including obtaining licenses and permits: $3330
- Marketing: $3500
- Hiring a business consultant to help with the production of a business plan: $2500
- Insurance: $2400
- Renting office space: $80000
- Decor and office fit-out, including furniture, televisions, telephones, filing cabinets, etc.: $10000
- Operational costs for the first 3 months of business, including employee fees: $40000
- Store equipment and devices required for your specific services: $30000
- Miscellaneous, including stationery, phone deposits, CCTV installation: $6000
The sum total of all of these costs is $179,080. Obviously, it is hard to estimate rent fees and employee fees, and the costs related to equipment will largely depend on the services that you will offer. Nevertheless, it can be helpful to have an approximate idea in mind of how much money you need to save before thinking about opening your own business. When you are calculating your savings, remember that seeking a loan is always an option!
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Take home message
Starting your own healthcare business is an expensive venture. Nevertheless, the financial, professional, and personal growth that you will almost certainly see after your business is up and running definitely makes these costs worth it. When you are assessing how much money you initially need to save and/or loan, you must do as much research as possible. This may mean reading guides like this one, reaching out to other business owners, or hiring a business plan specialist who can guide you through expected fees. Although there will always be risks involved with running your own private practice, the advantages should outweigh these as long as you have a good plan. The final tip we want to leave you with is the importance of preparation. Always, always, always prepare for the worst-case scenario - slightly over-budgeting will give you savings to fall back on in the case of an unpredictable emergency!
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