Preparing a Business Plan for a Medical Practice
October 28, 2015
Practices of all sizes should have a business plan, even if they don’t intend to add a new service, hire new staff or open a new location. A business plan explains where you want to go and how you plan to get there. It defines key performance indicators that measure your progress and affect your success. This planning process forces you to think about what you are trying to accomplish and understand the community you serve. A well thought-out business plan will help your practice be more patient-oriented, more efficient and more profitable.
Before you create your business plan, you should evaluate your practice’s strengths, weakness and opportunities. Ask yourself:
- What is happening in our area of practice?
- What are our goals?
- How will we get there?
Your plan should look three to five years out and should address how you plan to maintain or improve on your strengths, eliminate your weaknesses and make the most of your opportunities. Be sure to understand the true reasoning behind your strategic initiatives. It could be financial or it could something less tangible, like providing better care.
The business plan process should be driven by one physician leader, but it should involve everyone. Seek insights from management and administrative staff, the people who are familiar with the inner workings of the practice. It may be difficult to get direct input from everyone, so try sending a questionnaire to your staff requesting input or comments about the process. Getting buy-in early is key to a successful business plan. The last thing you want is a disagreement over big-picture issues when you are close to the finish line.
The essential components of your business plan should represent a well thought-out understanding of your objectives, thorough research into the demographics of your community, an understanding of the competitive landscape and detailed financial projections.
Your plan should begin with what you are hoping to accomplish and who is going to do it. This should be specific and measurable, including a detailed timeline and resources needed to obtain your goals. Make accountability part of the plan. Meeting business plan objectives can even be a part of the annual review or incentive process.
The next step is to define your product or service and explain its relevance to your customers. Ask yourself these questions:
- Who is going to use it?
- Why will they use it?
- What pain will the product/service relieve?
- What inconvenience will it solve?
Next you will need to describe the market in which you operate. This should include a detailed report of the demographics of your community and should answer these questions:
- How many potential customers are in your region?
- How far will they travel to see you?
- Who do you envision paying for your services - the patient, insurance or a combination?
You should also examine the competitive landscape in your area. How many other physicians in your area offer the same services? If you are thinking about adding a new service, look at your own files for meaningful data. How often are you referring the service out? The answers to these questions will be used to form your revenue projections, so make sure you are using reliable data.
Use your market research to make assumptions about potential volume. It’s better to err on the side of caution with these assumptions because these numbers will be used to form revenue projections. Your revenue projections will be used in conjunction with your cost projections to create your budget, which in the end, will determine your plan’s feasibility.
You may get to the end of your business plan and find that your goals are unattainable. In this case, you should modify your plans or move on. It’s ok to realize your plan is not feasible, as long as you know why. The ‘why’ will help you understand how to make your plan successful in the future.