How to Start a Medical Practice

Before skipping right to how you’ll pay for the business and diving into the paperwork for a small business loan, it’s crucial to begin with your ultimate career aspirations in mind. Understanding your "why" behind starting a practice will help guide your decisions throughout this journey.

Before you decide to purchase a practice or start one from scratch, take a deep look at what you want for your career. Ask yourself these critical questions:

• Do you have the time to commit to establishing a private practice? Starting a practice is an entrepreneurial venture that will require a significant amount of time and preparation upfront. If you’re currently working 60+ hour weeks at a hospital, when will you make time for the necessary research? Will you quit your current position or try to manage both temporarily?
• Are you prepared to handle the adminstrative and operational burden of running your own practice? Do you have experience in marketing or sales that can support you as an entrepreneur? If not, will you hire others to manage these aspects of the business so you can focus on patient care?
• What team do you plan to put in palce to support this endeavor? Will you start as a solo practitioner or work alonside with other physicans? If you're starting with a group, do you have a clear understanding of how ownership will be structered and who will be responsible for what?
• How will you set boundaries between work and personal time? Starting a business can be all-consuming, so it's important to have a plan for maintaining a balance. Will you offer night and weekend hours to attract new patients, and how will this impact your personal life?
• What is the long-term vision for the practice? Do you want to retire from this business in 20+ years or bring on partners and plan to transition out after 10? What do you want the legacy of your medical practice to be, and what can you put in place upfront to ensure that it eventually comes to fruition?

Create a business plan

Your ability to craft a well-thought-out business plan strongly indicates your readiness to open a private practice. This plan should offer a detailed look at your expenses, revenue projections, and the debt you plan to take on in the first few years. Your business plan should include:

• Executive summary: Introduce your business with a high-level overview of your practice’s name, mission statement, proposed location, and services.
• Business model: Clearly outline your services and how they relate to your ideal patient profile while also detailing your company’s mission and vision.
• Competitive research: Conduct a thorough review of competitors in your chosen location, highlighting how your practice will differentiate itself. This section should demonstrate that there’s a clear market for your services and that you’re well-positioned to compete.
• Marketing plan: Outline how you’ll attract and retain patients, combining digital and physical marketing strategies. Set specific marketing goals, such as the number of new patients you aim to acquire each month.
• Organizational structure and operations: Detail your hiring plan, whether certain roles will be in-house or outsourced, your practice’s hours, and the technology needed to support your staff and operations.
• Financials and income projections: This critical section should include startup costs, a 12-month income projection, and a proposed budget, as many lenders will want to see this information.
• Potential risks: Conduct a SWOT analysis to explore the strengths, weaknesses, opportunities, and threats to your business.
• Exit strategy: Plan for the future by detailing what will happen if you decide to step away from the business, including a transition plan if you bring on partners.

Review your finances

Starting a medical practice involves significant upfront costs. A business loan can help, but it’s essential to understand the total cost of opening your practice and your existing financial assets before you explore financing. Common expenses include:

• Real estate (renting or buying office space)
• Equipment (furniture, medical devices, etc.)
• Electronic health record (EHR) software
• Practice management software
• Marketing (website creation, digital presence, physical marketing materials)

Compare these costs against your existing financial resources, which might include:

• Savings: You might intend to use personal savings or have a nest egg set aside for the purpose of starting a business. Ensure that any funds you use from existing savings aren’t already earmarked for your personal emergency fund or family needs.
• Investments: While tapping into long-term investments like a 401(k) can be tempting, it’s often best to consider other financing options so as not to impact your long-term retirement goals.
• Lines of credit: Home equity lines of credit (HELOCs) may be available if you have equity in a property. However, these often have adjustable interest rates, which can fluctuate and increase or decrease monthly payments over time.
• Credit cards: While business credit cards can be useful for short-term purchases, they often come with high interest rates and low spending limits.

Seek funding for your doctor's office

Unless you have substantial savings set aside, you’ll likely need funding. Medical practice loans, a subset of business loans designed for healthcare professionals, can offer large sums at favorable interest rates. These loans are tailored to support practice development at every stage, whether you're expanding, acquiring a new office, or upgrading equipment.

When applying for funding, ensure you have the following:

• Your personal financial information: Your personal financial information: Especially if your business is new, lenders may want to know about your personal financial state, including your income, credit score, and existing debt.
• Business collateral: Some loans may require business collateral to secure the loan. Assets can include equipment, real estate, or another asset the lender can sell if you fail to repay the loan.
• Business plan: Keep the business plan you created in step three nearby. Some lenders may request a copy of your business plan as they make a lending decision.
• Your medical license: For certain loans, like a medical practice loan through BHG Financial, you’ll need to provide proof of your active medical license.

Complete the required paperwork to open your practice

With your business plan in place and financing secured, it’s time to lay the legal foundation for your medical practice. This may include:

• Legal entity creation: There are several types of legal entities, including partnerships, limited liability companies (LLCs), and sole proprietorships. Work with a legal professional to understand the tax implications of each and what makes the most sense for your business.
• Tax ID: Once your entity is established, you must apply for a unique employer identification number (EIN), which you’ll use when you file taxes and interface with the IRS.
• State-specific licensing: Depending on the state you start your business in, you may need to complete various paperwork to get set up. A local business attorney may be the best professional to support you in understanding licensing requirements for your state.
• Insurance: To protect your business, staff, and yourself, you’ll want to explore various insurance policies. These may include comprehensive business insurance, insurance specific to the medical field, like malpractice and worker’s compensation, or short-term disability for your employees.
• Credentialing with payers: Each physician in your practice will need to submit their National Provider Identifier (NPI) to healthcare payers. Start this process early, as it can take several months.

Find your space

Your office location is one critical element of business success. So, it makes sense to work with a qualified real estate agent who can help you find an office that meets your needs. Ensure the building you choose is:

• Large enough to fit staff and patients for the projected number of patients you plan to see daily
• Accessible to patients of all physical abilities
• Equipped with sufficient parking for staff and patients
• Set up for appropriate disposal of biohazard waste
• Not near a direct competitor

If you find a space that checks all the boxes, negotiate the lease or selling price to get the best possible deal.

Furnish and stock your office

Once you find and lease or purchase a physical space, it’s time to set it up for patient care. Consider purchasing the following and creating a comprehensive list alongside your staff to ensure you’ll be ready for the first day of accepting patients.

• Large equipment like X-ray machines
• Small equipment like stethoscopes, thermometers, etc.
• Provider tools like gloves, needles, scales, etc.
• Prescriptions and medications
• Software, including electronic health record (EHR) systems, patient management software, medical transcription software, and medical billing software
• Desks, tables, and chairs for staff
• Chairs, tables, and sofas for patients in a waiting area
• Waste bins and hazardous waste receptacles
• Artwork and other elements to make the office feel more inviting

Create your physical and digital presence

Before you officially launch, you’ll need to set up your exterior signage as well as your online presence. Consider whether you’ll want a professional logo designer to help you create your brand collateral or if you’d prefer to handle it yourself. Similarly, you’ll want to ensure you have a business website set up, even if it only contains your location and contact details to start. You can expand your digital marketing efforts once your practice is up and running.

Launch and grow your medical practice

While new businesses are rarely perfect on launch day, it’s critical to get your business and your name out there and start attracting patients. Find ways to get out into your community and serve your potential patients. Remember to stop and assess how the practice is performing, especially in the first few critical months. Remember that you may not see a significant inflow of cash in the first few months, but during this season, it’s more important than ever to stick with your business plan and execute the framework you put in place.

Purchasing an existing practice can be a strategic move for doctors seeking a faster start, but thorough due diligence is critical. By understanding the practice's financial health, securing a business acquisition loan, and assessing operational needs, you can position yourself for a smooth and successful transition into ownership.

Key benefits of acquiring an established practice

• Immediate patient base and revenue stream: Existing practices often come with a patient base and revenue, allowing you to generate income and focus on growth from day one rather than attracting new patients.
• Built-in operational framework: Existing systems, such as billing, scheduling, and EHR (Electronic Health Records) software, are often already in place, potentially easing the transition into ownership.

Important Considerations

• Specialty and compliance needs: Depending on the medical specialty, some practices may require specialized equipment or adherence to specific regulations, which could add to initial costs if upgrades are needed.
• Insurance contract transfers and credentialing: Acquiring an existing practice may require renegotiating insurance contracts or going through a recredentialing process, which could impact revenue temporarily.

BHG Financial offers highly specialized business financing up to $500,000^1,2 for medical practice loans, providing a reliable solution for your objectives. With repayment terms of up to 12 years¹, our medical practice loans deliver manageable monthly payments and boost cash flow. Get started by viewing your personalized estimate using our payment estimator.

BHG has over 20 years of experience supporting the funding needs of medical professionals. We understand the demands of the medical space so we’ve simplified the lending process with minimal paperwork and no personal collateral required. If you’re ready to take the next step in your career, we make it easy to secure the funds you need.

Is owning a medical practice profitable?

Owning a medical practice can be profitable. However, the level of profitability depends on location, patient volume, expenses, and specialty, among other factors. Physicians who are owners have more earning potential than employees.

Is it hard to open your own practice as a doctor?

Doctors are likely to experience challenges when opening a private practice. However, with the right network, employees, and education, starting a medical practice can be a rewarding experience both financially and for a physician’s career.