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FINANCE
The Importance of a Business Plan for Physicians
By Dr. Sandra Weitz
Editor’s Note: Today’s guest post was submitted by Dr. Sandra Weitz, a pain manage- ment specialist who grew her own practice to include 11 providers, a substantial clinic and ambulatory surgery center, as well as several other vertically integrated medical businesses. After
retiring early, she now teaches physicians how to maximize the earning potential of their own practices and business initiatives. We talk a lot on the blog about having an investing plan before you begin investing but haven’t specifically discussed the importance of having a business plan before you start a new business. Like I always say, you need a plan! Here are a few tips for getting started. We have no financial relationship.
In perusing social media, particularly various physi- cian-oriented groups dealing with entrepreneurship, I have noticed that there is tremendous anxiety about starting a business—especially a private practice. And there always seems to be an intense discussion about the need for a business plan and how to write one. Many people either do not know the purpose of a business plan or do not know where to start and what the important components of a well thought out business plan should be.
Why is a Business Plan Important for Physicians?
In short, a business plan is a blueprint for transition- ing from an initial stage idea to a profitable business. By writing one, the authors are obligated to think through and document their thoughts regarding all aspects of launching an enterprise: business model, positioning within the market, assessment of competi- tion, income and expense assumptions, projection of a rollout and its financing, securing space and hiring employees, expected ramp-up to ultimate profitability, and last but not least, an exit strategy.
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This may seem like common sense, but unless a person has launched at least one enterprise or has academic knowledge of the process, this approach is not familiar to most people. While it may seem incredi- bly intimidating at first, breaking it down to its smaller components can make this endeavor easily achievable even for those who do not have any formal training.
While any business plan makes some assumptions, carefully researching and understanding the gathered data will result in a plan that is reflective of the reality, mitigates risk and minimizes surprises. Furthermore, a well thought out business plan is mandatory for securing financing from banks or investors regardless of the type of venture involved.
Define Your Business Model
The simplest initial question is: “What is the busi- ness model of a particular enterprise?” This is a 30K-foot view. By outlining this, the physician entre- preneur can start thinking about the feasibility of the venture and how it fits in within the existing marketplace.
• Will the new business deliver a product or service for which there is an unfilled demand?
• Are there previous examples of same or similar business model, and if so, how successful are they?
• What are the barriers to entry?
• Does the expertise in the chosen field exist, and if not, how will it be acquired?
In the case of the private medical practice, such as the one I started, the business model has existed for at least a couple of centuries and in modern times is validated across multiple specialties and regions. On the other end of the spectrum is the untested busi- ness model, such as space tourism. The demand volume, operational safety, and associated income and expenses, and thus long-term profitability and sus- tainability in the near future are highly uncertain for a business model that is so new.
Once some of the answers to the above questions are provided, a physician has to consider the new
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