Starting a professional practice is a series of decisions that must be taken to lay the ground work for an operational business. There are many things to consider.
To make this process easier I have compiled a list.
Below are ten important actions in making you’re a practice flourish.
- Do Your Homework
The failure rate for practices is very low, but when it happens, it can be a life-defining disaster, both professionally and personally. In the past, one could build a practice from scratch and have a booked schedule of patients before opening for business. This is rarely the case today. As soon as your mind is made up to become your own boss, start exploring the unknowns that lie ahead. Talk with current practice owners about what challenges they faced, what they did to prevail, and what, if anything, they would do differently today. Once you’re comfortable with the challenges you’re likely to face, it is time to get your business registered. Having a business name search, getting a business number, and clarifying the structure of the business are the first few steps. http://www.bcbusinessregistry.ca/
- Determine Business Structure
There are a variety of business organizational structures to consider when starting out. Its is important to have a broad understanding of their value, operational requirements plus legal obligations, and tax ramifications. Speaking with an accountant is advisable in determining your business needs. For liability purposes, professional service providers tend to structure their businesses as a corporation or a limited liability partnership, if they are going into business another person. Making sure your business is set up under the best suited structure is critical when it comes to taxation. If a company is not under the best suited structure the owner can be hit with a large tax bill at their year end. It can not be stressed enough to understand the legal and tax ramification when establishing and then maintaining the growth of your practice. https://pacificadvisors.ca/what-we-do/incorporated-business/
- Write a Business Plan
Every owner envisions opening a successful practice, but you need an actionable plan to get you there. That’s where a business plan comes in. A business plan describes your business, sets goals, defines your customer base, and addresses finances. As a health professional, you understand the importance of specific, comprehensive treatment plans for your patients. You’ll need a similar plan for running your new business; in fact, a solid business plan is instrumental to your success. Take time in the initial planning stages to complete a business plan. A good business plan will give you a clear direction for the-set up and running of your practice, and allow you better control over your practice’s future. https://www.bdc.ca/en/articles-tools/entrepreneur-toolkit/templates-business-guides/pages/business-plan-template.aspx
- Find the Right Insurances
While you’re busy helping clients, don’t forget to protect your practice’s most important asset – YOU. Talk to your finance specialist about how to access professional insurance policies designed to protect your personal and business assets. Every business needs liability insurance, but the needs of a professional practices are unique. Before you start looking for places to set up shop, talk with an insurance agent about the kind of policies that make sense for your needs. Often your professional college will recommend a brokerage or firm that caters to your industry. Types of insure that may be requires are: Commercial Property Insurance, Professional Liability or Malpractice Insurance, Error and Omission, and Disability Insurance.
- Secure Financing
As you create a business plan, it’s vital to understand your finances before you open your practice. Overhead and payroll will be your most expensive line items. Controlling expenses and employee hours becomes important. Accounting systems and processes that monitor cash flow through your practice are vital, so make sure they’re set up right from the start. Talk to your accountant or finance specialist to gain a better understanding of how to structure your finances to suit the needs of your practice.
While there is no shortage of banks wanting to lend to health professionals, you may find that your local bank and others are unfamiliar with the cost and funding allocation requirements for a start-up practice. But many major lenders are familiar with your needs and can provide you with the required funds. Also, be sure not to base your loan decision solely on interest rate. Although the rate is important in keeping your payments lower, it should only be one factor in your decision-making process. Here are some other loan features to consider:
Loan term. Like your home mortgage, you should consider the longest term available (for example, 10 to 15 years.) This means you’ll have lower payments as you begin to grow your revenue stream. If your business does better than expected, you can always pay down your loan, the same way you might pay down a mortgage. Loans can typically be prepaid after three to five years without a penalty.
Pre-payment. Pre-payment options vary from lender to lender. Loan pre-payment terms are less important in the early years as you open and build your practice, but pre-paying your loan may become an option after your practice is no longer considered a start-up and is looked upon by lenders as an established practice. This occurs when you have demonstrated proven practice collections, adequate cash flow, and the new loan you’re considering is in your best interest — or more attractive than your existing loan.
Interest rate. Rates can be fixed for the term or adjust with prime or other rate indexes. Although payments may be lower with an adjustable rate, rates will eventually rise, so locking in a competitive fixed rate for the next seven to 15 years is your best solution.
Lender service levels. As a start-up, you will have immediate banking needs, such as merchant (credit card) processing, direct deposit accounts, business credit cards, etc. During construction of a new practice, specific lenders will have internal processes in place to pay the building contractor, equipment company and other vendors who may require deposits and incremental payments. They will also make sure all disbursements are made as planned so you can stay
I will reveal the next five steps on my follow up post. Pacific Chartered Advisors LLP is dedicated to working with business owners in developing successful professional practices from the start.