So you’re thinking about starting your own outpatient medical practice.
You probably have many good reasons to open a private practice. Private practices can be lucrative, although it requires you to spend time building relationships with patients while also attending to all business processes that are part of running your practice.
Maybe you want more autonomy over your practice and your workflow. Or maybe you hope to expand your services to underserved areas or specific populations based on your expertise.
If you’re thinking about starting an outpatient medical practice, one of the first things you should do is write a business plan. Even if you’re able to self-fund your practice and don’t need outside investment, your business plan is a great tool for thinking through all the different aspects of building a profitable and sustainable practice.
There are a few different types of business plans, depending on how you intend to use it. If you’re seeking investment or business loans, you’ll need a traditional business plan. They tend to be lengthier and more detailed. A Lean Business Plan might be a better fit if you simply need to think through all the different aspects of your business. A Lean Plan will be shorter, and it lends itself to quick revisions, but both types follow the same general outline.
In the medical field, this Lean Plan idea is also sometimes called a proforma, though a proforma sometimes refers specifically to the financial part of the plan.
Ultimately, no matter which type of business plan fits your practice’s needs the best, remember: keep it short, know your audience, and don’t be intimidated.
Once you consider these factors, then it’s time to sit down and write your business plan. You should go into this thinking about your business plan as a living document, not something you do once and then file away forever. Use it as a tool, especially around your financials. Revisit and update it regularly by comparing your forecasts to your actuals and adjusting as necessary.
To help you get started, you can download our free traditional business plan template or our Lean Plan template. If you’ve never written a business plan before, Bplans also offers a library of sample medical business plans that you can review or even download to use as a model.
The first section that will appear in your business plan is the executive summary. But before you dive right in, it’s the section of your plan that you should actually write last. It’s a summary and an overview of your outpatient medical practice and your plans, so it will be easy to put together after you’ve written the rest of your plan.
Executive summaries are short—keep it to one to two pages. Keep in mind that if you’re using your plan to get funding, investors and banks tend to read your executive summary to get a sense of whether to read on and consider your request. Do not neglect it; just write it last.
Your executive summary will include the following sections:
- Who you are: Your business name, location, and contact information.
- What you offer and the problem your business solves: What does your practice offer and why is it needed? This is your value proposition.
- Target market: Who is your ideal patient? Do they self-pay or use insurance? Be specific.
- Competition: Who else is offering similar services?
- Team: Who is on your management team?
- Financial summary: Explain your business model, startup costs, revenues, and liabilities to the company. Mention your funding needs.
- Milestones and traction: How have you validated that there’s a need for your practice in your location?
Position your practice’s business opportunity
Now that you’re familiar with what’s included in your executive summary, tuck that information away, and get to work on the rest of your plan.
Think of the next few sections of your plan as the overarching description of your practice’s business opportunity. You’ll cover the problem you’ve identified and the solution that your practice offers. Then you’ll think through your ideal customer, your competition, and your opportunities for growth. This section area should describe the services you provide and how they benefit your patients.
Problem and solution
First, describe the problem that you’ve identified and how your practice solves that problem. Here’s a brief example:
The problem: There is a lack of affordable pediatric and gynecological care available in coastal areas of Lane County, Oregon. Many patients have to travel miles to the closest practice.
The solution: Dr. Gardner plans to open Ocean Lane Outpatient Care to serve smaller Oregon coastal communities scattered outside of major towns with major hospitals. Due to her focus on pediatric and gynecological care, Dr. Gardner’s particular services are especially valuable in this location due to the lack of available service providers in the area. Dr. Gardner’s practice will accept private insurance and Medicaid, as well as a sliding scale for patients in a certain income bracket.
The services section identifies what kind of medical practice you are opening. Restate who your practice serves and what kind of services you specialize in. Talk about how your practice approaches treatment and what goals you have in addition to providing quality care. Here’s an example from a sample business plan for a medical practice.
Include a breakdown of all services furnished by the clinic, being as granular as possible. For example:
- PAP Tests
- Annual women’s wellness exam
- Youth eating disorder treatment
Next, talk about your ideal patients. If you’re in the earliest stages, you’ll want to do some research that verifies your hypotheses.
For example, Dr. Gardner would have needed to verify her assumption that people in coastal towns in Oregon are in need of pediatric and gynecological services—a need that isn’t currently satisfied by available resources.
A formal market analysis can help verify that there’s a need for your particular practice in your intended location.
Your target market section should include:
- TAM, SAM, and SOM: Total Available Market (TAM), Segment of the Available Market (SAM), Share of the Market (SOM). Here, you are looking at the difference between targeting everyone: TAM (all people who need medical care—so all humans in your area), versus your ideal clients: SAM (maybe this is those with certain insurance or ability to self-pay), versus the number of new patients you think you can realistically reach: SOM, especially within your first few years. The idea is that not everyone will be an ideal patient. It matters because you can waste a lot of money with marketing outreach to everyone, instead of targeting a specific population that is more likely to be looking for your services.
- Buyer persona: Imagine there’s one specific patient who represents your ideal patient. Be specific. Maybe she’s 34 years old, has private insurance, is relatively healthy, but needs more regular medical care and advice.
- Competition and competition matrix: List competitors and analyze what makes them competitive. For instance, your competitors might be large hospitals because of the wide range of services they offer. You might also be competing with local chiropractors or other alternative medicine practices that already have a foothold in local communities.
- Future products and services: Name the products/services you will offer as your practice grows and earns more money and as your patients develop new needs. Maybe you will want to open a second location when you gain enough patients. Or maybe you will want to extend your practice’s hours of operation.
Ideal patient profile
Your ideal patient profile identifies the type of patient whom you hope to attract and retain. To clarify, this does not mean you only serve your ideal patient type. Rather, focusing your outreach efforts on attracting your ideal patient will allow you to grow your practice more effectively than targeting a large number of patients who may or may not be in the market for your practice’s specialty.
When developing your ideal patient profile, consider:
- Who you enjoy working with
- Who needs the services you provide
- Who can and will pay your pricing (or have an insurance plan that you want to accept)
For instance, because Dr. Gardner specializes in preventive and curative care, a patient seeking palliative treatment for terminal cancer is not the ideal patient. This patient would not receive the best care for their needs from Dr. Gardner’s services.
Acquiring a new patient is six to seven times more expensive than retaining a current patient. In order to support and retain current patients, develop a strategy to proactively meet their needs and set benchmarks to measure the success of your strategy.
Execution: How your practice will respond to the opportunity
First, your business plan laid out the opportunity at hand. Now, the rest of your plan will focus on how to take advantage of that opportunity. Now is the time to lay out what you’ll do to attract patients and set up a viable business model with healthy financials.
Components of this section include:
- Your marketing and sales plan
- Strategic partnerships or alliances
- Your operations plan
- Your team and company information
- Financial plan
- Milestones and metrics that you’ll need to hit to be viable
- Your key assumptions and risks
- Your funding ask and exit strategy, if applicable
Marketing and sales plan
The marketing and sales component of your plan should include how you plan to reach the patients in your target market, how you’ll bill for your services, and what you need to do to bring in the right number and type of patients.
- Positioning: Describe how you will present your company to your customers with your positioning statement. Think about answering these questions: What are you offering your patients that they can’t get elsewhere? Why should they pick you instead of another practice? Where do you see yourself in the competitive landscape? Use this model to help:
“For [target market description] who [target market need], [how our business offering meets the need]. Unlike [key competition], it [most distinguishing feature].”
For [coastal community members] who [require gynecological care], Ocean Lane Outpatient Care [provides both pediatric and women’s health services]. Unlike [other area medical practices], Ocean Lane Outpatient Care is [conveniently located near the communities it serves and can fill the gap between pure pediatric care and full-blown adult care for young women].
- Pricing and billing: Medical pricing is complex, especially if you plan to work with insurance companies. Practice Builders says that “a 10 percent increase in pricing can result in a much better return than a 10 percent reduction in costs—or even a 10 percent increase in patient volume.”
Make sure you price your services at what they are worth and explain your pricing to your patients. Consider the demographics your practice serves when you choose your pricing. Research other practices in the area and learn more about how you can choose the best prices for your patients and your practice.Also, consider how you will get patients to keep coming back to your practice. Sometimes you can increase sales by upselling and cross-selling, or offering complementary services.
If you accept insurance, the contracts you set up with insurance companies for reimbursement will probably dictate your pricing, so this is a good place to talk about your negotiation strategy as well.
- Promotion: How will people discover your practice? Will you do direct mail campaigns? What kind of information will you include on your website? What types of advertising will you need to do to reach your target market? Consider what you can do prior to opening the practice to make the location and services public knowledge and to create name recognition. Be sure to:
- Update your website and social media frequently and ensure your website is mobile-friendly and share-friendly with credible links added.
- Make sure all communications with and about patients are HIPAA-compliant. Download a HIPAA Compliance Guide to ensure you are following regulations.
- Maintain a positive online reputation for your practice as a key management technique. You can do this by claiming your profile on any third-party sites that list it. Encourage your patients to review you online, too.
- Strategic alliances: List any people or organizations with whom you are working. You will most likely need to partner with a regional lab for medical testing. Opening an on-site lab can be costly for a smaller practice. You will most likely need to partner with a nearby hospital as part of a referral system or to share select services and equipment.
The operations section of your business plan covers how your business works, from the logistics to the technology.
- Technology: Describe how your technology works, but do not go into too much detail. Investors can ask for more information if they want to. Will you rent or buy equipment? The technology you need ranges from simple items like thermometers to more complex items like centrifuges.
- Billing and information storage: Provide a brief overview of how you will manage information technology and patient records to promote safety, efficiency, and compliance with HIPPA regulations and industry standards. Explain your usage of Electronic Medical Record (EMR) software in this section.
- Payment types you accept: Consider payment types such as private pay, private insurance, Medicaid/Medicare, etc. What kind of referrals can you offer to the uninsured or those who cannot afford your services?
Milestones and metrics
In this part of your plan, you set measurable, achievable milestones, such as the number of new patients added per month in the first year of operations. Milestones can be about any aspect of your medical practice as long as they emphasize growth. For metrics, decide which numbers to check regularly to track your company’s health. This area should also include information about traction (past successes) and risks:
- Traction: Look back at major milestones you have achieved. Hopefully, they demonstrate that your business model works and that you are filling a need for your market. If you’re looking to attract private funders, this section is important since it shows your initial success.
- Key assumptions and risks: Acknowledge the assumptions you are basing your business on. Set out to prove them right if you can. Also, discuss risks so that investors know you have considered what could go wrong and that you have a plan for dealing with challenges. Malpractice suits and changing healthcare regulations are risks specific to the healthcare field. Malpractice insurance is a must for addressing the former. Changing healthcare regulations can affect the volume of patients who are able to afford your services.
Your team can be more important than your product or service. Describe your team here, even if it is just you and a receptionist who answers the phone in your office building.
- Management team and qualifications: Address who works for you, what do they do, and how much you pay them. Compile the details of their relevant experience and education.
- Hiring plans: Outline who, if anyone, you need to hire to fill skills gaps in your management team and how much you plan to pay them.
The company overview tells about who you and your staff are and appeals to potential investors. Keep it short—it should be the shortest chapter of your business plan but is still very important.
It needs to include these elements:
- Mission statement: Your mission statement articulates your goals for what your company does for its customers, employees, and owners. It will read something like this: “Our mission is to provide X (services) for Y (customers) by Z (methods).” For instance, Ocean Lane Outpatient Care is dedicated to providing quality care for all the inhabitants of coastal Lane County by providing affordable and versatile services.”
- Intellectual property: List any patents you have or have pending, and mention any core technology you are licensing from another company.
- Legal structure and ownership: Explain your business structure and who owns how much of it. More on considerations for physicians and legal structure here.
- Business location: Describe the company’s location and any facilities it owns.
- Company history if it’s an existing company
Having a solid financial plan is critical, whether you’re seeking funding or not. A typical financial plan includes projections by month for the first year and annual projection for the next three to five.
Include these key elements:
- Profit and loss statement: this explains how your business made a profit or incurred a loss in a given amount of time (typically three months) by listing all revenue and expenses, then documenting the total amount of net profit or loss.
- Cash flow statement: documentation of how much cash the business brought in, how much it paid out, and the amount of its ending cash balance (on a monthly basis).
- Balance sheet: snapshots how your company is performing at a given moment by including how much money you have in the bank, how much your customers owe you, and how much you owe your vendors.
- Sales forecast: projections of what you think you will sell in a given timeframe (one to three years).
- Business ratios: Comparisons of your company’s financials with numbers from the industry profile.
- Personnel plan: justifies each member’s necessity to the business.
- Keep it brief. For example, Dr. Gardner will employ administrative aides and nurses.
- Use of funds: Needed if you’re seeking investment or a loan. This section explains how you will use investors’ money.
- Exit strategy: You only need this if you’re seeking outside investment. An exit strategy is a method by which entrepreneurs and investors, especially those that have invested large sums of money, transfer ownership of their business to a third party to recoup money invested in the business. Common exit strategies include being acquired by another company, the sale of equity, or a management or employee buyout.
When writing your financial plan, make sure to consider startup costs. For a medical practice, average startup costs can include initial fees, malpractice insurance, cost of renting or leasing office space, and the cost of any legal or tax advisors.
Consider submitting your plan to at least five to 10 banks if you need help financing your startup costs. Many banks have divisions designated to providing loans to new dental and medical practices, so submit your plan to that division if you can. Startup costs can be high in the medical field, so make sure not to underestimate them.
Finally, your appendix is the holder for any supporting information such as charts, images, graphs, and more. If you need to include large sets of data or pages of information, put it here. That way, it is available but does not distract from the plan’s most important pieces.
For instance, you can expand on your personnel plan with charts of each employee’s annual insurance costs. You can also include versions of your profit and loss statements and other financials that extend further into the future.
Don’t forget to go back to your executive summary! Remember to keep it brief and write it based on what you have written already.
When you’re ready to write your business plan, there are an array of resources available to you. Download our free business startup checklist to think about the next steps. Also, check out our free business plan template. Reviewing sample business plans in the medical field can help you get a better sense of the process and information you’ll provide. This one for a family medicine clinic will probably be most helpful if you’re setting up a primary care practice.
Remember that this plan is a living document. Schedule a regular business plan review meeting. You should review your trajectory and compare your financial projections to your actuals frequently to keep your practice on track.