There are countless questions that doctors have when they consider starting a private practice. You will need answers to these questions: How much does it cost to open a private practice? How will you get patients? Where will your office be located?
The number of doctors who are solo practitioners in private practice continues to shrink. In 2012, about 18.4% of doctors were in this category. Today, there are only 15% of solo doctors in private practice. Many will cite the cost to start and operate a private practice and the main reason.
Keep reading to find out whether or not going into private practice is worth it and learn what the top considerations are when starting your private practice.
How Much Does It Cost to Open a Private Practice?
This can be a million-dollar question. Some estimates have the costs to open a private practice to be as much as a million dollars when you add up all of the startup expenses. Here are the top expenses to think about when opening your practice.
Business Licenses & Medical License
Your first step in starting a private practice will be to get licensed. There are a couple of licenses that you’ll need, starting with your license to practice medicine in your state. You’ll need to check with your state’s board of medicine on procedures and fees.
You’ll also have to register your practice as a business. This is done with your state’s secretary of state’s office. There may be local and county licenses as well.
You’ll also need to purchase business insurance and malpractice insurance.
Unless you’re planning to base your practice around making house calls, you’ll have to set up an office. Your options are to rent space in an office building or purchase a building outright.
Your office needs to have several qualities whether you rent or buy. The office building needs to be accessible. An office that’s located in the middle of nowhere may be less expensive, but patients are unlikely to travel to you.
On average, Americans travel about 34 minutes to go to a doctor’s appointment. You should keep that in mind as you pick a location.
Another consideration is parking. There needs to be plenty of patient parking available within a short walk of your front door.
Unless you rent or buy a building that was previously used as a doctor’s office, you’re going to have to make renovations to your space. This can add high costs to your startup expenses.
Buying or leasing medical equipment is another significant expense for doctors starting a private practice. Fortunately, this is often a one-time expense, but you’re going to have to add maintenance costs to your
As you evaluate equipment, you want to purchase high-quality equipment. It may be tempting to buy less expensive equipment, but you’re going to have to replace the cheap equipment sooner rather than later.
Medical equipment longevity depends on the manufacturer. For medical devices that will last, check to see if they use the best cable assembly manufacturer.
As a private practice doctor, you’re going to need help managing your office. At the very least, you’ll need an office manager who knows medical coding. They can greet patients and work with insurance companies.
Assume that as your practice goes, you’ll need to hire more office staff, such as a nurse or medical assistant. You’ll need to have another person at the front desk to ensure your
These employees will make your costs jump because you have to account for payroll taxes, wages, unemployment insurance, and benefits. Don’t forget about your own salary as well.
Staff costs and other overhead costs are rising and making it very difficult for private practice doctors to make a healthy profit.
Business Consultants and Advisors
You’re not going to be the only one managing your private practice. You’re going to need consultants such as tax and business attorneys. You’ll need to hire an accountant, and you may decide to hire a marketing consultant.
Even if they’re your friends, they’re unlikely to work for free. Attorneys can cost as much as $400 an hour, and you should assume that an accountant will run about $125 an hour.
The most challenging thing to do when you’re starting out is to predict your practice revenue. First, you’ll have to calculate your startup expenses and your monthly operating expenses.
You’ll want to figure out your profit margin in your business. In other words, you need to calculate how much money will be required to break even and make a profit.
You should have two sets of projections. One is a conservative, worst-case scenario projection. The other is an optimistic projection that is possible if everything in your practice is perfect.
Choosing Your Exit Strategy
Do you have a vision for your private practice beyond making it successful? Not many doctors do.
What’s an exit strategy? It’s how you’ll end or exit the business. At some point in time, you’re going to retire. Do you plan to sell your practice or just close it down and leave quietly?
Another option is to sell your practice to a hospital. This is a potential opportunity for you since the number of private practices bought out by hospitals has doubled between 2012 and 2018.
You want to make sure that you have a solid valuation of the practice before you sell it. You’ll be able to recover your initial investment and have plenty to retire on.
The Costs to Open a Private Practice
How much does it cost to open a private practice? It depends on several factors. Many estimates will put these expenses above $500,000 to start a private practice.
It may be worth it if you market your practice well and have a team of advisors to guide your business. In the end, you can sell your successful practice and retire off of the proceeds.
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