Where do you want your personal and professional life to be in 2 years? Or in 5 years? And how are you going to get there?
Many doctors aspire to a bigger and better practice, financial security and more time for themselves. Yet, they don’t have a business plan to help them achieve those goals.
Business experts, practice managers, accountants and financial advisers say that without a plan, practices face potentially disastrous business and financial consequences.
Dr Neville Steer says without a business plan doctors may spend most of their time “fighting fires”, such as staff issues, unexpected expenses and changes in government health policy. Implementing proactive systems through a business plan can prevent fires in the first place.
Dr Steer, a GP in Victoria and member of the Royal Australian College of General Practitioners’ national standing committee on GP advocacy and support, says the day-to-day nature of medical practice can distract from long-term goals.
“As doctors are often the owners of the business, they need to take time out to consider their business plan away from the clinical issues. When looking at the strategy direction [of your practice] you need to be able to focus on your long-term goals.”
Financial planner Mr James Gerrard agrees. “Medical practitioners are time poor and need to step back to take a look at the business from a top view down”, says Mr Gerrard, an adviser with PSK Financial Services, Sydney, who specialises in helping health professionals with business and financial planning.
Doctors wouldn’t set off for an unknown destination without planning the route, says Mr Brett McPherson, national president of the Australian Association of Practice Managers. “The same principle should apply to your practice and its business plan.”
Mr McPherson describes a business plan as a practice GPS — greater profitability strategy.
What is a business plan?
Ms Sue Prestney, the small business spokesperson for the Institute of Chartered Accountants in Australia, says people are often daunted by the idea of a business plan, thinking it should be a 50-page document, when in fact it should be short, starting with a one-page summary of where the doctor is now, where they want to be in a set time frame, the strategies to get there and the actions to implement those strategies. (See box page C7.)
The benefits of a business plan can include making it easier to get finance from banks and investors, and providing an effective communication tool to the practice owners, investors and staff to ensure everyone is heading in the same direction, Dr Steer says.
It can also help to deal with change, such as a doctor leaving the practice, or the practice increasing in size and incorporating other health providers. “In a practice undergoing change there are strong reasons to have a document on the changes and how to implement and resource them”, Dr Steer says.
“And keep an eye on government policy and direction, as changes may require a major review of a business plan. Changes in technology may also mean a review is needed”, he says.
Clinical governance should also be covered in a business plan, as it requires systems to improve the quality and safety of health care.
Ms Prestney says medical practices also need to consider issues such as managing medicolegal risks, infection control and clinical research that impacts on practice.
As medical practices often involve shared ownership by several doctors, Mr Gerrard says clear rules and guidelines are essential to avoid disputes in unforeseen circumstances. “This includes how to deal with the death of a partner or if a partner wishes to leave, or how to admit a new [partner]”, he says.
However Ms Prestney says specific partnership and shareholder agreements are usually separate from business plans.
“These are legally binding agreements between the owners of the business and govern how the owners deal with each other, including what is expected from each of them, what their roles are, how their remuneration is determined, how decisions are made”, Ms Prestney says.
These agreements also include buy/sell arrangements, and how the value of the business will be determined for this purpose. The agreements cover how new partners are admitted, including valuation principles and payment terms.
However, Ms Prestney says a business plan still needs to consider changes in the ownership of the business.
Another issue unique to medical practice is the mix of bulk-billing and private billing. Practices need to assess the mix of billing in regular reviews of income and expenditure.
Other issues that business plans might address include arrangements with public and private hospitals and other health care providers, as well as with Medicare Australia and private health funds.
Who should be involved?
As well as practice owners, key staff should be involved in developing a business plan.
Dr Steer says the owners, investors in the practice, practice manager and key staff (eg, senior receptionist or practice nurse) should be involved in developing and implementing a plan. However, they may not all be involved in regular reviews, which ideally should be done quarterly.
Both Mr Gerrard and Ms Prestney strongly advise getting outside help, particularly from financial experts, when developing or reviewing a plan.
“Outsourcing responsibilities by bringing in a circle of trusted advisers such as business coaches, lawyers, accountants and financial advisers is a key to creating a business plan that will take a medical practice from just being profitable to the next level where expansion occurs and working hours [for the doctor] can be reduced”, Mr Gerrard says.
“Spending money to create a business plan that deals with a wide range of future scenarios will minimise the chance of costly and extensive legal challenges down the track.”
Ms Prestney estimates that developing a new plan with an experienced advisor, including financial budgets and forecasts, would cost at least $3000, although this would vary depending on the complexity of the practice and the plan.
Take a SWOT
Considering the strengths, weaknesses, opportunities and threats (SWOT) of a medical practice is a worthwhile exercise.
Ms Prestney says there are weaknesses in every business. In medical practice they can include seeing lots of patients but not increasing profit, dealing with lots of complaints about waiting times, or dealing with a receptionist who is cranky and rude to patients.
She says there are also external issues and services “that need a SWOT”, particularly threats to the practice such as the government changing regulations. A SWOT analysis can help develop systems to deal with these threats.
Strengths, which can include having a gifted practice manager or a popular doctor in the practice, can turn into threats if these people decide to leave. “Work out how to make that person stay with the practice”, she says.
A SWOT can also identify problems such as lack of sufficient staff to cover absences and determine strategies to deal with this, such as making arrangements with a firm that provides temporary staff.
Mr McPherson says a SWOT is only one part of the process of developing a business plan. The whole process should include a definition of the business, establishing its aims and objectives, a SWOT analysis, development of the plan, and its implementation and review.
How long will it take?
The time needed to develop a business plan depends on the complexity of the practice and how much detail is included.
Dr Steer estimates a reasonable-quality business plan for a small to medium-sized practice would take about 50 hours to develop. The process would involve two to three meetings with key personnel, with tasks delegated to senior staff to develop certain aspects of the plan.
Before implementation, a summary of the plan and its aims should be provided to all staff. Other information should be provided on a “need to know” basis.
For doctors, a business plan can be an eye-opener to what running a business is all about. “The problem for doctors is that they learn the profession but not how to run a business”, Dr Steer says.
A business plan template
The Australian Government, through its business website http://www.business.gov.au/Pages/default.aspx, provides information on how to expand a business, including a template for business and marketing plans with links to various resources Australia-wide. Although generic and aimed at all business models, it does offer a good starting point for practices that have never had a business plan.
It says a business plan should include the following sections:
- Business summary: A one-page overview written after the business plan is finalised.
- About the business: Includes details such as structure, registrations, location and premises, staff and products/services.
- About the market: This outlines a marketing analysis of the type of business, its customers [patients] and its competitors. It also covers key marketing targets and strategies for delivering on these targets.
- About the future: This section covers plans for the future and can include a vision statement, business goals and key business milestones.
- About finances: The financial plan includes how to finance the business, and costing and financial projections.
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