Opening a medical practice can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful medical practice.
Importantly, a critical step in starting a medical practice is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.
15 Steps To Start a Medical Practice:
- Choose the Name for Your Medical Practice
- Determine the Type of Medical Practice You Will Launch
- Develop Your Medical Practice Business Plan
- Choose the Legal Structure for Your Medical Practice
- Secure Startup Funding for Your Medical Practice (If Needed)
- Secure a Location for Your Business
- Register Your Medical Practice with the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Medical Practice
- Buy or Lease the Right Medical Practice Equipment
- Develop Your Medical Practice Marketing Materials
- Purchase and Setup the Software Needed to Run Your Medical Practice
- Open for Business
1. Choose the Name for Your Medical Practice
The first step to opening a medical practice is to choose your business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your medical practice:
- Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
- Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
- Think about marketing. Come up with a name that reflects the desired brand and/or focus of your medical practice.
2. Determine the Type of Medical Practice You Will Launch
The next step is to determine the type of medical practice you will launch. The three main types of medical practices are:
- Primary Care: These are medical practices that provide general healthcare and treatment for common medical issues such as colds, minor injuries, and ear infections.
- Specialty Care: This type of medical practice focuses on specialized areas such as cardiology, gastrology or orthopedics.
- Emergency Medical Services (EMS): These medical practices focus on providing emergency medical services such as ambulance transportation and urgent care.
3. Develop Your Medical Practice Business Plan
One of the most important steps in opening a medical practice is to develop your business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
Your business plan should include the following sections:
- Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your medical practice.
- Company Overview – this section tells the reader about the history of your medical practice and what type of medical practice you operate. For example, are you a primary care practice or emergency medical services practice?
- Industry Analysis – here you will document key information about the medical practice industry. Conduct market research and document how big the industry is and what trends are affecting it.
- Customer Analysis – in this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing products or services like the ones you will offer?
- Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
- Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
- Product: Determine and document what products/services you will offer
- Prices: Document the prices of your products/services
- Place: Where will your business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract customers to your medical practice? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
- Management Team – this section details the background of your company’s management team.
- Financial Plan – finally, the financial plan answers questions including the following:
- What startup costs will you incur?
- How will your medical practice make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
4. Choose the Legal Structure for Your Medical Practice
Next you need to choose a legal structure for your medical practice and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole proprietorship
A sole proprietorship is a business entity in which the owner of the medical practice and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to open a medical practice together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a medical practice include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a medical practice is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your medical practice, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
5. Secure Startup Funding for Your Medical Practice (If Needed)
In developing your medical practice business plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for a medical practice to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a medical practice that they believe has high potential for growth.
6. Secure a Location for Your Business
Having the right space can be important for your medical practice, particularly if you’d like to meet clients there. Consider how much space you need, how close it should be to your target clients, and how accessible it is for those with disabilities. You also must determine whether you will rent or purchase a space for your medical practice.
To find the right space, consider:
- Driving around to find the right areas while looking for “for lease” signs
- Contacting a commercial real estate agent
- Doing commercial real estate searches online
- Telling others about your needs and seeing if someone in your network has a connection that can help you find the right space
7. Register Your Medical Practice with the IRS
Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
8. Open a Business Bank Account
It is important to establish a bank account in your medical practice’s name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
- Complete the bank’s application form and provide all relevant information
- Meet with a banker to discuss your business needs and establish a relationship with them
9. Get a Business Credit Card
You should get a business credit card for your medical practice to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
10. Get the Required Business Licenses and Permits
Before you can open your medical practice, you will need to obtain a number of business licenses and permits.
Some of the most common licenses and permits required for medical practices include:
- Business License
- Professional License
- Commercial Driver’s License (if transporting patients)
- Food Service License (if preparing food)
- Health Department Certificate (if providing patient care)
Nearly all states, counties and/or cities also require:
- Sales Tax License or Seller’s Permit: for selling products
- Zoning Approval: typically at the city or county level, this provides authorization for construction or use of a building or land for a particular purpose
- Fire Department Approval: a process by which the local fire department reviews and approves the installation of a fire alarm system.
Depending on the type of medical practice you launch, you will have to obtain the necessary state, county and/or city licenses.
11. Get Business Insurance for Your Medical Practice
There are a number of business insurance policies that are important for medical practices. Some of the most common policies include:
- Business Owner’s Policy (BOP): a BOP is a package policy that combines general liability and property insurance into one policy. This policy is important for medical practices as it can protect you from losses resulting from property damage, theft, and liability claims.
- Commercial General Liability Insurance: this type of insurance provides protection against third-party claims for bodily injury or property damage. This is important for medical practices as it can help protect you from costly lawsuits.
- Professional Liability Insurance: also known as malpractice insurance, this type of insurance provides coverage for damages that may be awarded to patients in the event that you are sued for malpractice. This is important for medical practices as it can help protect you from financially devastating lawsuits.
- Health Insurance: if you will be providing patient care, it is important to have health insurance to cover any medical expenses that may arise.
Other business insurance policies that you should consider for your medical practice include:
- Workers’ compensation insurance: If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents. It also covers medical expenses and lost wages.
- Commercial property insurance: This covers damage to your property caused by fire, theft, or vandalism.
- Business interruption insurance: This covers lost income and expenses if your business is forced to close due to a covered event.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
12. Buy or Lease the Right Medical Practice Equipment
Medical practices need a variety of medical equipment in order to provide quality care to their patients. Some of the most common types of medical equipment include:
- Medical Beds: medical beds are necessary for providing patients with a comfortable place to rest. There are a variety of different types of medical beds, so be sure to select one that is best suited for your practice.
- Exam Tables: exam tables are used for exams and treatments. They come in a variety of shapes and sizes, so be sure to select one that is best suited for your needs.
- Exam Lights: exam lights are an essential piece of equipment for providing quality care to patients. They come in a variety of shapes and sizes, so be sure to select one that is best suited for your needs.
- ECG Machines: ECG machines are used to record the electrical activity of the heart. They come in a variety of shapes and sizes, so be sure to select one that is best suited for your needs.
- Ultrasound Machines: ultrasound machines are used to create images of the inside of the body. They come in a variety of shapes and sizes, so be sure to select one that is best suited for your needs.
You can lease or buy medical equipment for your practice. The type of equipment you need and how much you plan to use it will determine which option is best for you.
13. Develop Your Medical Practice Marketing Materials
Marketing materials will be required to attract and retain customers to your medical practice.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your medical practice. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
- Website: Likewise, a professional medical practice website provides potential customers with information about the products and/or services you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
- Social Media Accounts: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your medical practice.
14. Purchase and Setup the Software Needed to Run Your Medical Practice
There are a variety of software programs that are necessary for running a medical practice. The most common software programs are:
- Patient Management Software: Patient management software is used to track patient information, including medical history and insurance information. This software is essential for managing patient care.
- Accounting Software: Accounting software is used to manage the finances of your medical practice. It is important to have accurate financial records in order to make sound business decisions.
- EMR Software: EMR software is used to electronically store patient health information. This software can improve the efficiency of your practice by allowing you to access patient information from any computer with internet access.
Research the software that best suits your needs, purchase it, and set it up.
15. Open for Business
You are now ready to open your medical practice. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.
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How to Open a Medical Practice FAQs
Is it hard to open a medical practice?
There is no one-size-fits-all answer to this question, as the ease or difficulty of opening a medical practice will vary depending on your skills, experience, and resources.
However, if you follow the steps above, you should be able to open your medical practice without too much difficulty.
How can I open a medical practice with no experience?
If you're looking to open a medical practice but don't have any experience, don't worry - there are a few things you can do to get started.
One option is to find a partner who has experience in running a medical practice. This person can help guide you through the process of opening and running your business.
Another option is to take courses on how to start and run a business. These courses will teach you the basics of how to operate a business, including how to manage finances and how to market your products or services.
Finally, you can read books or articles on how to start a medical practice. This will give you a general idea of what you need to do in order to get your business up and running.
What type of medical practice is most profitable?
The profitability of medical practices can vary greatly depending on the location and specialty of the practice.
However, some medical practices are more profitable than others. For example, medical practices that specialize in cosmetic surgery or dentistry often have higher profit margins than other types of medical practices.
How much does it cost to open a medical practice?
Opening a medical practice can cost anywhere from a few thousand dollars to several hundred thousand dollars, depending on the size and type of practice. The average startup costs range between $200,000 and $1 million to cover the cost of equipment, staff, office space, medical supplies, insurance premiums, and other expenses. Additionally, you may need to factor in marketing costs such as website development, advertising campaigns, and promotional materials.
What are the ongoing expenses for a medical practice?
There are a number of ongoing expenses associated with running a medical practice. The average ongoing costs range between $50,000 and $150,000 annually. These costs include rent or mortgage payments for office space, staffing expenses, equipment maintenance and repairs, medical supplies, insurance premiums, marketing costs, continuing education courses for staff members, computer systems maintenance and upkeep costs, utility bills, and more.
How does a medical practice make money?
Medical practices make money by charging patients for services. Most medical practices charge a fee for each visit or procedure that is performed. In addition, medical practices may also offer services such as lab tests or x-rays, which patients can purchase at a lower cost than if they were to go to a hospital or laboratory. Many medical practices also offer monthly memberships that provide patients with discounted rates on services and products.
Is owning a medical practice profitable?
Yes, owning a medical practice can be very profitable.
Is owning a medical practice profitable?
Medical practices that specialize in cosmetic surgery or dentistry often have higher profit margins than other types of medical practices. The profitability of a medical practice will vary depending on the specific industry and services offered. The average medical practice owner earns around $100,000 annually, but some make much more. Additionally, medical practice owners typically benefit from the tax advantages associated with owning a business. With the right plan and dedication to success, owning a medical practice can be a very profitable venture.
Some of the key things you can do to make your medical practice more profitable include:
- Offering high quality services and products
- Developing a strong online presence
- Investing in staff training and certification programs
- Keeping overhead costs low
- Utilizing effective marketing strategies to attract new patients
- Narrowing your focus to a specific niche market
Why do medical practices fail?
There are many reasons why medical practices can fail, such as:
- Not investing enough time and resources into marketing and promoting the business
- Lack of understanding about the needs of their target market
- Poor financial management
- Unclear business goals or objectives
- Lack of proper staff training
- Lack of communication between staff and management
One of the main reasons that medical practices fail is a lack of planning. This can include not having a detailed business plan, not doing research on the industry, and not targeting the right customers.
Another reason is a lack of marketing and sales skills. This can include not creating a sales process and not have a clear and strong value proposition.
The last main reason is a lack of financial management skills. This can include not having a realistic budget, not tracking expenses, and not investing in the business.
Who are key players in the medical practice market?
The medical practice market is made up of a variety of different players, including small businesses, large enterprises, and even individuals.
Some of the key players in the market include:
- Mayo Clinic
- Kaiser Permanente
- Cleveland Clinic
- Johns Hopkins Medicine
- Dignity Health
However, there are many other players in your specific target market, and it is important to research the market to identify the key players that may have the most direct influence on the success of your business.
How much should I charge for my medical practice services?
Medical practice fees can vary depending on the type of medical practice services being offered, as well as the size and scope of the project.
However, some common medical practice fees include:
- Consultation fees - $75-$200 per hour
- Diagnostic fees - $100-$300 per hour
- Procedure fees - $400-$2000 depending on the complexity of the procedure
The best way to determine the right fee for your medical practice services is to research the rates of similar businesses in your industry, and to also consider the value that you will be providing to the client.