Private practice: the challenging but rewarding road to financial success

Carbon's Accounting & Tax Partner Matthew Vaughan-Davies shares with Medical Forum tips for medical practitioners who are thinking of opening up their own practice.

Leaving the secure employment of the hospital system to start a medical practice can be thrilling and daunting at the same time. Suddenly the challenges of being a business owner are added to the already time-consuming tasks of providing quality patient care.

While years of medical training and professional development might have provided doctors with the skills and tools to treat and care for patients, essential business development and management skills are often absent or insufficient.

The private practice lifecycle can be divided into three key segments – planning and set-up, operations and growth and business succession phase.

During the initial planning phase, there are key considerations to get the practice started correctly and efficiently.

Most complexities arise when operating within a group of practitioners and other health service providers. Multiple moving parts and business segments require strict time, people and operations organisation. Staffing needs, managing medical practitioners and setting and enforcing KPI guidelines all come on top of the day-to-day tasks of running a medical clinic.

The financial success of the practice largely depends on key decisions made during the planning, design and set-up phase.

The location and availability of medical services such as pathology, pharmacy and allied health can significantly contribute to the financial success of the practice, as well as the overall satisfaction and convenience for your patients.

Once a clear vision of the clinic’s ideal patient profile, practice location and pricing strategy has been formulated and documented, attention needs to turn to the legal structure and financial plan of the entity.

Without adequate structure planning and an initial financial and business plan, the practice’s financial wellbeing can be exposed to adverse yet avoidable financial outcomes, creating unnecessary financial and operational distress on the practice, as well as impacting on your valuable family life and financial security.

Before establishing the practice, seek professional advice about the compulsory ASIC and ATO registrations, incorporation and registration of business entities, and understand your tax obligations including income tax, GST, PAYG withholding and superannuation.

Knowing how much money to set aside to meet tax obligations and cash flow needs of the practice will help set and control realistic expectations around lifestyle and investment spending.

Once the practice is up and running, regular maintenance is needed to assist with the daily operations of the clinic as well as attending to administrative tasks including patient billing, staff and medical practitioner rostering, book-keeping and bill payments.

Dealing with these tasks in the most effective way will help narrow the focus on providing care to patients, allowing higher volumes of patients which in turn will lead to an increase in practice profitability.

The long-term goal of operating a private practice is to create income and wealth over and above what could be achieved as an employee in the public health system. However, it is essential to ensure that the additional revenue stream being generated results in the creation of family wealth and the lifestyle you want.

The final hurdle is to establish a retirement plan surrounding the practice. Once practice goodwill and profitability have been created, a transition plan to a successor needs to be established, and professional help can assist in a comfortable transition into retirement.

Establishing, operating and growing business and personal wealth takes a combination of medical expertise, hard work and good advice.

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Source: Medical Forum