Taking the Plunge from Public to Private: Considerations for Medical Practitioners
For many medical practitioners the move from being an employee in the public health system to starting a private practice is daunting enough without having to worry about the world of accounting and tax. Naturally the medical clients we see are very good at what they do, but too often this change is made without proper consideration as to the business side of things. You study and work hard to perfect your craft, ensuring the best results for your patients - so why wouldn’t you do the same for yourself in terms of getting the best financial outcomes for your business?
Here are some considerations to make during your planning phase:
Have you made a business plan?
A simple well laid out business plan is so beneficial. It helps you gain clarity around your purpose and goals and will help grow your practice. It’s like the backbone of your business!
Your business plan should consist of 4 parts – here are some things to think about.
Human resources (the connective tissue holding your business together): What staff are required now vs in the future – receptionists, administration, bookkeeping/accounting, doctors, nurses, other health specialists? Do you need a lawyer to assist in drafting employment contracts? How can you help your staff grow and develop and ensure staff retention?
Physical location (business anatomy 101): Are you taking over an existing practice or do you need a new physical location for consulting patients? If you are leasing a new space, does it have suitable access and is it zoned for medical consulting? Does it need a new fit-out?
Financial matters (get your business’ metabolism going): How are you going to finance the new operation: paying for staff, rent, equipment, software? Will you use personal funds, are there other partners investing, or what are your financing options? How will you manage growth? Bear in mind that you might need to see a financing specialist (and this can be a slow process). Cash flow needs to be closely monitored at all stages of your business life-cycle.
Information Technology (the brain stem of your business): Medical software is expensive – do you need a certain level of automation with your patient records and systems? Do your research and choose software that is going to meet your needs in terms of regulatory requirement, administration, practice management, billing and patient records. Don’t forget your accounting systems - talk to your accountant to see if there is a cloud-based system you can use to ensure real-time connectivity with them.
What’s the best structure?
The structure you choose will have a direct impact on your tax position. In the medical industry there is no one size fits all. Just as you would take a holistic approach to the management of your patients, the same applies to your business.
Things to consider:
What are you goals and what is the best structure to achieve these? A company OR trust OR partnership OR sole trader
Is there benefit in putting a service trust in place?
With your practice evolving over time, you need to continually review your structure to ensure it’s working as best it can for you. Investing in some advice at this point can save you a lot of time and money down the track.
Insurance is important
Every business involves some degree of risk and it’s important to understand what these are. It’s akin to you consenting your patients! Be aware of the most appropriate insurance policies you will need as a medical practitioner. Common ones include professional indemnity, public liability and business owner’s insurance. You should also consider cyber insurance, income protection, life insurance and other personal insurances. Consulting with an insurance broker can streamline this whole process and is a good investment of time.
Prepare for growth
It’s like the CPD of your business! Continually making your business as best as it can be is important to ensure longevity. Having well formulated staff policies and procedures in place will help you as your practice grows. Other things like getting bank accounts, credit cards and equipment finance are also critical to ensure your business grows whilst allowing you to focus on what you do best, treating your patients!