If you feel ready to start your own PT clinic, you likely have worked as a therapist for several years (as an employee), and surely understand how a clinic works. You may even feel confident that you know what steps to take to make your business profitable. So why should you take the time to compose a business plan? In this article, we explain why you should seriously consider composing a physical therapy business plan. Then, we will provide guidelines for physical therapy private practice business plan content.
First Clarify Your Purpose
You may be a great therapist, but that doesn’t necessarily translate to your being a successful business person. A good business plan acts as a dynamic blueprint for running and expanding your business. The primary purpose of a physical therapy business plan is to define what your business is, or what you intend it to be over time. Clarifying the purpose and direction of your business allows you to understand what needs to be done for forward movement. Consider personal as well as financial goals. Through the process of composing your business plan, you will likely address many items that will drive or otherwise affect your business, including:
resources needed to lease space
where to hire staff
how to acquire referring sources to point patients to your new business
“The development of a comprehensive business plan shows whether a business has the potential to make a profit.”
By putting statistics, facts, figures and detailed plans in writing, a new business has a better chance of attracting investors (e.g., family, friends, and possibly an SBA Loan) to provide the capital needed for getting started.
As you start your practice, and even as your business matures and grows, you will need to concern yourself with your business’ capital needs. Financing concerns begin with the start-up costs and continue with ongoing operations. When you look for outside financing, one of the first things an investor or bank will request is your business plan. Private investors, the SBA, or any lending institution will want to see how you plan on running your practice, what your expense and revenue projections are, and whether your plans are attainable with the business you have created. All of this can be answered by a well-written and thorough business plan.
The Eight Must-Haves for a Physical Therapy Business Plan
1) Company Description
Explain the Form of Business you selected (e.g. LLC), choose a Company name and compose a Company Objective/Statement of Mission. In this section, you will also provide your bio and that of any key staff. Finally, you will need to describe what milestones you may have already achieved to this point. (E.g. secured a lease for space, scheduled a build-out, selected and leased your PT equipment, etc.)
2) Industry Analysis and Trends
This subject area is more crucial to start-ups seeking a large capital infusion. But it nevertheless has some subject matter that you should consider addressing. You will want to describe the PT industry (i.e. is it expanding or shrinking?) and its seasonal factors. Explain what technology you will be deploying (e.g. laptops, EMR software, 3rd party billing & collection firm) and discuss whether your PT business is sensitive to economic cycles (e.g. how would your clinic be impacted by a recession?)
3) Market Positioning & Pricing
Describe your local demographics. Is the town in which your clinic is located mostly higher income, middle income or lower income? Is the community or suburb mostly residential or is there significant industry in the area? These factors will impact the provider mix of reimbursements, which will, in turn, impact your clinic’s profitability. A Physical Therapy clinic has four unique aspects:
Explain how you plan to address items b. and c., as most clinicians are not well-schooled in those aspects of ownership. As your clinic grows, you may find that your time is split between the burdens of running your business and the need to generate revenue as a clinician. When you reach this “tipping point”, will you seek outside help or just work longer hours?
4) The Competition
Describe your catchment area. How many (if any) other PT clinics are within a 2 ½ mile radius of your location? Are they clinics owned by a large regional PT provider? Or are they physician-owned or standalone clinics? Hospital owned? Patients do not typically want to drive more than 20-30 minutes to receive physical therapy so keep that in mind when locating your clinic.
5) Strategic Position & Risk Assessment
The content for this section typically is a discussion of your:
Company’s strengths (you and your staff’s skills, experience, and specialty areas)
Market/Industry Opportunities (e.g., as baby boomers enter retirement age and stay active later in their lives, demand from this demographic increases)
Any risks that may impair your ability to grow a profitable business (e.g., capitalization limits, quality of clinical staffing)
Strategic Position, i.e., how you’ll distinguish your clinic’s offerings from other PT clinics near/in your catchment area
What is your Company’s “Message” to the local market? What is your brand promise and strategy to connect with your target audience? What Marketing vehicles do you plan to deploy? (E.g. website, social media profiles, brochures, physician “lunch and learns”, physician shadowing.) Finally, can you form strategic partnerships with local businesses, schools, and athletic teams to create more interest in your clinic’s services?
Here you will discuss your insurance verification, new patient documentation, patient scheduling, and compliance. Who will do your payroll? You should decide whether you want to have in-house staff doing your billing and collection, or whether you will contract an outside firm for this work. You should also explain how you will staff your clinic at different patient visit levels. Be sure to address your I.T. configuration (e.g. computers, fax and copiers, etc.) and discuss contingency planning in the event of a business interruption.
8) Financial Data & Projections
Unless you are familiar with accounting and forecasting, you may wish to get help from a consultant or accountant to put your forecast together. A critical support piece is the opening section discussing your Financial Assumptions and Revenue Forecast. You will then need to put together an Income Statement, Sources and Uses Statement, and Balance Sheet that covers the first few years. Lending institutions or private investors will want to see at least a 3-year forecast, but most will ask for a 5-year forecast.
A well thought out and carefully written physical therapy private practice business plan can serve to clarify your thinking before launching your new clinic. This exercise forces you to think about many of the details surrounding your business start-up. A business plan may very well be necessary should you need to go to capital sources beyond your family and close friends. Composing a physical therapy business plan is not an easy task, but it can provide you with the comfort of knowing you have a thorough understanding of the business risks and opportunities for your new adventure. See our next article to understand what your first section, the Executive Summary, should include.
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