You’ve done it. You’ve decided to take the plunge and open your own dermatology practice. Congratulations! But take care: With about 20 percent of new small businesses failing in the first year, it’s key to learn from those who have traveled the road to health services self-employment before you. So before you shop for locations and window treatments, here are five strategic tips to ensure your open-for-business experience is healthy and successful.
Secure your capital.
It’s true: For a new business to succeed, it really does take money to make money. Experts estimate that almost 30 percent of new businesses fail because they run out of cash. In fact, results collected by Investopedia show that two of the four most common reasons why small businesses fail involve cash-flow problems—mainly insufficient budgeting and a lack of sufficient capital.
For Daniel Lambert, CEO of PathologyWatch, exploring various forms of capital was pivotal to startup success. “Look at raising from different asset classes: private equity, growth equity, sovereign wealth funds, PE firms, family offices and cash-rich investors. There are many sources of capital that are often overlooked,” he advises.
Once you’ve formalized your vision and bolstered it with a satisfactory cash flow, it’s essential to hire key players who share your vision and offer expertise in fundamental skills.
Hire people with office management, business, and legal expertise.
You may be an expert at differentiating herpes zoster from acne vulgaris, but do you know the latest HIPAA compliance requirements or how to handle payroll tax? Your staff will need both clinical and nonclinical support, so one of your first steps should be hiring those with hands-on management, legal structure, and compliance experience.
“Choosing the right legal structure for your medical practice is one of the most important business decisions you’ll make,” says Jack Wolstenholm, head of content marketing at LeverageRx. “Deciding whether to establish a sole proprietorship or a more complex legal structure must be thought through wisely. It requires calculating both the costs and benefits to your practice, and factoring in your risk tolerance to liability.”
Staying ahead of the game in one of the most highly regulated industries could mean the difference between staying open or becoming a statistic.
Establish your specialized services.
What is your specialty? For instance, if you’re setting up a practice in an area with a year-round sunny climate, specializing in skin-cancer treatment could be your focus. If you are unsure, check out practices in the area. Remember that while you are providing healthcare, you are also a small business owner. That means keeping an eye on your competitors. To narrow down prospective areas, call some practices to check on waiting times for an appointment for new patients. If the wait time is longer than two weeks, there’s plenty of room for another doctor.
“Public demographic information can tell you about future growth in different communities,” say experts at The Dermatologist. “If you expect to attract patients from many different communities, look at traffic flow to make sure your practice is easily accessible.”
Your expertise will help build your patient base, but it’s the mindset of a small business owner that will help keep your doors open for business.
Start by investing only in the essential equipment and space.
With this new cash flow, it’s tempting to overspend during the initial stages of business development. Before you schedule the interior decorator, look at your financial overhead with a long-term perspective. This endeavor is going to put your ability to maximize cash flow to the ultimate test.
One area where you can minimize overhead expenses is usable physical space. Experts recommend starting small and leaving room for expansion. For example, when Jerome Obed, DO, a board-certified dermatologist who runs Broward Dermatology and Cosmetic Specialists in Fort Lauderdale, Florida, opened his new practice, he only prepared two out of his four exam rooms. When his patient numbers increased, he furnished the remaining two exam rooms in his office.
The process of gradually building up at the same rate of acquiring new patients applies to investing in equipment as well. When you’ve determined your specialty, those are the pieces that should be purchased first. To control startup costs, we’ll discuss later the options of outsourcing certain functions to free up funds to purchase essential equipment.
Along with medical equipment, your IT system is an essential part of your office operation—and one of the most expensive. “You’ll need a practice management system for demographic information, scheduling, and billing, and an electronic health record (EHR) system for patient information,” say the staff at The Dermatologist.
Consider outsourcing functions.
Using a third-party service for billing or payroll tasks is a common practice for medical offices of all sizes. Services like PathologyWatch can manage both the business and technology aspects of digital pathology technology. That means your startup can offer all of the services you need to grow your new practice without having to invest in your own laboratory equipment and lab staff.
You may not know what lies ahead when you open your own dermatology practice. But by talking with people who share in your journey for a private dermatology practice and following these five proven tips, you can learn ways to minimize risk while maximizing opportunities for growth.