You are now faced with a multitude of decisions, many of which you did not have to consider during your medical training. Doctors must realize they are in the business of practising medicine. They must also acquire a management philosophy toward their practice by:
understanding the tasks that are performed
understanding the manner in which they are performed
being able to gauge the quality of performance
A doctor's business, like any other business, involves:
planning
financing
accounting
taxation
selecting professional consultants
office procedures
personnel
understanding the pricing structure of the business
billing systems
THE MANAGEMENT CYCLE
Fundamentally, your job as manager of your practice consists of a three-phase cycle based on planning.
Plan - establish objectives, assess the situation, and develop an action plan.
Implement the plan.
Monitor and evaluate the results.
This cycle should be repeated on a large and small scale throughout your business life. For example, in the financial area:
The budget is your year's operational plan .
Its implementation by collecting fees and paying bills through the year is subject to various checks and controls.
Your year-end review/assessment of actual results in comparison with the budget lets you evaluate the success of your plan and your implementation.
This leads into planning for the next year .
Plans exist at different levels of detail. At each level the basic cycle applies - plan, implement, and evaluate your life's goals.
Philosophical position - what you want to accomplish in your career so that you can look back with satisfaction when you retire.
Strategic plan - translates your philosophical position into long-term objectives as well as shorter-term goals for a specific period of time.
Operational plan - translates your goals into specific plans for day to-day activities.
Financial plan - states your strategic and operational plans in terms of dollars and cents.
All these plans should be in writing for your advisors and business contacts and, more important, for you. Written plans clarify your thinking, increase lender confidence and reduce the time you spend with advisors. Most important, in your periodic review of results, written plans are of the greatest value to you.
THE PLANNING PROCESS
In developing your plans - whether philosophical, strategic, operational or financial - work from the general to the detailed. The following steps provide an outline for the process.
Establish objectives:
In general terms, state what you want to accomplish with this plan.
Assess the situation:
Identify the opportunities and problems, and evaluate alternative approaches. Remember that you are part of the situation - examine yourself realistically.
Establish specific goals:
These are the building blocks for your plan.
Develop an action plan:
Identify the specific "how to" items to implement your objective.
YOUR BUSINESS PLAN
A formal Business Plan is one of the most effective management tools available to you:
It brings together all aspects of your business, and it structures the information in a way that helps you through the management cycle.
It clarifies the factors that are most likely to affect the success of your business of medical practice.
It helps you communicate with your banker, professional advisors and other business contacts.
Most important, it supports you in your role as manager of your practice.
Business plans usually have four components - information about the business, financial information, supporting data, and a monitoring method.
Business Data
This section of your Business Plan describes your practice from a business point of view. It provides background information to help an outside reader get oriented to your particular situation and evaluate your business position. More important, developing it helps you develop a business perspective on your practice. Typical information might include the following:
Business description: ownership and legal structure of the practice, its history (if any), location of the office, description of any real property and whether owned or leased, plans for growth.
Market description: primary or consultant care (or both, or alternatives), geographical area served, whether the practice is at or near capacity, other competing practices serving the same market.
Management description: review of key management functions marketing, finance, budgeting, personnel, administration - and the strength or weakness of available management skills in each.
Business advisors: a list of the outside advisors and professionals whose expertise you should be taking advantage of. These may include accountants, tax advisors, bankers, solicitors, insurance agents, financial planners, human resources consultants, computer consultants and others.
Financial Data
The financial section of your Business Plan translates your plans into dollar amounts. It is the key both to managing your own finances and to communicating with your banker and any other lender. It includes both actual and projected financial information such as the following:
Financing or capital requirements: a summary of your requirements for funds to purchase equipment, pay operating expenses, provide an adequate personal income, and possibly purchase or buy into a practice.
Sources of financing: these may include savings, private loans, bank loans, leasing, trade credit, and operating income from billings for your services.
Financial statements: for the past three years, if you have been in practice for some time. This provides your historical success record. If you are purchasing a practice, you should review its financial statements and incorporate key information into your Business Plan.
Projections of income and expenses: for the next one, two or three years, showing where you expect your practice to be financially over that time period and including the impact of your assumptions. It is common to forecast using three different sets of assumptions - best case, expected results, and worst case. This helps you with "what if..." forward planning.
Cash flow forecasts: reflect the timing of cash inflows and outflows. Cash flow forecasting is extremely important. A business can be operating profitably but still fail if it does not have the cash to pay the bills when they come due.
Supporting Data
This section varies significantly depending on the type of business and its circumstances as well as the intended reader of the Business Plan. For a doctor starting practice, it might include your professional CV or other documentation of your professional qualifications and hospital appointments. Other information might include the qualifications of your support staff, a description of your office facilities, and/or similar material.
Monitoring
Regular monitoring is the key to keeping your plan on track. You should consult with your accountant about developing a management control system that will provide you with key information to monitor the progress of your business. Monitoring and evaluation complete the management cycle and prepare you to start the new cycle with a revision of your Business Plan. You should set aside some time annually for a detailed evaluation and Plan revision - convenient times are probably after your fiscal year end when your accountant completes your financial statements or at income tax time.
PROFESSIONAL ADVISORS
Choose your advisors carefully. They can save you a great deal of time and can truly assist in your quest for financial security. Interview several before making individual selections. Establish a healthy rapport with your advisors. You will need:
Lawyer
Accountant
Financial Management Consultant
Bank Manager
ESTABLISHING A PRACTICE
To guide your short-range planning and help translate your plans into the day-to-day business of seeing patients in an office, the following sequence of practical steps may be useful:
Setting the Framework:
Decide on your starting date
Select a community
Decide on your form of practice - solo, group, partnership
Establish a tentative budget and investigate financing
Acquire professional advisors
Locate an office and sign a lease
Start to develop administrative and personnel policies
Decide on and price equipment and furnishings
Down to the Details:
Apply for licences, hospital privileges, etc.
Arrange for insurance
Start acquiring staff
Develop detailed administrative policies - scheduling and patient flow, telephone policies, records systems, accounting systems.