How To Create An Effective Business Plan
Whether you are a new practitioner opening your first office or a veteran DPM setting up shop in a new location, having an effective business plan is a necessity.
The business plan is a promotional selling document. Indeed, it is a major tool for selling your business to a banker. It is to the banker what the history and physical are for physicians.Since a major audience for your business plan consists of higher-ups at the bank, the black and white of your plan is far more important than a winning personality. Gone are the days when you could stroll into the bank, say you are going to do them a favor and let them loan you some money. You must present yourself like any new small business owner with a written well-conceived business plan. This is also true if you plan to try financing from the Small Business Administration (SBA).
Drawing up a business plan helps you organize your thoughts and plans for the practice, much like charting may help you organize your thoughts on treating a patient. It also can help you sell yourself on the practice, providing “a sanity check” that can help you crystallize the financial realities as well as your long-term goals. As an instrument for obtaining financing, the business plan is impressive as can be to the banker. You may also want to give your employees copies of the business plan (albeit with certain modifications). Doing so can make them feel like they are an important part of the project.
Again, I can’t overemphasize enough how important it is to tailor the plan for the appropriate audience. Bankers don’t care how many double osteotomies you have done or if you use a screw or k-wire. They care about the number of procedures you expect to do and the number of new patients you expect to see, simply because they contribute to the cash flow of your practice.
Ensure A Reader-Friendly And Impressive Presentation
Your business plan should include 10 parts: A cover page, a table of contents, an executive summary, information on who you are, a needs assessment, information on the practice, the services you plan to offer, marketing info, financial info and an appendix.
1. Cover sheet. Before you do anything else, put your name and phone number on the cover sheet, as well as your cell phone or pager number. Time is of the essence for bankers and they want to be able to contact you immediately without playing phone tag. Unfortunately, basic contact information is one of the most common items left out of the business plan.
On this sheet, you also want to note who it was prepared by, the date it was prepared, indicate that it’s confidential and include a copy number. Always make it copy three or higher, which gives the appearance that you are dealing with more than one financing source. It is also easy to copy this onto each page of the document via the insert tool on Microsoft Word. Make sure the cover sheet (no spots or wrinkles) is an impressive presentation that commands the banker’s attention.
2. Table of contents. People are busy and they need to get where they want fast. An easy way to get off on the wrong foot with your banker is to try to find some information and fail because it is buried in the middle of page eight. A table of contents also can prevent the king of all embarrassment statements, “I know it’s in here somewhere.” It also adds a professional look to your presentation.
3. Executive summary. The executive summary is the most important part of your business plan. It must be concise, accurate and consist of no more than three or four pages. Very often, the person you deal with at the bank will need to present your loan application to a committee that may review a dozen presentations that morning. The summary allows bankers to get the information quickly. Bankers have told me when they’re pressed for time, the summary is the only part of the plan they read. It is like the abstract in a journal article. If it looks boring and uninteresting, you may just pass on it. However, if it is interesting and informative, you will stop skimming the pages and read it.
How To Be Convincing
At Selling Yourself
4. Professional accomplishments, personal info and financial history. Although you may call your office anything, the reality is you are the company. It goes without saying that a big part of this is the impression you make. Tell them about your maturity, your family and stability of life. Here is where your “I love me” paragraph goes. Also remember what your grandfather said to you, “If you don’t say it about yourself, no one else will.”
If you are new in practice, then go with listings of training, fellowships, certifications, letters of recommendations and other statistics. If you have been in practice for years, then the “I love me” approach should focus on what you have accomplished.
Your personal financial statement goes here. One side note: Be careful during your residency to keep your credit report clean. When you decide to open, get a copy of the report so you can correct any errors. If your credit report is a mess, start cleaning it up on day one of the process. If you are new to the bank, promise to do all your banking there. If you’re not new, remind them how much banking you have done there in the past. Then list all those whom you will ask for guidance and advice. Name your attorney, accountant, consultant, builder, etc. Emphasize that they are experienced in the healthcare industry. If you do not have a lawyer or accountant yet, look in the phone book for names, ask other physicians for recommendations and then list those you will interview.
Define Your Practice And Services
5. Needs assessment. The needs assessment really should not be difficult, since you should reiterate your thought process in choosing the location, expanding the office and buying the new equipment. Although we will discuss mostly the “new practice” situation, you can easily adopt it to any scenario. For instance, you may describe the need for a new piece of equipment or treatment room or why the town needs another podiatrist. Will this allow you to increase the number of patients you will see or will the new piece of equipment allow you to do procedures no other podiatrist in the area does?
For new practitioners opening a new practice, addressing demographics is important. What demographics of the town will help ensure your success? Is the population changing from a bedroom community to an employment community? The APMA says a population of 20,000 can support one podiatrist.
Also find out the population of the town and if the PCPs are sending their foot cases out of town for treatment. This is an especially sensitive issue with bankers, who would rather have root canals than see any dollars leave their cities. Is the only podiatrist in town a 60-year-old angry man who is a jerk? You can say it more nicely, but I am sure you get the point.
6. The practice. What type of practice is it going to be? This means more than just being a “podiatry practice.” What type of legal entity is it going to be? This gets into the idea of corporations and sole proprietorships. If it is going to be a corporation, who will be the management team? Determine how many employees the practice will have, how many doctors will be involved and if it will be a single or multi-specialty clinic?
What type of management software do you plan to use? The banker may not know the software, but copies of reports and other documents available from the software will emphasize your control of the practice.
7. The services you plan to offer. This is more than just a list of medical services you are going to offer. You should offer a summary of your internal marketing plan. Advertisers call this value-added service. Every podiatrist does bunions, so list what value-added services, such as evening hours for post-ops, will make the patients want to see you. Maybe it’s your office hours or the fact that you will make house calls. This is especially important if you can plan to offer services (like offering Saturday hours) when no other podiatrist does.
Another aspect is what marketers call niche marketing, which is trying to reach a specific population with a specific need. Maybe you speak Spanish and the other podiatrist in town does not. Will you treat patients at the local nursing home or do you feel a nursing home is beneath you? Will you take Medicaid, especially since no other podiatrist in the area does?
What Are Your Marketing Plans?
8. Marketing info. Why and how are you going to get your name or the information about the new equipment out? If you’ve completed your external marketing plan, you may include highlights of it here. Don’t include the whole marketing plan, since it is going to be too long. For a new practitioner, this is an obvious problem, but it can be a problem even for the established practitioner with new equipment or the ability to see new and different patients. Just look at all the marketing the eye clinics started to do when the new laser came out.
Figure out your marketing budget and whether or not you will do a mass mailing or use the Val-Pack coupon approach. Determine if a big ad in the yellow pages will help or if the influx of managed care is so great that the effectiveness of the yellow pages is nearly gone. Do you plan to join a service club like the Rotary or Lions? This is a useful approach, especially if you ask your banker to introduce you to the club of which he or she is a member. Bankers always belong to clubs. If you have children, emphasize that they will be joining the local soccer team. Tell the banker your wife thinks you should sponsor a soccer team and ask if he or she has any suggestions.
Be Clear About Your Initial Investment And Projected Revenue Streams
9. Financial info. What risk are you planning to accept by putting up some of your own money? Outside of the medical professions, the borrower usually is required to contribute up to 25 percent of the money from his or her own finances. Bankers know people at risk tend to be “debt-propelled.” It can be difficult to calculate expected revenues and expenses if you are just opening up, but it is easier if you have a history of being in practice. Be aware there is a fine line between embellishment and optimism.
The pro forma is simply an estimate of the expected revenues and expenses. Expenses include: planned rent; planned salaries; what will it cost to get the office space ready; required draw; how much your spouse can contribute to the household (so you can contribute the majority of the office revenues to office expenses and debt service); predicted cash flows and planned expenditures for equipment.
For revenue projections, you want to include the number of new patients you expect each month and information supporting that prediction. Also include copies of any assisting services like hospital agreements. If you are new to practice, do not talk about how you’re not going to accept Medicaid or some other insurance because it pays less than “the norm.” This is a surefire way to get off on the wrong foot with the banker. All the banker sees is you reading People magazine in your inner office while patients go elsewhere. Can you say, “Bye-bye loan?”
Try to do a break-even analysis on the practice and especially expensive pieces of equipment. If you are purchasing a practice, you should already have these figures.
The banker also can give you a second opinion on figures before you buy. Although there are legal obligations regarding the truthfulness of the financial statements, never feel safe merely accepting the seller’s or his or her accountant’s interpretation of statements. When certified public accountants audit a practice, company or anything else, they are saying (based on the information they have), whether the entity is or is not OK. They do not necessarily check out the information. Be mindful of the expression “Garbage in, garbage out.”
Remember to provide a balance sheet, statement of cash flows (is inclusive but only the cash from operations are important), an income statement, operational indicator, and how you plan to improve the cash flow.
If your business plan is targeted toward expanding your existing practice or purchasing new equipment, the pro forma is basically the same. You would document the expected costs, lease payments, increase of utilities or staff required and the increase in new services you can offer.
10. Appendices. Appendices are usually just collections of papers you want to include in case the banker wants to see them, such as copies of leases, agreements, standard business forms, licenses, certifications, agreements with hospitals, articles of incorporation or insurance policies.
Dr. Metzger is the founder and principal of Innovative Healthcare Resources, which provides practice management information and consultation, and locum tenems to the podiatric community. For more info, you can contact Dr. Metzger at (800) 495-8959 or via e-mail at email@example.com, You may also check out www.innovativehealthcaresources.com.