Ten tips for taking on a practice
Buying into or expanding a physiotherapy practice can be overwhelming. Director of business advisory at William Buck, Belinda Hudson, gives APA members key considerations to think about before taking the leap.
1. Business plan, budgets and benchmarks
Planning is key to the success of your practice. If you haven’t already, write a business plan to communicate your vision and a roadmap for success. This will ensure that you have all bases covered and that you can benchmark your progress as you go. For current owners, a business plan is not something that you complete once and put in a drawer—it is an important living document that changes as the business grows. A business plan will also be handy if you need to approach a bank for funding as well.
Tracking your progress will help you set goals for the future and will assist in determining how your business is progressing, not only against your own goals but industry averages. This can give you an insight into specific target areas within your practice.
2. Deciding whether to buy into a practice or start from scratch
If there is an opportunity to buy into an existing practice this may be a less risky option, particularly if you are already working in the practice, have a strong patient base and know how the practice runs. While this is an obvious benefit, it can also make the decision more difficult if the selling parties are staying on or if the culture isn’t accepting of change. If the practice is long-held by the current owners, the buy-in price may be unrealistic or unmanageable.
When buying into a practice, a component of the purchase price is an intangible asset called goodwill. Goodwill is the value that the practice owners have created over time. You are paying a premium for receiving an established practice that has already achieved a level of success. It’s important to complete a due diligence process to ensure everything is being considered.
Alternatively, setting up from scratch allows you to build the culture from the ground up and create your own vision for the practice. Of course, the downfall is that you need to develop everything, including the patient base; therefore, the establishment time and return on investment will take longer.
3. Securing a premises
Ensure your building has easy access, car parking, visibility, and the right feel for your vision. If you are buying existing premises then you need to ensure they are suitable to be operated as a physiotherapy practice and if not, it can be easily converted.
There will be a number of ways to fund the purchase of the premises, car park and fit-out including bank funding or personal savings. Speaking with a finance professional early (pre-approval) in the process will ensure you get the best outcome.
4. Your business structure
Contrary to popular belief, one size does not fit all when it comes to a business structure. It’s important to seek professional guidance to walk you through all the options and considerations. The recommended structure will completely depend on your goals, personal assets and family situation as well as whether you are buying the practice premises or leasing it.
You will need to consider the best structure to achieve asset protection. Generally it is best for the business to be in a separate structure to any assets held (including premises).
5. Surround yourself with the right people
If you are going into practice with others it is important that you are aligned in thought, vision and goals for the practice. This is important as it will also affect the practice’s culture and people’s willingness to work within your practice.
You should also align yourselves with professionals who understand your industry, including fit-out, building, legal, banking and accounting professionals. These people should also share your vision to get the right outcomes for you.
6. Protect your investment
Insuring your assets and income is always important to allow you to keep doing what you need to do without worry or stress. This includes more than insuring the building premises but also insuring your ability to work.
If you are going into practice with others then additional protection may be required, such as key person insurance.
7. Having agreements in place
Agreements are used when setting boundaries and expectations between different parties and your practice. If there are multiple practice owners it will be important to have unitholder or shareholder agreements and buy/sell agreements in place. These agreements set out the rules about running the practice, ownership and exit requirements.
Other important agreements that should be considered include business premises lease agreement, employment contracts and agreements with physiotherapists who are not employees. A common consideration with them will be between a service agreement and a rental agreement.
8. Staffing considerations
As an employer you will have many responsibilities and regulations to follow. Some of the most common things you will come across are pay as you go withholding obligations, payroll tax, WorkCover, superannuation payments and employee entitlements including annual leave and long service leave. Ensuring you are registered correctly for all obligations and have appropriate contracts in place is crucial.
9. IT systems and processes
This can include things such as IT support, practice management software, cloud accounting systems (such as Xero or MYOB) and internal policy and procedure manuals. Internal policies will cover many different areas of the day-to-day running of the practice including, for example, leave policies and occupational health and safety procedures.
The above considerations do add up in cost, so it is important that you budget correctly and ensure that you are able to fund your practice accordingly. If you are starting out with a new practice there will be significant costs to launch, market and build the practice.
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