In this article, we cover the importance of setting a budget for your private medical practice, before you open your doors so that you have a strong foundation to build your private practice on.
I know it’s not something many people think about before they open their practice. But what you have to remember with most new businesses is that your first few months are probably going to run at a loss. So it’s always good to go in informed have an idea of how much your monthly expenditure is going to be before you open your doors. That will also give you an idea of how many patients or clients you need to see on a daily, weekly and monthly basis in order to cover those expenses and how much money you need to save up before you take the leap into private practice to make sure that you are covered.
Setting your private practice budget :: Rental
The first thing I would advise you to look at would be your rental, and the very simple reason for this is that you have to consider a few things when deciding on where you want to open your private practice. You know what they say “Location, location, location”. You have to take a few things into consideration when making this choice, for many people venturing into the private sector this can be daunting and isolating especially as for most of your career you have had colleagues around you. Perhaps you want to look at starting your practice in a center so that there are other professionals around you. Maybe you prefer the quiet and are thinking of working from home or from your own offices.
Both of which will have their own benefits.
So would you be looking at full time rental in an existing practice where you are signed into a set number of months on a lease. And if that is the case, you may have to consider the area that you’re looking to rent in based on your budget. The more upmarket the area, or the more well established a practice may be, the higher that monthly rental is going to be to begin with.
Or you could look at what a lot of other practitioners have done is they’ve looked at things like subletting which means you rent office space, or a therapy room for a set number of hours a week or a set number of days in a month, this can work out to be a lot less financially constricting as a full month’s rental when you are starting out.
Setting your private practice budget :: Telephone and Internet expenses
So the next thing one does have to look at when it comes to setting your budget is what are your telephone and internet expenses going to be in a monthly basis. And it’s something we don’t often think about, when going into private practice, firstly, your patients are going to need to contact you. Secondly, you’re going to need to be able to phone them back. This means that you are going to need to have a telephone line. So there’s a couple of choices that do come in here.
Are you going to go with a landline, and in which case you have to consider line rental and contacts with Telkom. Or are you going to go with a mobile number which means that you don’t have a fixed landline but call rates might be a little higher. There are benefits to both but what you do need to consider is when a client phones and leaves a message, you need to be able to phone them back. So you need to make sure that your budget covers telephone costs on a month to month basis. And that for your first three months, you may be running at a bit of a loss. So you may want to look at do you want to go prepaid? Or do you want to go with a contract both options again, have their pros and cons.
You also need to consider internet, especially if we look at what happened last year. Many practices and a lot of patients are feeling a little bit more insecure about seeing people in person which has lead to an increase in teletherapy sessions. You may have clients that are looking for teletherapy and if that is the case you are definitely going to need some sort of internet connection, and again you have got a few considerations to make here.
Are you going to go with mobile data where you are buying data bundles on a regular basis or a fixed internet line? Now there are some great benefits to having a fixed internet line and more often than not, you can get them at a fairly reasonable monthly rate that does not fluctuate, which is great when setting the budget for your private practice. You may also need to look at what line speed you need, and that kind of thing in order to do a teletherapy session. So you know, if you don’t need a 200 meg line, don’t spend the money on a 200 meg line, if all you need is a 25 meg line, then that’s what you should get, and weigh it up based on your clientele and their needs.
Also have a look at what sort of services are you using for your phone? Are you using voice over IP that will need internet? Are you using practice management software that’s cloud based or note taking software that’s cloud based as that would also need internet. So you have to take these things into consideration when setting up your systems and budget for your private practice.
Setting your private practice budget :: Website
Before starting your private practice you would also have to get your website built. Now, it seems strange, you’re gonna say to me, but Shaz, I haven’t even opened my doors, I’m not even seeing clients yet why do I need to spend money on a website?
Having a website designed and ready, and people being able to start booking appointments gives you the ability to actually start building up a wait-list, which means that when you open your doors, you already have clients ready and eager to see you. But in order for them to be there, ready and eager to see you, they need to have a way to find you. So one of the best ways to do that is to have a website.
Now you can go and spend thousands on a website, or you could build a website yourself. Again, both of these options work, you can find a really nice middle ground and get a company that will help you both develop and host the site, or are you going to have hosting as a monthly cost through another company and build the site, yourself, these are things that you do need to think about because at the end of the day, for everything that you are having to spend a monthly subscription or a monthly payment on that’s got to be included into your budget. And some of those things you might have to start paying for before you even start seeing clients.
Setting your private practice budget :: Subscriptions
The next thing that we do need to consider are your monthly subscriptions. Now, going into any private practice or any business, there are certain things that you are going to need to cover on a month to month basis. And you will be very amazed at just how quickly subscriptions can climb up. So you do need to keep an eye on them and work out what are your core subscriptions that you would need to use to begin with.
Email Hosting ::
The very first thing you need to think about is email hosting. So depending on what you decided with website hosting, a lot of these web hosting companies will also give you email hosting. However, maybe you went with a website through something like Wix that you built on your own. And if that is the case, then you may have to look at a web hosting firm that’ll allow you to host your internet and email accounts, most hosting fees aren’t too much they are normally around R 100.00 per month.
Online Directory Listings ::
You may to be listed on one or more online directories, some of these have monthly fees and some have an annual fee. You do need to consider going in what would make more sense for you. And based on your budget, would you be going for more an annual fee or a monthly fee? Having yourself listed on an online directory though, is a good step because what it does is it gives you that ability to have people try and find you.
Document Storage ::
Are you going to use an online option like Google G suite or a physical storage where you will need to house files with a company like Tidyfiles? Either way you do need to keep an eye on how much you are spending on storage as these monthly subscriptions can add up. Try not to spend too much on things like document storage, I mean, Google G Suite isn’t actually too expensive. And if you do need to upgrade your storage on them, it’s simply 29 Rand a month, which is far more affordable than other options, which could run you into a couple of hundred rand a month.
Teleconferencing Technology ::
We are living in an age where as I said earlier many people are more comfortable doing teletherapy sessions. There is also the risk that you may not be able to see someone in person and being able to move the session online means you done lose the appointment. You need to know what is the minimum requirements for you to have the ability to have an online session via Skype, Teams or Zoom. Obviously, you do get the free versions, but one of the knock on effect of that is if you take for example, Zoom’s, free version, you might be limited to only 40 minutes at a time. So you may want to look at how do you have a version that’ll allow you to have more than one person in the session if you’re doing couples or group sessions, or that’ll allow you more than 60 minutes at a time.
Yes, there’s the conversation around using Whatsapp Video call. Again, you do need to look at the security around doing something like using Whatsapp Video call very simply because if it is not safe, you may wind up in a situation where your session is no longer private. So do take that into account when you are looking at your teleconference technology especially in healthcare you need to make sure that the technology you are using is secure.
Membership Fees ::
Now membership fees could be fees to a number of things including your annual BHF renewal, your annual HPCSA fees, if you are with any board, you may have annual board fees that need to be paid. Things like OTASA, INSTSI, PSYSA do springs to mind.
So you need to make sure that you’ve catered for that within your budget more than anything, especially if you’re starting your business towards March or April, because that’s often where a lot of these annual subscription fees tend to renew. And the last thing that you want to do is to be in a position where you are about to open your practice and you’re suddenly hit with a large number of subscription fees that need to be paid upfront before you can open. Remember, you cannot practice in private practice without being registered with the HPCSA and without being up to date with your BHF fee’s. So you need to make sure that you have catered those into your month to month budget. And if you haven’t catered it into your month to month budget that you are aware that come March/April of each year, you do need to have a bigger expense budget, because those annual fees are going to come through.
Setting your private practice budget :: Insurance
I often like to say insurance is the thing that we have to pay but we all hope that we never have to use it.
Malpractice Insurance ::
You cannot practice without malpractice insurance. The simple truth is that you never know what might happen and you need to make sure that your bases are covered. As a healthcare practitioner in private practice you have made a huge investment into your career and practice, its vital that you protect this investment. There are a number of insurers out there so ask around, figure out what works best for you, do your research and decide on the option that suits your needs best. Some of the top options are AON, MPS, ProfNet and PPS
Property Insurance ::
So now you’re going to look at me a little bit strange and go. But property insurance, yes, property insurance, you need to consider that you will have invested a lot of time and money into getting the right equipment, potentially the right technology, materials, depending on what practitioner type you are furniture and other necessary tools and resources to run your practice successfully. So property insurance is there to protect your property from natural disasters, fires, damages, as well as theft. If things like this need to have things like this happen, you need to be in a position where you can replace them in order to continue running your practice. So without property insurance, you could be sitting in a position where worst case has happened and you now can’t replace the equipment, or furniture that you’ve lost, which means you’re now unable to practice and not being able to practice again means that you are not earning any income.
Income Protection ::
As a health care practitioner, in private practice. It’s a no work, no pay scenario. So you need to consider things like this. Because down the line, you may want to get married and take two weeks off for honeymoon. For those two weeks, you’re not working. Now if you’re in a medium sized practice, and you’re doing eight to 10 sessions a day, over a period of two weeks, let’s say you work five days a week, you’re already missing nearly 100 sessions. That means that for the two weeks that you’re on leave, you haven’t earned money at the end of the month, when all the debit orders need to go off, you could be slightly short on what your expenses are. In which case you could be dipping into overdrafts or credit cards, which is a whole different ballgame. So always have income protection, it is a safety feature, things do happen. Maybe you get sick and you’re unable to work for a month or even longer than that, at least with something like income protection, you know that your monthly commitments and expenses are paid, which means when you’re back up on your feet, you’re not sitting in a situation where you’re two months in arrears on your rent and everything else. So income protection insurance is a very definitely a vital one for me.
General Liability Insurance ::
So this will only actually play a role if you have set up in an existing practice or in an office space. But I will also advise that potentially, if you are practicing from home, like any office building, whether you are leasing your practice premises, or you own the building, people will hold you as the practice owner responsible for any accidents or incidents that might take place on the premises. Even with a liability notice you do have you do run a risk. I mean, for an example, if an elderly woman slips and falls was entering your practice, or a child is running and trips over the chair of a leg into the hallway, both instances these people could injure themselves. And in both instances, these people could, in turn, blame the practice for the incident. So general liability insurance will be able to protect you against financial ruin, which would include things like bodily injury, injury or property damage to others.
So please do take that into account when you start out just to make sure that you are covered from all aspects, you’re covered from a malpractice side of things you’re covered from. If anything goes wrong in the property, natural disasters, you’re covered. If you do get ill or unable to work, and you are also covered should anything happen at the practice that could result in injury or damage to a third party, that you are safely covered and protected.
Setting your private practice budget :: Software
Now there are various types of software out there. But as a healthcare practitioner, there’s also some very specific software’s that are catered towards healthcare and private practice management.
You do have some appointment scheduling software that is standalone software, or you could use your calendar, it is something that you are going to need to think about. Because buying an appointment scheduling software or subscribing to an appointment scheduling software can in its own way, obviously increase your monthly expenses.
The next thing you do want to look at is obviously billing software. So once your practice is up and running, you do need to be able to bill or invoice your clients. A lot of the billing software’s out there also have the functionality to assist you with appointment booking. So they do have calendar options and that kind of thing. So again, you do want to make the decision? Does it make more sense to get a calendar scheduling software with a standalone medical billing software? Or do you get a combination package?
Again, with your medical billing software you also need to look at what is your billing structure? Are you more of a cash based practice? Are you going to be billing mostly medical aid claims?
If you are going to be billing mostly medical aid claims? Is the software capable to do direct claiming, there are many software options that do allow things like direct claiming or switch claiming or EDI claiming there is a cost per claim that goes through? So you need to look at, how much are you going to be able to spend on a month to month basis on submitting directly to the scheme through your billing software as well as what your monthly or annual subscription fees will be.
Setting your private practice budget :: Consumables
Now consumables are oftentimes really large expenses that can run up quite quickly. In a private practice, you do need to consider these and you do need to think very carefully about this. You also need to understand that you cannot claim everything as a consumable. But you do you need to look at what are the things that you want in your practice that your clients can make use of or that you need to clean the practice and that kind of thing.
Office Expenses ::
So the first thing we’re going to look at in consumables would be if you’re going to be working from a practice and you’re there from eight until five every day, during the day you might want tea, coffee or maybe a bottle of water or a cool drink. Maybe whilst your patients are waiting in the waiting room, you want them to be able to have make a cup of tea or a cup of coffee or get water out of a cooler. These things do add up into office expenses. So again, lets weigh up that decision are you going to have an espresso machine or are you going to have a kettle with tea, coffee and sugar available for clients .You need to look at these things because it will affect your month to month expenses and your budget.
Cleaning Materials ::
We living in an age at the moment where and COVID is on everybody’s mind. So you do need to consider that your monthly cleaning materials are part of your consumables. The materials can be everything from your dish washing liquid to wash cups from people having tea and coffee to your floor cleaners, polishes, basically the stuff that you need to clean the office. But more importantly, it’s also going to include stuff like hand sanitizer for when your patients walk into the practice. Perhaps you have sanitizers available in session rooms. That’s also going to include things like, surgical masks for yourself. If you are in a more physical field like occupational or physio therapy this may also include things like gloves, bed covers etc, unfortunately these are non-recyclable and you are going to have to consider them in your monthly budget
Printing & Stationary ::
So there are things that you’re very definitely going to need in the practice from a stationary point of view, pens, pencils, paper, ink in the printer. But stationery can also be a rabbit hole. If you are an educational psychologist, maybe there’s play therapy involved which means maybe you need a coloring book with crayons and that kind of stuff. You do need to consider printing and stationery as a month to month expense and budget what you prepared to spend on it. You don’t want to be buying Parker pens for people to fill out intake forms. But you also don’t want to be in a position where you’re buying a new pen every day.
Before you spend a single cent on opening your private practice, have a budget set out to have an idea of what your monthly commitments will be. Once you have an idea of the monthly commitments add in what your estimated expense on consumables will be.
Once you’ve got that, number in your head, you need to plan. If you plan on starting your practices, let’s say six months time, how much do you need to put aside every single month to ensure that in six months time, you have enough saved to cover you for at least the first three months of practice?
Once your private practice starts growing, expanding and getting bigger, then yes, maybe you can look at how do you expand that budget? How do you add a few more things in? Do you maybe look at hiring somebody in and that kind of stuff. But to start off with you want to work with as clean a budget as you can with as few subscriptions as possible. You really want to keep it as lean as you can, so that you have enough to get you through. But that also when the practice starts making money, that you’re able to put money back into the practice to continue growing. And the last thing you want to do is open your doors with no cushion behind you. And if you don’t have enough clients coming through the door in the first month that you’re already running into a deficit.