Starting a medical practice takes a huge amount of planning, and often the final budget ends up being significantly higher than it was during the planning stages. Unaccounted for costs, unforeseen circumstances and changes to the initial plan all have an impact on the final bill.
While there’s no specific figure for starting a medical practice, it’s estimated that the average cost of a practice fit-out is approximately $AUD400-500 000. Here are some of the main factors affecting that cost as well as other considerations when starting a practice.
Factors affecting the cost of starting a practice
If you’re planning on starting a practice from the ground up, there are a number of factors that will affect the final cost, such as:
Practice location – it’s likely you’ll have to pay more to purchase a practice in a metropolitan area vs. a regional location. Proximity to parking and public transport can also raise the cost.
Size of practice – bigger floor space can increase costs but could be worth the investment if you plan on employing a team.
Equipment purchasing – buying new medical equipment can be very expensive and negatively impact cash flow when you need it most. Take a look at equipment finance and hire options to spread the cost out over time.
‘Intangible’ design features – a comfortable waiting room and welcoming décor may not be critical to the business, but they will make a positive impression on patients.
Insurance costs – whatever your specialisation may be, investing in insurance is an essential step in setting up a medical practice.
Marketing – it’s critical to promote your business to establish a patient base, so a marketing plan will need to be factored into your budget.
Other purchasing options
Once you’ve developed a business plan, you might find that unfortunately it’s not feasible right now to start a practice from the ground up. If that’s the case, other purchasing options such as buying into an existing practice (joint ownership) or purchasing an existing practice can cut down on some of the set-up costs and associated risks. Buying into an existing practice is also a good way of seeing what it takes to run a medical practice successfully, so you can use that knowledge to grow or start your own practice further down the track.
Whether you’re buying premises or fitting out a rented space, it’s likely that you’ll need financing to set up a practice.
A commercial property loan can be ideal for those buying property for a practice, as it has various structures, such as through an SMSF, partnership, company or trust entities – which can lead to potential tax advantages. Depending on your lender, you may be able to borrow up to 100% of the purchase price without having to pay Lender’s Mortgage Insurance (LMI) and choose a repayment schedule that suits your business growth.
If you’re researching practice fit-out finance options, consider a lender that can manage suppliers and invoice payments for you to take some of the pressure off during the busy set-up phase.
Considering setting up a practice? Talk to one of our BOQ specialists about our practice finance options.