The Business of Private Practice
During a break in a recent workshop I was presenting on private practice development and management an attendee asked, “What is the #1 thing you would recommend to an early career clinician considering private practice, if you knew then what you know now?” I pondered the question and answered:
“Determine an underserved area in the city of your choice—typically on the edge of town. Find a suitable building and purchase it. You will need to formulate a business plan to secure financing from the Small Business Association, another lender, a wealthy family member or an investor. Condo offices today are popular and convenient—which I bought in 2000.
Design the building with a pleasant waiting area, an adequate front office, a small break room and at least six suites. Furnish the place. Hire and train a responsible front office person to handle calls, make appointments, greet patients, collect, reschedule, and do simple typing.
Recruit five (or more) other practitioners with complementary niches. (You want to be the only provider that specializes in kids and parents, for instance.) Strive to attract a psychiatrist or psychiatric nurse practitioner. With the proper mix of providers significant cross-referring should occur.
Depending on your locale, a fully furnished suite, in a new or remodeled building, with front office support, and potential referrals should rent for about $1500/month to $2500, in some upscale markets. If you purchased the building for, say, $375K and put $50K into improvements, you will have a 10% down payment of about $42K and a monthly mortgage of about $3K. With another $2K/month for the front office wage and an additional $1K/month for ancillary expenses, the total monthly nut comes to about $6K. The rent from the five suites totals $7500 to $10K. This provides a net monthly profit of $1500 to $4K.
If this plan seems unrealistic, remember that if you practice for 40 years and choose to rent all that time, you will pay an average projected monthly rent of about $3K, again depending on your locale. Twelve months times $3K over 40 years equals $1.4 million. You will have spent over a million dollars in rent and accrued no equity! You will make your landlord rich and happy.
If you follow my suggestion, the mortgage will be paid off in 30 years—hopefully sooner. You will then earn about $1/3 million in rent over the last decade of your career. When you finally retire you can continue to rent the entire building for $15K-$18K per month. If and when you decide to sell the building, which you own free and clear, it will no longer be in the outskirts of the city, and if well-maintained, should be worth what you would have spent in rent—about $1.4 million. You clearly have conducted your practice as a business and you now have your pension!
Larry F. Waldman, Ph.D., ABPP is a licensed clinical, forensic psychologist who practised in Phoenix for 45 years. He worked with children, adolescents, parents, adults, and couples in a solution-focused manner. He also provided forensic consultations in the areas of family law, personal injury, and estate planning. He is a Mental Consultant to Social Security and teaches graduate courses for the School Psychology and Counseling Departments for Ottawa University. He is the author of “Who’s Raising Whom? A Parent’s Guide to Effective Child Discipline;” “Coping with Your Adolescent;” “How Come I Love Him but Can’t Live with Him? Making Your Marriage Work Better;” “The Graduate Course You Never Had: How to Develop, Manage, Market a Flourishing Private Practice—With and Without Managed Care;” “Too Busy Earning a Living to Make Your Fortune? Discover the Psychology of Achieving Your Life Goals.” and “Overcoming Your Negotiaphobia: Negotiating Your Way Through Life.” Dr. Waldman speaks professionally to educators, corporations, chiropractors, attorneys, and mental health associations on the topics of private practice management and development, parenting, marriage, and wellness. Click on Larry's image above to see his contact details.
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