The commentators tell us that most small enterprises businesses have a reasonably predictable pathway, regardless of the industry they are in. With the continued steady migration of clinicians to starting up their own private practice, it is interesting to hear of the same avoidable mistakes being made by so many.
If we take the Australian Bureau of Statistics definition of a small business, one that employees fewer than 20 people then we confidently say that many private practices fall into this category. With this in mind, we can also note that the ABS also states that 60% of small business will close within the first three years of operation. Ouch. This is not what we wish for you in private practice startup. Yet, I am hearing of private practices closing with increasing frequency.
Business goes through a predictable sequence of events, knowing these helps you appreciate what you have achieved, understand where your business is currently and assertively plan for the future. Yes, this applies to private practices of all shapes and sizes. Jeremy Streten’s “Business Legal Lifecycle: how to navigate your way from startup to success” book describes these steps brilliantly.
Here are some of the common mistakes that I hear about for private practices closing down:
They fail to plan. In the excitement of hanging out their shingle, there may not have been sufficient financial planning, marketing forethought and exploration of supportive software and systems. Sheer determination, sticky notes and spreadsheets will only get you so far. They also fail to understand the legal implications for the business structure they select. There are significant differences between a sole trader and Pty Ltd Company status that you need to know. Tax management, GST, liabilities, insurance and more… are all big topics that need to be dug into and understood.
They fail to design and use systems for invoicing and receipting their clients for the services they have delivered. Invoices to schools, NDIS, consortiums for HCWA and BSI work lie dormant with months and months of money owing all backed up. ‘But I don’t have time’ is not an option nor is a quick cheeky overdraft a solution. Developing systems and habits is the key to getting invoices out weekly, fortnightly and monthly at the latest. Outsourcing this role is also key to many fast-growing practices.
They fail to get great advice from a business coach, a lawyer and an accountant. Furthermore, they don’t facilitate a roundtable discussion with these people and themselves to ensure that all advisors are on the same page. The face to face group conversation uncovers previously unseen challenges, clarifies peoples roles and builds an advisory team around the new business owner. Find your tribe of private practice advisors.
They try and do everything themselves and at once. This ends up with the new business owner being chronically overworked, horrendously underpaid and exhausted. I am a big fan of bringing in some admin and bookkeeping support as soon as possible. Start as you mean to improve and engage these guys to do the admin and build the systems you will definitely need down the track.
They fail to anticipate the steps in building a team. So often I hear that the first recruit is a clinician, then suddenly ‘voila’ the admin load doubles and the owners time is dug into with logistics, supervision, promoting…… Read the previous paragraph, with admin support in place the first clinical recruits come into a smoothly running private practice. Knowing that your income may take a slight dip when you bring in a clinical team is vital so that you can plan finances and Cashflow accordingly.
The take any referrals and end up dashing all over the countryside providing services. Travel takes time and eats into admin, marketing and service delivery time. Although it is hard, there are times when politely declining a referral and forwarding it to a trusted colleague is very strategic.
These are just a few of the challenges (there are loads more) that new private practice owners struggle to see and plan for in the busyness of daily life. We are absolutely delighted that Jeremy Streten Lawyer and CEO of Business Legal Lifecycle is joining us to LIVE present at the Paediatric Private Practice Virtual Conference. He will make all this and loads more completely understandable and assist in helping you focus on next legal steps for your business. We know you will LOVE his presentation. Read and register now so you don’t miss out.