What do an entrepreneur in the software industry, an engineer wishing to build his first manufacturing facility, and a doctor considering setting up a new cataract/refractive practice have in common? The answer is this: They all need to take a moment to sit down and write a business plan.
This plan will constitute the framework and guidelines to successfully set up their respective ventures. Whether each will need to do this on his own or with the help of an experienced business person, investor, or lawyer will depend on the individual's professional track record. However, finalizing a business plan is an essential step toward the success of any of the above-mentioned examples.
Setting up a successful cataract/refractive practice has, from an entrepreneurial point of view, many points in common with any other business, hence the generalist focus of this article. Most of the points we mention in this article are applicable to any venture, and that is no coincidence.
The main purpose of the business plan is not—contrary to what many people think—getting the numbers right, checking in advance whether the often huge investment in resources will pay off, and determining whether you will really create a profitable practice. That would be naïve because such preliminary figures are mere estimates. The entire business plan refers to the future, often relying on guesstimates; therefore, no matter how well prepared one is, there will always be a degree of uncertainty.
Let us assume you are ready to build a new practice. The real objective of your business plan is to focus your mind and make sure you do not overlook essential elements that, if left unattended, could jeopardize the entire investment. To simplify, ask yourself these questions: Will I be able to purchase all the required equipment? Will the initial investment starve the operation of cash? Will it be difficult to pay staff in the first 12 months?
Another focus should be to make sure none of the points detailed below get inadequate attention. Yours would not be the first venture crippled by an overlooked detail, jeopardizing a project that has absorbed most of your time over the past 2, 3, or 4 years. If you go through with the investment, make sure you do a complete, professional job. (For instance, does your lawyer know about all the permits you need?) Other surgeons have shown it is possible; you can do it too.
GOALS AND MISSION
To begin, make sure you define the business goals and mission of your practice. This may sound like stating the obvious—your goal is to offer cataract/refractive services to your patients—but you will need to clearly define where you will do so, to which patients, and how widely or narrowly focused you want your practice to be. Do you prefer a standalone operation, or would you like to practice as part of a larger clinic with a wide range of related activities? Any option is valid; there is no uniquely correct concept. But think it through because it will define the rest of your business plan and, needless to say, your professional future over the next 5 to 10 years. Follow this process with a short overview of how the idea has grown, which also serves the purpose mentioned above.
Once you have defined the overall picture by identifying your goals and mission, it is time to plan the more practical aspects. Begin by writing a summary of the location, construction, equipment, people, permits, and other essential points you will need to take into account when building your practice. These are a lot of things to handle and probably the areas (except for the equipment) in which you have the least experience. Just like the engineer in our original scenario who may only have scant exposure to financials, turn to others for help in any area in which you lack experience. If you have never chosen an appropriate location or handled permits (do not underestimate this part), get outside help and calculate this expense into your financials. The investment will be payed back. Relying too much on your gut feelings might save money initially; however, it generates expensive errors. Do not try to control the entire process; this is something you will most likely notice yourself while writing the business plan.
Marketing is easy, right? Most surgeons think they know how to explain what they do and highlight their surgical accomplishments. Sure, knowing how good you are in your field is half the job, but getting the message across is the other half—the tricky half. Learn from your peers but also seek help on strategies for advertising or public relations campaigns; this is a specialist job. The main points you need to consider in your business plan are (1) Product mix: Exactly what services will you offer to patients, and when? Will you offer them all at once or step by step while growing? (2) Sales estimates: Be realistic. (3) Market analysis: Who are your competitors? Will you focus on a specific category of patient? Is there still a lot of scope for growth, or will you be the next one on an already crowded block? (4) Pricing policy: Will you lead the market, or will you have more affordable fees to undercut the already established practices in your area? (5) Corporate image, advertising, and promotion: Exposure is key, but remember what advertising agencies will not tell you—half of your budget might be wasted money, but nobody exactly knows which half. (6) Analysis: Be realistic about your strengths, weaknesses, opportunities and threats (SWOT)—an extremely useful exercise if well done. Make sure you drop the draft analysis on the desk of a few close outsiders (ie, people you can trust who are not experts in your field). You might be in for a few surprises when you get their feedback. (7) Marketing goals and strategies: This should be a document summing it all up.
Describing the job profiles of the staff you intend to hire is one of the most cumbersome parts of the business plan. Yet staffing is a key element in almost any venture. It is crucial that you dedicate the appropriate time to this task. Do not forget to spend more than a few moments on the administrational organization of your practice and, importantly, what to do in case key personnel decide to leave. Set up a contingency plan for those cases. The same applies to major incidents that could seriously affect your daily activities, including equipment failure.
The operational side is your favorite part, for which you have already developed the most detailed ideas. Make sure to put these down in well-defined terms that are easily understandable to the nonexpert, in case you wish to attract outside investors or convince your bank about crucial financing. People will not invest in a venture they do not understand. (Although events of the past few years seem to contradict that statement.)
Put your main focus on the overall identity you want to give your practice, such as its location (and why there), what the premises will look like, and the sort of layout you consider ideal for the comfort of your patients. The layout should also ensure the optimal operational efficiency for the medical staff.
Risk management is challenging. We all think that, having thought through it so many times, nothing will go wrong, yet things will go wrong from time to time. The business plan is a document describing future events, so the odds are that something will go wrong or at least not as smoothly as you imagined. Pay attention to defining possible risks (a good SWOT analysis will help you move in the right direction) to reduce their potential impact. For example, consider linking with other practices for surgery rooms, and maintain good relations with financial institutions for the occasional cash squeeze.
Finally, although it is probably the last thing to worry about at this point, how do you plan to exit your cataract/refractive practice? Will you sell it? Will you transfer it to one of your children? All of the points above are essential, but in the end they are all dwarfed by your dedication to working out the numbers. Your cataract/refractive practice will be your source of income and your way to create future wealth. This is the time to get your calculator and open the spreadsheets. Things to take into account include the investment budget, statistical data and ratios, return on investment, and financial projections.
For most action-minded entrepreneurs, which hopefully includes the majority of us, writing a business plan is not the most pleasant task. However, it is a crucial deciding factor for the success of your practice. Understating its importance can be a painful mistake. For those counting on some sort of outside financing (most of us, we guess), it is a sine qua non condition to simply get started. Overall, a balanced business plan will help focus your mind on all things needed and will be a handy script to fall back on while implementing all those great ideas for your practice.
Tom Van der Heyden, MBA, is Managing Partner of S3 Strategic Sourcing Solutions in Barcelona, Spain, and Shanghai, China. Mr. Van der Heyden may be reached at tel: +34 93 205 87 50; e-mail: tom.vanderheyden@S3sourcing.com.
Erik L. Mertens, MD, FEBOphth, is Medical Director of Medipolis, Antwerp, Belgium, and Medical Director of FYEO Medical, Eersel, Netherlands. Dr. Mertens is the Associate Chief Medical Editor of CRST Europe. He may be reached at tel: +32 3 828 29 49; e-mail: email@example.com.