If you are starting up a healthcare business, such as an independent pharmacy, veterinary hospital, dental or optometry practice, you probably have two main goals in mind: Providing skilled services to your patients and earning enough profits to enjoy a comfortable lifestyle. After all, your business is your income! So how can you ensure a strong return on your investment when starting-up? Avoid these pitfalls and you’ll be off to a great start!
Taking on More Debt Than Your Cash Flow Can Support
By far, the biggest challenge that pharmacy and practice financing experts run into is owners and practitioners who have taken on more debt than their revenue and cash flow can reasonably support. It takes time to build revenues. For example, after your first year of ramping up, if you forecast that your start-up will produce $500,000 in revenue year 2, don’t borrow $750,000+. In other words, do not over leverage yourself. Nobody wants to be pessimistic but be conservative with your projections. Depending on what type of practice you are starting-up, be prepared for a 12- 24 month breakeven period. Carefully analyze your demographics, the competition, and the costs of starting-up in the location you choose. Be certain to have a sufficient amount of financing available to reach your breakeven point.
Not Working With a Specialized Lender in Your Particular Field
If you’re a pharmacist, veterinarian, dentist, optometrist or a medical doctor in a specialized field, make sure to engage with a pharmacy or healthcare related lender experienced in your particular space. There are specialized lending programs and loans out there specifically for independent pharmacists and healthcare professionals. Working with a lender who is well-versed in this area can be a major benefit and can be the difference in your success.
Ignoring Key Parts of Your Start-Up Budget
While we cautioned earlier on the risks of taking out too much debt, make sure you have enough financing to cover important parts of your start-up pharmacy and healthcare practice budget. Do you have an adequate amount earmarked for marketing expenses, inventory, staff, etc.? While you need to build your patient base, not having enough working capital to reach breakeven can be the difference of success and failure. What about regulatory compliance and technology? Make sure your start-up is strategically planned in all areas. Good planning will reap major rewards!
Ignoring the Long-Term Plan for your Pharmacy or Healthcare Practice
Speaking of that strategic plan, what is the long-term goals for your pharmacy, veterinary, dental, optical, or medical practice start-up? How will you continue to finance your operation while you grow your business? What do you need to do, and how much do you need to borrow when your business starts rapidly filling scripts, seeing patients, and growing revenues quickly? How much additional inventory do you need on hand to keep up with demand? With a pharmacy or medical practice for example, it’s a critical balancing act with having enough cash flow to cover expenses while waiting for insurance reimbursements to come in. It may seem like a distant future when you are starting up, but prepayment restrictions, balloon payments, or penalties for early principal payments can catch up to you. Unless you are an expert in finance, consider working closely with a pharmacy or healthcare practice lending expert from the very start! When you choose the right lending partner, you will give yourself the best chance for success! Call US Medical Funding today to get the best assistance with your pharmacy or healthcare practice financing needs!