How to Finance a Dermatology Practice Expansion
A growing dermatology practice may eventually need additional space, providers, equipment, or services to accommodate increasing demand. Expanding can create opportunities for growth, but it can also require significant capital.
For physicians considering dermatology practice financing, expansion financing can potentially help fund eligible growth-related expenses while allowing the practice to maintain working capital.
Why Expand a Dermatology Practice?
Expansion may become necessary when a practice consistently reaches its available appointment capacity or when physicians identify opportunities to offer additional services.
Growth can involve expanding the physical facility, adding providers, increasing equipment capacity, or introducing new specialties and procedures.
Adding More Exam Rooms
One common form of expansion is increasing the number of available exam rooms.
Additional rooms can allow physicians and staff to accommodate more patients without necessarily moving to an entirely new facility.
Hiring Additional Providers
A dermatology practice may expand by adding another dermatologist, physician assistant, nurse practitioner, or other qualified healthcare professional.
Additional providers can increase appointment capacity and potentially allow the practice to serve more patients.
Expanding Into Additional Space
A practice may be able to lease or purchase additional space adjacent to its existing location.
This can allow the physician to expand without completely relocating the practice and potentially preserve the existing patient experience.
Opening a Second Location
Some established dermatology practices may eventually consider opening another location.
A second office can expand the practice’s geographic reach, but it also introduces additional expenses for real estate, staffing, equipment, technology, marketing, and working capital.
Adding New Services
Expansion does not always require more physical space.
A practice may expand by introducing new services such as cosmetic treatments, additional procedures, or other dermatology offerings.
New services may require specialized equipment, training, marketing, and additional staffing.
Purchasing Additional Equipment
Growing patient volume can increase the need for medical and cosmetic equipment.
A practice may need additional examination equipment, procedure equipment, imaging technology, or laser systems as it expands.
Renovating Existing Space
An expansion may involve reconfiguring the current facility rather than moving.
Renovations can create additional treatment areas, improve workflow, or make existing space more efficient.
Working Capital for Expansion
Expansion can increase expenses before the additional revenue is fully established.
Working capital may be needed for:
- Payroll
- Rent
- Medical supplies
- Marketing
- Utilities
- Insurance
- Technology
Develop Financial Projections
Before expanding, physicians should estimate the additional revenue and expenses associated with the project.
Projections can help determine whether the expected increase in revenue is sufficient to support the additional operating costs and financing payments.
Evaluate Patient Demand
Expansion should be supported by actual or reasonably expected demand.
Physicians should consider appointment availability, wait times, patient growth, referral sources, local competition, and other indicators before committing significant capital.
Consider the Cost of Additional Staff
Adding space or services can require additional employees.
Staffing costs should be included in the expansion budget rather than considered after the project begins.
Plan for Marketing
An expansion may require additional marketing to attract patients to new services, providers, or locations.
The practice should determine how it plans to communicate the expansion to existing patients and reach potential new patients.
Financing Options Can Vary
The appropriate financing structure depends on the type and size of the expansion.
Funding needs may include construction, renovation, equipment, real estate, technology, and working capital.
Physicians should evaluate the financing structure based on the specific project rather than assuming one financing option will fit every expansion.
Protect Existing Cash Flow
A practice should avoid putting unnecessary pressure on its existing operations when financing an expansion.
Maintaining adequate working capital can help the practice manage unexpected expenses and the transition period associated with growth.
Measure the Results
After completing an expansion, physicians should monitor patient volume, revenue, expenses, provider productivity, and other performance indicators.
This can help determine whether the expansion is producing the expected results and identify areas that may need adjustment.
Final Thought
Expanding a dermatology practice can involve adding providers, increasing clinical space, opening another location, purchasing equipment, introducing new services, or improving an existing facility.
Physicians should develop a detailed expansion plan that accounts for both the upfront investment and ongoing operating expenses. Financing may provide a way to fund eligible expansion costs while preserving capital for the practice’s day-to-day operations.
