We’ve entered an era where becoming an entrepreneur is at the forefront of many people's minds. Becoming your own boss can give you a sense of autonomy, self-efficacy, and control over your working life that many people crave. While going off on your own can certainly be rewarding, there are a few important things to consider before opening your own physical therapy private practice.
Opening your own practice sounds like a great opportunity—a way to put your own stamp on your work life and receive the credit you deserve for your outstanding work—but opening the doors can be a major challenge. Getting up and running, especially in a high-cost living area like the Bay Area, has the potential to be a real challenge.
In the Bay Area, for example, a small commercial space costs anywhere from $5 to $15 per square foot. Considering that you will probably need at least 1,000 square feet for a small practice, you can expect your immediate overhead to be a minimum of $5,000 per month. At a reimbursement rate of $75 to $100 per patient, a therapist will need 50 to 67 patients lined up for treatment within the first month just to cover the rent. Don’t forget that the initial cost of equipment is also expensive and your rent will increase annually.
It’s common for an average startup business to remain unprofitable for two to three years, —a time not-so-subtly referred to as ‘The Valley of Death’ in business circles. As a new business owner, the pressure of being over-leveraged financially at launch can be hard to manage and take a toll on you physically and mentally.
Once you get the initial facility and equipment overhead taken care of, the next step is to optimize how your business is going to make money. The great thing about working for a clinic or private practice is that their reputation has already been established. Not only can they get patients in the door, they also have billing, insurance contracts, paperwork, taxes, phones, and scheduling automated.
When you go out on your own, how will you go about getting patients to pay that initial overhead?
While it may seem like an easy problem to fix, getting patients in the door can be a challenge for any budding private practice. An independent physical therapist I know who just opened a private practice recounted that, unless specialized in an area of unique expertise, opening up a typical orthopedic private practice can be almost impossible. Another colleague who has been in business for over three years still has problems maintaining a 40 patient a week schedule.
Why? Because of the oversaturation of physical therapists within the market and the subsequent small reimbursement rates. Becoming profitable may require specializing in a unique substrate of physical therapy that may or may not be your calling. You may consider negotiating and implementing a special contract with insurance companies that reflects your specialty so you can get paid fairly.
Michael Gerber, a prominent entrepreneur and author of ‘The E-Myth’ defines the reasoning behind becoming an entrepreneur very well. The purpose of going out on your own is because you would eventually want your business to grow autonomously. “The work of the Entrepreneur is to wonder, to imagine, to dream...to educate {ourselves} sufficiently so that, as {our} business grows, the business’s foundation and structure can handle the weight.” He summarizes that if you want a thriving business, you need to create the systems where you step back and let your employees take over.
Being the sole-proprietor often means doing all the patient, administrative, and executive work that requires 12 hour days, seven days a week. As a sole-proprietor, it’s challenging to take a day off, a vacation, a sick day, or even weekends away because getting paid is based on doing the work. This workload will continue until you create the systems necessary for future employees to help take it over.
Michael refers this difference as “owning a job” as compared to “owning a business.” Owning a job where you do all the work is a recipe for disaster. The only option for creating a flourishing business is to keep scaling top of mind.
To scale your business, you need to hire an administrator(s) to handle billing, scheduling, taxes, collections, cash flow, insurance contracts, software, paperwork, and legalities. A typical administrator salary starts at $64,000 a year, so previous margins will drop and you will need to see more patients. Ensuring this employee is a good fit is critical; this sole-employee will be tasked with everything that 3-5 administrators do at a typical clinic.
While some private practices use a contracted human resources expert, most sole-proprietors do the hiring themselves. Hiring the right employees is a technical skill that requires higher education and practice. The hiring aspect of scaling a business can be easy to overlook which can lead to high attrition rates. A physical therapist we talked to recently has gone through six administrators in two years and cites this as the ultimate barrier for scaling their business. Emotionally, high attrition rates are tough for all and dampen morale for everyone involved in the process.
Once you have the marketing and administrative systems in place to ensure that you have a surplus of patients that you can no longer handle alone, the same rules will apply for hiring physical therapists. Company culture is an important factor in employee satisfaction, which increases retention rates. In our current economy, it’s never been more common for employees to switch jobs. This trend has led to a large shortage of qualified employees for businesses that have scaled and a need for further help distributing the workload.
At Luna, we saw how challenging it could be for physical therapists to take back control of their working lives. That’s why we created the FIERCE model to combat all the downsides of running your own private practice.
With Luna, there’s no overhead, scheduling hassles, patient marketing, or challenges with scaling.
Therapists have the potential to make the same money as an owner of a large private practice. Come see what happens when you work with a team that has your best interests in mind. We’d love to have you.