Some general practitioners (GPs) are keen to build their practice from the ground up.

“When you start from scratch you can control every detail, from the way the practice looks to its culture,” says Nathan Marris, Relationship Manager at Medfin Finance.

A new practice can also be a cheaper option than buying into an existing practice though the cost will vary according to personal preferences and location. It’s estimated that in regional Australia, for example, you could pay as little as $30,000 for a fit-out but $100,000 is probably a more realistic ballpark figure. In metropolitan areas, the ballpark is closer to $200,000 rising to as much as $500,000.

However, since you don’t have an established patient base, you could experience cash flow problems while you’re building the business.

“Bringing other GPs into the practice can help with the expenses,” says Marris. “Contracting doctors pay about 30 percent of their income to the practice owner to cover administration, staffing, and other costs. Clearly, it would make economic sense to have to four or five other doctors working with you but it can take time to find GPs that fit the culture of your practice. On the other hand, if your premises only have space for one or two doctors, you’re putting a limit on your future income. Finding the right balance can be a challenge.”

Some medical finance providers will tailor monthly loan repayments, so they start low and then rise in line with increasing cash flow.

“This is where a deep understanding of the industry comes into play and why it can be helpful to consult a specialist,” says Marris.

An option to purchase

The loan will usually cover the total cost of turning the premises into a medical practice, including technology and medical equipment. If the practice is located in a commercial property, there may also be an option of 100 percent finance to purchase the premises, either immediately or at an agreed point in the future.

“If you buy the property in your name your company can pay rent, and this will help pay off the mortgage,” says Marris. “If possible, you should have a clause written into the premises lease agreement allowing you the first right of refusal on the property in, say, three or five years’ time.”

Meeting local demand

Dr Prema Joseph studied medicine at the University of Malaya in Kuala Lumpur then completed further training and attained her fellowship of General Practice in Australia. She had been practicing in Sydney’s Hills District for 22 years when, in 2013, she decided to open a medical practice in the area.

“It was never a particular ambition, but I did have a vision of the kind of practice I’d like to run and, as it would also be a sound investment, I decided to go ahead,” she says. “I wanted somewhere local with easy access throughout the day, and I also wanted room to expand.”

Unable to find an existing practice that met her criteria, she purchased a two-storey premises in an industrial area of Castle Hill and opened the Premier Medical Practice.

“I was confident that the people who work here would appreciate having a medical practice close by,” she says. “As I’d done a lot of research I felt comfortable about taking on the loan.”

Joseph’s sister, Preeti Nair, who handles the business side of the practice, confirmed that the premises had the necessary approvals then, once Medfin had approved finance, arranged for the fit-out.

“The practice is continuing to expand,” says Nair. “Upstairs we have a psychologist, pathology collection centre and a dietitian. We are also looking to add additional GPs and are in search of good doctors who are a good fit for our culture – people who are interested in building a relationship with our patients and committed to providing high-quality care.”

 Medfin’s tips for setting up a new medical practice

1. Make sure the premises are approved for use as a medical practice.
2. For the fit-out, choose a specialist who knows what a practice needs and will provide a comprehensive design and quote.
3. Choose a building with easy access, such as a bus stop outside and a council car park nearby. Remember the importance of ‘location, location, location’.
4. Develop a business plan. This will provide a roadmap for your practice and allow you to benchmark your success.
5. Ensure you have adequate income protection, accident and life insurances. As a GP, you are the business asset – if you can’t work, you have no income.
6. Invest in a specialist, independent accountant or legal adviser who can ensure the right structures and processes are in place from the start.

More from NAB:

• The business of building a successful practice
• A flying financial start to your medical career
• Things to consider before setting up a general practice.