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Opening a second practice

Article-Opening a second practice

Mr. AllenOverall, practices with multiple locations can simply make more money. “Once you have learned how to effectively manage associates and coordinate schedules with one location, you can often make enough revenue and profit to cover your expenses and pay yourself well,” says Thomas Allen, founding partner of Practice Real Estate Group, a full-service healthcare real-estate solutions company based in Austin, Texas. “By opening a second location, you can double your income.”

A major advantage of establishing multiple practice locations is the economies of scale afforded by branding and marketing.

“The dollars needed to promote all of your locations combined can be significantly less per location than for a single location,” explains Allen.

Cosmetic practices with multiple locations can also reap referrals from various medical groups situated in the vicinity.

“You might also gain referrals from existing patients, because often patients know friends or family across town who would enjoy the convenience of a location nearby,” Allen tells The Aesthetic Channel.  “It is easier to fully penetrate a market.”

And depending on the aggregate size of the locations, “you typically receive better pricing from vendors, due to buying more and having the chance of becoming a big account for a vendor,” Allen says.

NEXT: Planning for a Second Location


Planning for a Second Location

The tipping point for opening a second location is when the first location generates enough income each month to cover negative cash flows while the second location is ramping up, according to Allen.

“However, you need to plan for a second location basically from the first day you open the first location, meaning you cannot pursue a second location if your first location is not successful,” Allen states. “If you know you want to own multiple practices, then you need to be laser focused on the first location becoming cash flow positive quickly, and providing patients a great experience.”

Allen observes that a practice should wait about two years after opening a first location before applying for a bank loan for a second location. He also cautions about personal lifestyle choices. “Banks look very closely at a doctor’s lifestyle, even though the cash flows are good for the first location,” he says. “Banks will scrutinize school debt that has not been reduced, driving a $75,000 car and living in a large house. It is important that you are not funding everything in your personal life through debt. You do not want to be trapped in a larger lifestyle where you lack excess cash to make the investment into a second location,” he says.

NEXT: Multiple Location Challenges


Multiple Location Challenges

One disadvantage of multiple locations, though, is that certain patients may perceive the practice as a chain, “which for a medical practice may be a bad thing, even though a chain may provide a better quality of care because the chain is comprised of experts and has a history of cases diagnosed and treated internally,” Allen says. “Still, you might lose some patients.”

But the biggest challenge in owning multiple locations is the growth process, according to Allen. “This entails understanding cash flow and not ending upside down where you become stressed out because you cannot pay the bills from overspending or an unplanned event,” he notes. “Therefore, you need to have a strategy for growth and a team of experts to help you execute correctly.”

The proper management of personnel is also key. “For two locations, if you do not have staff willing to drive back and forth, you may need to initially hire part-time staff at one of the locations,” Allen says.

Allen recommends that practices use the same branding in all markets. “Your first location worked for a reason. I would not reinvent the wheel on a second location,” he says.

However, Allen emphasizes that multiple locations are a lot more work. “And for any number above three locations, you are likely going to be pulled away from the clinical side and become more of a manager,” he says. “At that point, you need to consider hiring a CEO or a chief operating officer, which will cost plenty of money.”

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