[Editor's Note: This fantastic guest post about setting up a medical practice startup was submitted by Juli Albright, General Manager of Alamo Plastic Surgery. There is an ever-increasing need for information like this as fewer and fewer docs open their own practices and are now doing so with ever-increasing student loan burdens.]


The Complicated Dream of Owning Our Own Medical Practice

In 2016, after 14 years of post-high school education and training, my husband was graduating from an integrated plastic surgery residency program in Pennsylvania. Our dream had been to open a practice back in our home state of Texas. Initially, we hoped to locate an existing successful practice with a soon-to-be retiring plastic surgeon who would be willing to transition the practice to us. We quickly realized this was much more complicated, and we ran into several common problems:

  1. Practices overestimate their value, especially to a newly minted surgeon.
  2. Overhead expenses are higher than a new surgeon can support.
  3. Branding, reputation, and office culture are already set, and are difficult to change.
  4. Office space, equipment and PM systems may be poorly maintained or antiquated.


Back to Broke and Geographic Arbitrage

Although we had prioritized and successfully paid off his high-interest medical school loans during residency, our net worth was close to zero. After reading White Coat Investor, I became uncomfortable with taking on a new business loan, especially with an expanding family. Following guidance from WCI, my husband searched for opportunities in the Mid-West where cost of living is low and salaries are high. We moved in July and, three weeks later, had our second child. For three years we continued to live modestly (albeit one expensive car) saving ~40% of our income for retirement and, if the current employment did not work out, a future solo practice.


Starting Up Our Own Medical Practice

medical practice startupIn August, after failing to achieve acceptable terms with our previous employer, we started a plastic surgery practice in San Antonio, TX. We utilized a variety of resources to help us start the practice, including books, lectures, blogs, podcasts, colleagues, friends and family. We wanted to share our experience and offer a few helpful tips for others who may be contemplating a similar transition. Although some of our experience will be specific to our location and specialty, we tried to highlight some generalizable pearls. If you need a sample business plan, bank loan presentations, marketing plans, Google Ad help, or have any other questions, please contact us. We would love to help! 


7 Steps for a Successful Medical Practice Startup Applying WCI Principles


#1 Cash Is King

In 2016, after paying off our loans, our net worth was essentially zero. Obtaining a bank loan was nearly impossible. Most banks wanted to shuttle us into the Small Business Association (SBA) process which has higher fees and can take up to 6 months for approval. Three years later with a much higher net worth, the process was much easier and we had better options. We planned for initial capital and six months of expenses to be self-funded.

However, since the top reason businesses fail is lack of capital, we decided to take out a significant business line of credit. Our bank and banker offered interest-only payments on what was borrowed during the initial two years. After this initial borrowing period, the loan amortizes, and principle with interest are paid back over an 8-year term at a reasonable interest rate and no early payment penalties. We view this line-of-credit as a security blanket to help us adapt to any curveballs.


#2 Expect Curveballs

We expected to have a more balanced plastic surgery practice with a target of 50% cosmetic/50% insurance mix, as my husband enjoys both. However, many of the major commercial insurance carriers in San Antonio were offering PAR Medicare or LOWER in-network reimbursement rates, which ultimately would not be enough to cover overhead expenses. One major carrier even refused to offer a contract, citing “adequate in-network coverage for plastic surgery.” Our business plan relied on initial revenue being primarily from insurance cases. After much trepidation, we decided to proceed as out-of-network for the major carriers and are selectively engaging smaller local insurance plans that offer more sustainable reimbursement rates.

To compensate for this lack of insurance income, we increased our marketing budget to capture additional cosmetic patients. Although, as an engineer, I want everything to go according to a predetermined plan, this is not realistic. If you read Shoe Dog or Jeff Bezos in The Everything Store: Jeff Bezos and the Age of Amazon, you have to continually move forward by making the best decisions possible at the time.


#3 Location

Choosing the right location is critical to a startup practice. The mindset must be one of total commitment. Once you invest in your practice, this will be your home for the duration of your career. Most of the information you need can be obtained for free online, but does take a significant investment of time and lots of spreadsheets. Alternatively, consultants exist that purport to do this research for you, although we did not utilize these services.



Finding the right location is kind of a numbers game. Ideally, the location should have a limited number of physicians in your specialty given the overall population. Your competitors’ ages, affiliations, and areas of expertise (if known) can be considered as some may be approaching retirement. Who accepts what insurance carriers? Knowledge is key.


Patient Population

Know the demographics of your patient population. Where are the more populated areas and/or prosperous areas? Where is the city’s current growth/future growth? What are rents like in these areas? Where are the surgical/hospital facilities? Where would the office be located relative to these facilities, your home, your spouse’s office, and your children’s schools? The more information you have the better.


Insurance Credentialing and Contracts

Although we did some research on insurance payments in the area, we did not fully appreciate the extent to which insurers would attempt to gouge solo physicians. Even though my husband had a three-year track record of good patient outcomes in another state, insurance carriers were unable (or unwilling) to take this into account. If your practice is predominantly insurance-based, I would recommend starting this tedious process as early as possible (at least six months for credentialing and contracts). However, even this may not be adequate, as some of the carriers informed us that their review process for contract negotiation could take as long as 120 BUSINESS days!

Obviously there are other financial and familial factors to consider, such as COLA, state taxes, family planning, etc. If you have aging parents, you may want to be close to them or have accommodations for them to move near you.


#4 Business Plan

Although this may sound scary to physicians, it is not that complicated . . . but it is required! Not only will the banks require a sound business plan before issuing a loan, but YOU must also do it for YOURSELF! This business plan is for you to determine if this incredible investment of time/money/effort is worth it. A brutally honest business plan for your medical practice startup will allow you to make an informed decision. The business plan can also be used to compare to other business opportunities or investments.

Basically, project expected capital, revenue, and expenses to determine profit. The numbers will likely change over time and should be adjusted as such (for example, pay raises for employees, interest on your loan, etc). Initially, most of the projected costs and revenue will be estimates gleaned from online sources, such as the Bureau of Labor Statistics. Other data will be from quotes you have obtained for necessary services like malpractice insurance, etc.

A great resource for a business plan template is a physician that has previously graduated from your residency program and started their own practice within the last 5 years or so. You will want to cultivate this relationship anyway as they can be a wealth of knowledge about other things (like hiring practices, EMR, etc).

The business plan acts as your guidepost for starting the practice. Were you only supposed to spend $10k on equipment? If so, try to limit spending to $10k on equipment and don’t be distracted by the new $100k laser machine which is “guaranteed to pay off in 2 years.” Until you have warm bodies through the door, don’t invest in expensive equipment. Stick to the plan!


#5 Website

Website design and development can be an overwhelming process, but the great news is you can start this now. [Be aware, that your ABMS certification board may not allow you to publish your site until after graduation]. Your website is your virtual front door and may be the first impression your patient gets. So it HAS to be done right.

It may be tempting to hire an expensive company to design and host your website. If you do not have a good eye for design or have the time needed to commit to creating one on your own, a one-stop-shop may be worth it. Just understand the costs and common pitfalls that we learned from the White Coat Investor blog on website hosting. Most of these companies will charge you ongoing fees ($1500+ for website hosting and undefined Search Engine Optimization). If you decide to end your contract with the company, you will not own the website.

There are many WordPress templates (~$70) which anyone can easily modify and use. Upwork is a great source for cheap designers (website and logos) and developers (usually ~$15/hr). Most marketing companies will charge ~$100/hr. If you have the time and patience, it can be very cost-effective to design your own website. Additionally, it will be incredibly easy to update the site's content, add new pages, or do whatever you want to it. Remember to keep the site current and fresh for new prospective patients.


#6 Marketing

Develop a marketing plan along with a business plan. Our understanding is, in our specialty, marketing should be ~15% of your overall expenses initially and will typically adjust to about 3%-5% of gross revenue over time. A marketing plan for a medical startup should include the following:

  • Direct Marketing – doctor referrals (plan on arranging meetings with all the doctors who might refer to you), office signage, direct mail (expensive and may not be advised for a startup), local advertising, etc.
  • E-mail MarketingMail Chimp, Hubspot (free version), and others offer great training on creating e-mail campaigns.
  • Search Engine Optimization (SEO) – Essentially, this means getting to the top search position on Google when someone searches for your specialty in your city. Website content, social media, website traffic, and time are all key factors. This is a good area to get assistance with, as best-practices are always changing. But make sure it fits within your budget.
  • Google Ads – This is a wonderful tool for a new practice as it immediately improves your practice’s visibility. There is no getting around the fact that it is expensive. In our space, we allocate ~$1500/mo for our campaigns.


#7 Bonus – Tax Write Off

We set our medical practice up as a professional limited liability company (PLLC) which is a pass-through entity. Since my husband’s first employed job ended in June, we have 6 months to deduct some sizable startup business expenses. This combined with the 199A deduction, means we expect to pay very little in taxes for 2019. Moving forward we will have to earn less to have the same after-tax income. This is a great bonus to living our dream!


‍It is a wonderful feeling to work for yourself and invest in yourself. Although we know the next several years will be difficult financially, we view this as a long-term investment in our investment portfolio. Although we acknowledge the risk, we also anticipate higher returns than Vanguard mutual funds.

Do you own your own medical practice? What has your experience taught you? Share your story and comment below!