Many people dream of owning their own company and seizing control of their professional lives. Unfortunately, over 80% of new business ventures fail within the first 12 months; and for those that do succeed the first year, 80% will fail within the first 5 years.
Don't let these statistics discourage you. Instead, try to understand why the failure rate is so high. Then, commit to the steps necessary to avoid failure. There are a few things you can do to improve your chances of success. Let's take a look at them.
Most new practices re q u i re start-up capital to cover rent, equipment, and salaries until business revenues begin to cover everyday expenses. The biggest mistake doctors make today is underestimating these costs. They often seek capital from a bank, friend, or relative and ask for what they estimate will be needed. More often than not, however, the amount the doctor asks for turns out to be less than what they actually need.
Safe not sorry:
Going back for additional funding typically proves to be a daunting task; the physician-entrepreneur has now lost credibility from a business management perspective. Your best solution is to develop a detailed month-by-month cash flow statement that represents the first 12 to 24 months of operation and a general cash flow statement that covers an additional 2 to 3 years. It's a good idea to assume that it will take 3 to 5 years for the practice to become profitable when determining your capital requirements. To your initial estimate, you should add 20% to 50% additional capital.
If you find you are having trouble raising the capital, don't make the mistake of starting out with whatever capital you can raise. This is the kind of mistake that most often leads to failure. Instead, write up a detailed business plan before you seek capital.
The second reason most businesses fail is poor management. The world is full of people with great ideas. But the idea people are often strong on imagination and weak on execution. That's where a business plan comes in. Appropriate basic elements of a business plan include a mission statement, values statement, goals and objectives, competitive analysis, pricing strategies, organizational charts, and expense projections.
If you find this idea tedious rather than stimulating, you likely fall into the idea-person category. This is the first signal that you will need to match up with someone whose talents focus on the details of running a business. Once you have completed your business plan, you will want to use it as your guidebook for managing the new private practice.
You should compare your projected income and expenses with your actual income and expenses each month, determining along the way if any changes need to be made. The business plan you create should be provided to potential lenders along with a concise written proposal that lists the terms of your venture as well as the funds you'll need.
If you are still having trouble raising the necessary capital, ask questions and listen to the answers. A banker or entrepreneurial investor may have a good reason for their reluctance to invest in your venture. These people often have vast experience in business dealings and can there f o re offer valuable insight into what you can do to improve your approach.
One of the best ways to increase your odds of success is to seek the help of qualified professionals. A certified public accountant, financial planner, and business attorney can prove valuable. Another way to aid your success is to seek out a mentor who has the business experience you lack and is interested in helping your business plan succeed.
The ultimate key to success will be your passion for your new practice. When you find yourself at a low point, and you likely will, it will be that passion that sustains you and your practice.