One of the first steps in setting up a private practice is finding and setting up a location, as it will both impact your business pro forma and because you will need the address for other steps such as credentialing. There are several factors to consider, which we cover below. Once you have your location selected and secured, we cover tips to prepare for opening.
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Choosing a Private Practice Geographic Area
One of the most critical aspects of ensuring your private practice’s success is picking an ideal location that serves your target patient base. As such, it is very important to do an extensive market analysis of your general area of interest. You may enlist the help of a consultant if necessary, but this is one step that you do not want to skimp on. Consider:
What is the competition? What are their typical patient volumes? What’s their wait time for a new appointment? If this is a relatively saturated area with plenty of options and nonexistent wait times, what will set you apart from the existing competition?
What is the demographic makeup in the area, and does it fit your typical/desired patient mix? For example, setting up a pediatrics or obstetrics practice in a county where the average resident’s age is in the 50s or 60s may be challenging.
What kind of payer mix is there in the area?
Is there a hospital nearby, or do you need to have a hospital nearby? Is the hospital a source of competition, or can it be used to establish a referral base?
Are there other specialties in the vicinity that could have a synergistic effect on your practice? Where are they currently sending their patients?
Choosing The Exact Private Practice Location
Once you’ve honed things down to a specific geographic region, then you can focus on picking the specific building or lot (if you’re planning on building, although most private practices don’t start out by building a location unless this is an expansion site of an existing practice).
Look at your business pro forma and decide what your budget is for rent or purchase. You can then either enlist the services of a commercial real estate agent, look online for medical office space listings, drive around by yourself and look for openings, or start asking around about known vacancies with contacts in the area. Most people will do a combination of these things. If you know of other practices in the area that aren’t competitors, this is a good time to leverage those networks as well as lay the groundwork for letting them know you’re coming to the area. They may have conducted their own office searches recently, and have leads for you that may be appropriate as well, or even have space within their own office buildings.
Pay close attention to the convenience and visibility factors, as well as what your ideal patient population will expect in terms of appearance. If you are starting an aesthetics based practice, for example, you may need a more modern and shiny appearance, whereas with other patient populations, you may choose to prioritize your dollars elsewhere. These will be fundamental drivers for your profits.
Once you have some candidate properties to check out, these are thing you should be taking into consideration as you scope out potential private practice locations:
How visible and easy to access is the building from major roads?
Is this location convenient for your target or existing patient base?
Is the location in a high traffic area where you might be able to get potential patients driving and/or walking by and noticing your practice's signage?
Are there other practices nearby that are natural referral sources?
Is there enough space to accommodate not only your current plan but your future practice goals and needs as you grow? If you plan on offering ancillary services in your private practice, can the space accommodate it?
Is there enough parking to accommodate your expected patient volume?
Is the asking purchase price or rent appropriately valued?
Are there enough accessibility features in the building for your population?
Will your ideal patient demographic like visiting this office?
How much work will you have to put into upfitting the space to make it fit your needs and your desired aesthetics? This includes thinking about whether there is appropriate plumbing and electricity, whether walls need to be torn down, and what the building will allow you to do and not do.
How long of a lease will they offer, and does this give you the security that you need? Alternatively, is it too long because you’re planning on eventually moving out and building your own location?
When considering a lease, explore our negotiating tips for a private practice lease agreement.
If you are looking for future expansions but those plans are further on the horizon, also consider how conducive the space is to subleasing to either a complimentary practice or service until you can grow into it. Not all space layouts are created equal.
If you are buying the building or planning on building on a lot, you’ll have to consider the investment potential of the medical office building as well. The qualities you look for in a building that you intend to sell for profit will differ than a building that you just intend to rent. Read this article on investing in medical office buildings for more context.
Seek Professional Guidance
We recommend hiring a commercial real estate professional to take you on tours of vacant office spaces. They can also help you identify potential issues and coordinate inspections and any other needs. Additionally, they may know the backstory of the property and be able to help you leverage this information in negotiations.
If you decide to lease, we also recommend running the lease by a real estate lawyer before securing the location.
Renting Vs Purchasing Your Private Practice Location
One of the biggest questions when choosing your private practice location is deciding whether you want to buy or lease.
On our checklist for starting a private practice, we always encourage keeping expenses low at the beginning of your private practice journey. Generally, that means leasing. However, there are several downsides to this approach, as you will likely find that you have to outfit most medical office spaces to fit your needs, and most leases are triple net (NNN) leases, which means that you have to pay for most of the expenses of the building or office space regardless. You may find that renting space from another practice or retiring physician or renting space in a medical office building is much more efficient and limits both startup costs and mental bandwidth required to open.
There are, however, benefits to purchasing a medical building if you have the proper funds and situation to do so, or if you already own a successful practice and are considering adding an additional location. There are many perks of investing in medical office buildings or spaces. Since you know you have a stable tenant (you!), and that you aren’t going to default on payments to yourself, the ability to have the money you put into rent go towards your own ownership of the building instead of someone else is a great idea that also comes with the tax advantages of owning real estate. It also takes the money you spend in renovating the space to suit your needs and puts that capital investment into your pocket as the landlord.
While eventually, we are big advocates for most practices owning their own real estate if it’s financially possible, remember that you don’t have to start there. Especially if you are early in your career or in a very high cost of living area, there’s a good chance that you won’t have the money to do it right away, and if so, don’t worry. Focus on building your practice and revisit this at another time. The last thing you want to do is stretch your budget too thin as your practice or new location is getting off the ground.
Even if you are in a position to buy your own space at the beginning, consider not just if you want to purchase, but when. There are many reasons to defer on purchasing your own medical office space from the beginning. You can test out a market first, see how the practice builds, and then make a decision to make the large investment that you would need to have your own space. What if the location is less than ideal? What if your needs change or you realize you need more or less space? What is your practice revenue is unable to sustain the facility at first? For all of these reasons, while the ultimate goal may be to own your own medical office space, many practices plan on renting initially.
One situation where we often see people building from the beginning is if this is an expansion location for a practice where there is already a tried and true formula to success, and there has been sufficient market research to indicate that a new location will do well. In these cases, many partners in a private practice will see ownership in the medical office building as a worthwhile investment opportunity and decide to build.
PSG resource: We offer a new office space directory. You can either advertise an office space in your private practice or browse available office space from members!
Preparing to Open Your New Private Practice Location
Once you decide whether you want to lease or purchase your private practice's location and that issue has been settled, it’s time to move the discussion to preparation for opening your private practice location.
One of the first things you’ll need to do is furnish the medical office building. Depending on the previous occupant's setup, you may need a contractor. You may also want to consider hiring an interior decorator. Make sure when planning out the space, you plan for:
Front desk
Waiting rooms
Exam rooms
Back office
Storage
Ancillary practice areas, such as merchandise sales, physical therapy spaces, laboratory or imaging spaces, etc.
Be sure to plan for having furniture and flooring that will be durable with foot and wheelchair traffic. Also remember to have ADA-compliant entrances and doors.
Equipment and Supplies
As we mentioned in lease versus purchase for the location, try and limit overhead at first. The less you spend, the faster your private practice will make a profit.
See if you can get equipment heavily discounted or even free from other medical practices, retiring physicians, or hospitals in the area. Things to remember and budget for:
Exam tables
Chairs (for staff and patients)
Stethoscopes
Otoscopes
Blood pressure monitors
Consumables such as: ointments, gloves, scalpels, syringes, gauze, alcohol wipes, and tongue depressors
Office furniture (for front office, physician's office, lounge/breakroom, etc.)
Hardware such as: fax machines, computers, phones, and credit card machines
Clothing such as: lab coats, staff uniforms, name tags, and patient gowns
Operating room equipment, if applicable
Imaging or lab equipment, if applicable
We offer partnerships with companies that can help with several of these things. Remember to check out our private practice resources page for relevant exclusive PSG discounts.
Certificate of Occupancy
Make sure you cover the following:
Fire Inspection
Safety inspection
City inspections
Utilities
You'll want to create accounts with and get your utilities (phone, internet, electricity, water, trash, etc.) set-up.
Aesthetics
To make your practice inviting, professional, and easy to find, don't forget to account for the following as well:
Landscaping
Signage
Decor
A little bit can go a long way.
Opening Your New Private Practice Location
Congratulations, your new location is physically ready to open!
Make sure you drum up awareness before you officially open for business. If you need them, we have tips on marketing your private practice.
To double check you're ready to launch, make sure to run through our setting up a private practice checklist.
Conclusion
Picking a location for your private practice is one of the most important decisions you will make. Take the time to consider all of your options and the pros and cons of each carefully. Hire a consultant and/or a commercial real estate agent to help you with the process as needed. Keep in mind both budget and overhead costs in the process, but also don’t skimp on the little things that may make your practice more attractive to patients or the logistical things that you need to stay in compliance with regulations. Lastly, remember that not everything has to be done all at once.
We wish you the best of luck! Please browse our resources below for additional help specifically related to opening a new private practice location, as well as our more comprehensive list of private practice resources, perks, and discounts for our PSG members.
Additional Private Practice Resources
Office Space Directory, for Members from Members
We offer a new office space directory. You can either advertise an office space in your private practice or browse available office space from members!
Financing
When you need financing for your medical practice, you want to work with someone who understands your industry. For over twenty years, Bank of America Practice Solutions has helped doctors across the nation reach their goals through smart financial solutions1 and expert guidance. Whether you own a practice or are just getting started, we can provide customized financial help for your short-term needs and long-term aspirations.
Purchase and start-up:
Practice sales and purchases
New practice start-ups
Owner-occupied commercial real estate products2
Growth and restructuring
Improvement and expansion financing
Equipment financing
Practice debt consolidation3
Expert guidance. Personal attention. Real solutions.
To learn more, reach out to our partner Paul Belau, 614.679.5321 or paul.belau@bofa.com.
1 All programs are subject to credit approval and loan amounts are subject to credit worthiness. Some restrictions may apply.
2 For Owner-Occupied Commercial Real Estate loans (OOCRE), terms up to 25 years and 51% occupancy are required. Real Estate financing options are subject to approval and product availability is subject to change. For SBA loans, SBA eligibility and restrictions apply.
3 Bank of America may prohibit use of account to pay off or pay down another Bank of America account.
4 To be eligible for this reduction, applicants must provide association name and membership number at time of approval.
Bank of America is a registered trademark of Bank of America Corporation. Bank of America Practice Solutions is a division of Bank of America, N.A. ©2019 Bank of America Corporation | MAP#3249875
Learn more at bankofamerica.com/practicesolutions
Disclosure: Bank of America is a sponsor of our Private Practice Education Series and partner of ours, which means that we may earn a referral fee if you decide to contact them.
Office Furniture
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