Becoming a Healthcare Entrepreneur

Professionals from every healthcare profession can successfully apply the principles of entrepreneurship to their businesses. Properly trained managers and support staff can increase their value to their employer by learning and helping to implement these same principles. Regardless of whether you are a current practice owner, an aspiring owner, a manager, or a support staff member, you can adapt qualities, perspectives, and ways of thinking to become a successful Healthcare Entrepreneur.

As a Healthcare Entrepreneur, you must expand how you think about your practice. This means adding a business dimension to your perspective, all the while pursuing your dreams, goals, and aspirations. Healthcare Entrepreneurs structure their businesses to maximize lifetime earnings; therefore, the primary financial metric is “What is the value of my company?”

Certainly, money is a part of your business’s value, but esoteric values such as quality of care also must be taken into account. Looking only at the money or only at the more personal values diminishes both. Attending to both enhances both.

When applied thoughtfully, the best business models in healthcare also result in the highest possible quality of care. In fact, failure to implement the principles of Healthcare Entrepreneurship can actually diminish the quality of care. An example comes from the professionals who must limit their time spent with each patient to see enough patients to make ends meet. Healthcare Entrepreneurs use business principles to remain profitable without having to cut clinically valuable corners or sacrifice job satisfaction.

Making the shift from traditional thinking to Healthcare Entrepreneurship thinking requires an ongoing commitment. Ingrained habits and the historical sociologic tenets of most professions may act as inhibiting forces. Fear of censure by your peers for opening new paths can compete with your desire to succeed. In reality, there is nothing to fear. Successful Healthcare Entrepreneurs tend to be admired by their peers and sought after by their patients.

“A decent hockey player always knows where the puck is. Great hockey players know where the puck is going to be.” — Wayne Gretzky

As a Healthcare Entrepreneur, you will recognize that the business you own has value. How that value benefits you and increases your personal wealth depends on the decisions you make. Certainly, the salary, dividends, and bonuses you draw from the business are among the benefits. They are not the only considerations, however. Nor are they the primary considerations driving decisions. For example, as a Healthcare Entrepreneur, you may choose to take home less money in any given year so you can invest in equipment that will make a larger contribution to your personal wealth at a later time.

This does not mean Healthcare Entrepreneurs ignore their annual profits; they keep their eyes on their current profits and on the value of their business. Healthcare Entrepreneurs make business decisions by determining how their decisions will affect the monetary value of the business over the near term and the long term.

For example, consider a physician who has an option to purchase an expensive piece of diagnostic equipment. Over the near term, the cost of doing so will diminish net profits. Over the longer term, however, owning that equipment will likely bring in more patients, resulting in more profitable billings per patient and increasing the value of the business when it comes time to sell. All other factors being equal, the savvy Healthcare Entrepreneur likely will invest in the future and purchase the equipment.

Unlike business owners in other industries, far too many healthcare practitioners simply shutter a practice when they are ready to leave or sell the practice to a colleague at a price well below its true value. Healthcare Entrepreneurs are always tracking the value of their business and building that value. When the time comes to sell their business, they are in a position to profit and, in a very real way, keep profiting personally long after they have retired.

The healthcare industry is fraught with risks. Although some people choose to avoid thinking about them, no one in any business is immune from risks. Healthcare Entrepreneurs manage and master their risks by staying on top of the information flow regarding factors that impact their business and by making informed decisions. Likewise, they know their own level of risk tolerance and make decisions commensurate with that level.

There are no right or wrong levels of risk tolerance for a Healthcare Entrepreneur. For example, some adhere to conservative operating models; they will not enter a new market, offer a new service, experiment with new technology, or take other risks until the new market, service, or technology has proven itself. This approach reduces the risks but also tends to reduce the rewards.

Other Healthcare Entrepreneurs follow an “early adopter” model. These professionals keep their eyes on future trends and consider the predictor variables that might help them get a jump on new trends that turn into profitable options. They maximize profits by staying ahead of the curve.

There is one exception to the “no right or wrong” principle of risk-taking in the business world: impulsivity. Certainly, there are Healthcare Entrepreneurs who tell tantalizing stories of a profitable decision made purely on intuition. Their success is a product of chance; if you roll the dice often enough, eventually, you will come up with snake eyes. Successful Healthcare Entrepreneurs know to walk away from the table when they experience such a fortunate gain. It is foolhardy to take the profits from random good fortune and re-invest them impulsively in another risky venture. Owning a successful business is hard work, and much of that work involves learning about, understanding, and keeping on top of the information that guides productive business decisions.

In the tumultuous world of healthcare, Healthcare Entrepreneurs learn to manage and adapt to change. More often than not, they choose to make changes rather than feeling compelled to change in reaction to outside forces.

Healthcare Entrepreneurs think outside the box and develop profitable opportunities within the boundaries of their circumstances. For example, when faced with fee cuts in excess of 50%, an entrepreneurially minded ophthalmology group, recognizing that most of their patients were senior citizens with the predictable health needs associated with late life, added audiology, dermatology, and a balance clinic to their business. Everyone benefited; the patients had easy access to oft-needed services, and the practice limited the negative financial impact of the fee reductions.

Healthcare Entrepreneurs are open to re-inventing their businesses to take advantage of new opportunities. Traditional practitioners, on the other hand, tend to have a narrowly defined range of activities in which they can and will engage. Healthcare professionals offer a striking number of explanations when asked why they did not take advantage of new opportunities or why they did not make minor changes to increase profitability. Too often, the explanation is simply, “I never thought of that.”

Not all Healthcare Entrepreneurs are practice owners. Those who work with, and sometimes for, others are called Intrapreneurs, reflecting the fact that they bring their entrepreneurial skills and spirit into other organizations. Some examples of Intrapreneurs are office managers, contracted managers, and practice consultants. Intrapreneurs are professionals who set up or manage entrepreneurial projects in partnership with or on behalf of a company they do not own.

Successful Intrapreneurs must have the skills needed to create a business independently, along with the skills required to successfully navigate the politics of a larger organization. Those who bring both to the table can create lucrative opportunities.

For example, consider the physical therapist who is contemplating opening a second office in a nearby town that does not currently have access to physical therapy services. One option is for the physical therapist to take all the risk and open a satellite office. Another option might be to negotiate with the local hospital to open a physical therapy department as a joint venture. With the entrepreneurial physical therapist at the helm, the risks and profits are shared. There is room for everyone to gain.

Your Vision

You can take the first step in building a practice from virtually anywhere in the world. Write down your vision for the practice, first describing the big picture and then giving it substance by including as much detail as your imagination will allow. This may sound simpler than it is; moving ideas into plans and wishful plans into actionable plans can be challenging. A person who is genuinely committed to having a successful practice most likely will have already spent time daydreaming about the future, but now is the time to go beyond the passive stage of fantasizing.

Once you have written down your daydreams, consider them from different angles. Talk to friends and mentors to learn their thoughts. Begin to write down, in clear, concrete terms, what it will take to convert your dreams into reality. Most aspects of business should be viewed as a ratio, so in addition to considering the potentials of your ideas, also consider the costs and risks. Likewise, most things in business happen in steps and stages. Think through the steps and stages and write those down as well. With these few steps, you have begun to write a business plan.

Your Business Plan

A business plan is an essential (let me say that again: essential) tool for those who want to maximize their success. Experts often cite the lack of a business plan as one of the leading causes of business failure. Savvy investors will not even consider an investment opportunity if it is not backed by a business plan. If savvy businesspeople will not risk investing in a business that lacks a business plan, why should you?

Writing your business plan requires thought, research, and informed decision making. The more fully developed and detailed your business plan is, the better it will serve you. The major headings for a basic business plan are shown in Table 1. There is nothing magical or sacrosanct about the list; you can modify it to fit your needs. Basic business plans guide you toward goals, help you stay on track in meeting those goals, and help you maintain your focus on factors that might enhance or interfere with your business. Keep in mind that banks often require a business plan before they will lend you money.

Any time you must make a significant business decision, consult your business plan. Once you make a decision, revise the plan to reflect the associated changes. By way of example, consider an internal medicine group that has been approached by a local hospital interested in purchasing the group. The group stands out as an attractive acquisition in part because of its consistent pattern of substantial growth over the past several years.

The hospital’s offer includes a purchase price that seems low to the principles of the group. A quick review of the business plan will remind them of the factors that promoted their recent successes. The data underlying the plan may predict many more years of growth, in which case the practitioners may choose to pass on the hospital’s offer. Alternatively, the plan may point to a slowing trend, in which case the hospital’s offer may deserve full consideration. Armed with the information in their business plan, the principals in the group will be better prepared to successfully negotiate a more favorable price and other terms if they do choose to pursue the acquisition.

Completing a business plan can sometimes be discouraging to would-be Healthcare Entrepreneurs. Because it is difficult to find the time to finalize the plan when one is completing professional training, it may be necessary to hire a Consultant to write the plan for you. One way or the other, the time or money you invest in a business plan is well worth it.

Excerpted from Lucrative Practices: The Comprehensive Handbook for Healthcare Executives , by Michael B. Spellman, PhD.