Finding Sources of Financing
If your practice isn’t constantly welcoming new patients and keeping up to date with regard to equipment, treatments, and procedures, then it may be heading for trouble. New patients are the life-blood of a medical practice or medispa and providing excellent service and the best standard of care by offering state-of-the-art technology is key to keeping them coming through the door. However, doing so requires the commitment of resources, both financial and human. A previous article addressed human resources; this article will address ways to secure financial resources to grow your practice.
One method is to internally finance your own growth by using the profits from your practice and the ongoing cash flow to purchase new equipment or expand. The advantages to this are that you are “borrowing” from yourself, no applications to fill out, no approvals to wait for and no interest to pay. However, there are downsides to this approach. First, new technology is expensive, so it may require extended time to save up enough cash for the purchase. It can also mean you have to delay other investments in your practice, which can hurt your growth potential. A third concern is it depletes your profit/cash flow cushion so any unexpected or unplanned expenses can have a negative impact on your practice. Given these concerns, it is important to consider other financing options.
Line of Credit
A word of caution is in order. Getting loans is more difficult than it was in the past and many small businesses, and small medical practices and medispas will find it challenging to secure financing. According to a 2017 National Small Business Association study, one-fourth of small business owners say they can’t obtain the necessary funds to operate their businesses. Interestingly enough, the study also reveals that of those that do successfully secure financing, 85% of that financing is coming from a source other than a large bank; and the situation has only gotten worse due to COVID. With this in mind, it makes sense for your practice to develop a variety of financial allies.
Cheryl Whitman is founder and CEO of Beautiful Forever, an aesthetic business-consulting firm, and the Beautiful Forever University training program for medspas, and author of Beautifully Profitable, Forever Profitable. Contact her at email@example.com, 561.299.3909.