Our Client Wanted to Open a Second Medical Practice. We Needed to Know Whether the First One Was Ready to Support It.
By ProfitWise - a Visa Business Plans company
One of our medical-practice clients came to us with an exciting idea: the practice had been growing steadily, and the owner was considering opening a second location.
Because we handle the practice’s specialized bookkeeping, we already had a clear picture of how the business had been performing. The monthly financials showed consistent growth, collections were healthy, and the practice had been generating a solid profit. From an operational standpoint, the owner was also seeing enough patient demand to start thinking seriously about expansion.
The opportunity looked promising, but before discussing what a second location might generate, we wanted to answer a more fundamental question: Was the existing practice financially ready to support it?
We Started With the Practice They Already Had
Having clean, up-to-date books meant we weren’t starting the analysis from scratch.
We could look at how revenue and collections had been developing over time, what was happening with payroll and provider costs, how operating expenses were changing as the practice grew, and how much cash the business typically needed to operate comfortably.
That historical information gave us something much more useful than a snapshot of a successful month. We could see the financial patterns of the practice and determine how much cash it was consistently generating before deciding how much of that could reasonably be committed to another location.
Then We Built the Second Location Into the Numbers
Opening another office would require much more than paying for a lease and buildout.
We considered the initial investment in equipment and technology, but we also needed to account for what would happen once the doors opened. The new location would begin carrying payroll, insurance, utilities, supplies, and other operating expenses immediately, while patient volume and collections would take time to develop.
That timing can make a significant difference.
A second location may ultimately be very profitable while still requiring financial support during its first several months. We therefore wanted to understand not only what it would cost to open, but how much capital the new office might consume before it could comfortably support itself.
We Didn’t Build Just One Version of the Future
We then started testing different scenarios.
We looked at what the numbers could look like if patient volume developed according to the owner’s expectations and compared that with a slower ramp-up. We considered the timing of hiring providers and staff and how bringing people onboard too early could affect cash requirements.
That allowed us to estimate when the second location could begin covering its own operating expenses and how much support it might require from the existing practice in the meantime.
It also changed the financing conversation.
Instead of beginning with how much a bank might be willing to lend, we could first determine how much financing the practice might actually need. From there, we could evaluate the effect of the resulting payments on cash flow and whether a combination of existing cash and financing made more sense than relying too heavily on either one.
Sometimes the Numbers Change the Plan, Not the Goal
This is one of the reasons we like doing this analysis before the owner makes the commitment.
The numbers don’t necessarily tell a business owner to expand or not to expand. They can help determine the most financially comfortable way to do it.
In this case, we might find that opening with a smaller team would substantially reduce the amount of cash needed during the first few months without limiting the practice’s ability to grow. We could then establish the patient volume at which adding another provider begins to make financial sense. The same analysis would help us determine how much of the investment the practice could comfortably fund itself and how much, if any, would be better financed so the existing office isn’t left short of the cash it needs to operate.
Now we’re no longer making individual decisions about staffing, financing and cash reserves in isolation. We’re seeing how they affect one another and can structure the expansion accordingly.
The Bookkeeping Gives Us the History. Then We Use It to Look Ahead.
This is where the relationship between specialized bookkeeping and Fractional CFO support becomes particularly valuable.
Because we work with the practice’s books every month, we understand how the business has been performing and can identify the financial trends behind that performance. When the owner brings us a decision like opening another location, we can use that history as the foundation for forecasting, scenario analysis and a much more detailed conversation about what the decision could mean financially.
For this client, the question wasn’t simply whether the existing medical practice was successful. We already knew from the books that it was growing steadily.
The next question was what that success could realistically support.
And that’s exactly the kind of question we want to answer before our client commits hundreds of thousands of dollars to the next stage of the business.
