Is your allied health practice ready for a second clinic?

Medical & Dental

A second allied health clinic is financially ready when realistic demand can support its staffing and premises costs, the opening cash requirement is funded, and the first clinic can operate well without constant owner involvement. A waiting list alone cannot answer those questions.

For a physiotherapy, psychology or other allied health practice, a new location can improve access and create room for a capable team. It can also leave the owner travelling between two sites, carrying two sets of fixed costs and seeing fewer clients personally.

Before looking at a lease, examine the business you intend to replicate.

Establish what makes the first clinic work

Review revenue and costs by service, practitioner and location where relevant. Look at appointments available, appointments attended, cancellations and the work required outside consultation time.

Be careful with a single utilisation percentage. A practitioner's week also includes clinical notes, professional development, supervision and other necessary activities. A target that ignores these responsibilities can produce an unrealistic staffing plan.

Ask which parts of the current result depend on you. Do referrals come to the practice or specifically to you? Are you handling recruitment, clinical leadership and difficult administrative issues as well as delivering services?

Include the cost of replacing the work you will no longer be able to do at the first site.

Test demand at the proposed location

A waiting list at one address does not necessarily transfer to another. Travel patterns, referral relationships, service mix and appointment preferences can change the picture.

The government's market research guidance recommends examining customers, competitors and demand. Apply that locally: which services are needed, who is likely to use them and what evidence supports the expected bookings?

Discuss the opportunity with referral partners without treating expressions of interest as committed revenue. Distinguish clients likely to move from the first clinic from new demand. Moving an existing appointment may fill the second location while leaving a gap in the first.

Build the forecast around those separate movements.

Price the whole opening period

Fit-out and equipment are only part of the initial commitment. Allow for the lease arrangements, recruitment, systems, insurance, opening supplies and the time needed to establish the clinic.

Then model the period between opening and a sustainable level of appointments. Costs can start well before revenue becomes dependable.

Use at least a base case and a slower-start case. The second should reflect a plausible delay in recruitment or bookings, rather than an arbitrary percentage reduction applied to every line.

For each case, identify the lowest cash balance and the extra funding needed to reach it. Include the effect on the first clinic and the owner's income.

A clear forecast makes it easier to discuss funding options before the business is committed to a deadline.

Check the service mix and GST treatment

Do not assume everything provided by a health business receives the same GST treatment.

The ATO's other health services guidance sets conditions for GST-free treatment, including the listed service, the recognised professional and whether the service is appropriate treatment for the recipient. The recipient is not necessarily the patient in every arrangement.

This deserves attention when the new clinic adds services, classes, reports or different contracting arrangements. Have your adviser confirm the treatment before finalising prices and forecasts.

The point is to understand the revenue you will retain and the obligations attached to it, without letting an assumption flow through the entire model.

Decide who will run each location

A second clinic needs someone accountable for its day-to-day operation. That responsibility should be clear even if administration is shared.

Set a small reporting routine covering bookings, collected income, staffing, overdue accounts and cash. Review the same definitions at both sites so changes are comparable.

Agree what will trigger a response. If recruitment takes longer than expected, will you delay opening sessions? If bookings grow slowly, how will spending be adjusted? Who has authority to make those decisions?

It is easier to discuss these thresholds while the expansion is still a choice.

Bring the decision back to your own workload

Expansion may increase the value and resilience of the practice. It may also move you into a management role you have not yet decided you want.

Consider the income, time and responsibilities you expect after the first year. Discuss the household effect of lower drawings during the opening period and any additional guarantees or debt.

Could we start with fewer sessions or shared rooms? A smaller commitment may help test demand, subject to suitable premises, contracts and clinical requirements. Compare its costs and limitations with a full opening.

Should the first clinic fund the second? Only after assessing what the existing business needs to operate and withstand setbacks. Treat the transfer as a deliberate investment with appropriate documentation.

If a second location is becoming a real possibility, speak with EFS. We can help connect business planning, cash flow and your personal financial position before you commit to the next lease.

General information only. Obtain advice on your financial, tax, contractual and professional obligations before expanding.

Speak with our team

For advice on your circumstances, speak with Paul Connolly.

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