In any small business, including running a physician’s office, the most valuable piece of your business is the real estate. Most people have heard the McDonald’s story of founder Ray Kroc, who believed that the most valuable aspect of McDonald’s was the real estate underneath each restaurant. For small business owners including physicians, getting a piece of the dirt underneath their business is essential.
As I have mentioned in other posts about physician’s offices, the top two expenses in running a business are payroll/benefits and overhead. The most costly part of overhead is rent or leasing of space to run your business. Thus, aside from cutting staff to reduce payroll and benefits, the best thing you can do for your business is to negotiate a better lease or to purchase your office space and pay it off over time. Most retail businesses must choose the best location for their business that generates high traffic and lots of willing customers. Similarly, physicians must also choose locations that are either part of existing hospital medical complexes or are close to large populations and ancillary facilities. Physician’s must also ensure that their offices are accessible to public transportation as many patients must use public transportation to travel.
Many physicians starting out cannot afford to purchase their own space. Thus they must lease space until they have the means to purchase. If you choose not to own your space, then in order to build some wealth you need to invest your income and savings wisely. For when that day comes that you must shut down your practice or your business, it will be the only thing you have to show for all of those years of hard work. If you are able to sell your practice or your business then that is a big bonus. But unlike other retail businesses, most physician’s practices are not sold for much.
One strategy some physicians utilize is to buy larger space than they typically utilize. Then they rent out space to other physicians. This is an excellent strategy for those physicians who have the means to do this. In some respects it turns the physician into a real estate investor rather than just a business owner. Thus for smart doctors who think in advance and invest in their practices, they will have a lasting asset that goes beyond the life of their practice.