Expansion isn’t just about the big-ticket items. Sure, you’ll need more office space, furniture, medical equipment, and more staff. It’s the less obvious costs that can put a wrench in your plans, though, if you don’t plan for them.
Anticipating the full range of costs can be the difference between your medical practice thriving or stumbling. So let’s walk through 7 commonly overlooked and underestimated costs you’ll face and how to prepare for them.
1. Building Permits and Contingencies
Complying with government regulations increases the total renovation or construction costs of your new location. Permits for a simple project in an area with a low cost of living might only add a couple of hundred dollars. However, a large or complicated build, especially in an area with a higher cost of living, can cost thousands of dollars in city, county, and state fees.
Also, consider budgeting for contingencies. Your builder’s quote is their best estimate, but your final cost could be 10 to 20% higher due to delays or supply chain issues. You may also make changes to the original plan. Maybe you want the changes to make your location more accessible or environmentally friendly, or you have to adjust to new regulations or material shortages. Any unplanned modifications to your renovation can inflate the cost.
Talk with your contractor or local inspector to plan for permits and fees. They can estimate your project’s costs. Plan an additional 10% or more to fund any contingencies.
2. Equipment and Technology
A new medical clinic needs new equipment. From imaging technology to dental chairs, healthcare devices are expensive. Even furnishing the basic chairs, tables, and desks is a hefty upfront investment.
Another overlooked expense is technology for your expansion, especially in a new location. Investigators at the Baylor Research Institute estimated that a five-physician practice in 2011 would spend $162,000 implementing its IT and $85,500 on first-year maintenance.1 With inflation and additional electronic services like telehealth, technology costs could easily add $250,000 to your total expenses.
You can add these costs to a long-term business loan or secure business equipment financing for your technology and medical devices. Factor additional funding into your budget since you will likely face additional maintenance expenses in your first year.
3. Hiring and Onboarding New Staff
Hiring staff for your expansion is a necessary and ongoing expense. You have to recruit, vet, train, and retain qualified professionals. Budget for salaries, benefits, insurance, training time, onboarding materials, and sometimes relocation expenses. Even after you open your doors, it could take months to fill schedules. During that time, you still need to cover payroll.
You can cover staffing expenses with cash flow from your original clinic, business loans for medical practices, a business line of credit, or cash reserves. But having a sound financial plan to hire and pay your employees will either make or break your medical expansion.
4. Licenses, Insurance, and Regulatory Fees
Every new location and service line usually requires new licenses, state filings, and changes to your malpractice and property insurance. Expanding into telemedicine? You may need to be licensed in every state where your patients live. Adding a surgery center? That means navigating more complex accreditation processes.
These compliance-related costs aren’t optional. Account for them at the beginning of your expansion so you don’t delay opening or expose yourself to legal risks.
5. Hidden Operational Costs
With your new location renovated and furnished, expanded staff hired and trained, and all the legal documents in order, it might seem like patients are all that’s missing. But daily operations bring a long list of small, recurring costs.
Every new exam room needs medical disposables, every new desk needs office supplies, every new bathroom needs sanitation products, and every new waiting room needs magazines. The bigger your expansion, the more small items you’ll purchase.
An expansion also means increased utility payments, cleaning services, maintenance expenses, and technology troubleshooting. You’ll need to plan for these recurring costs to keep your healthcare business running smoothly.
You can estimate these hidden operational costs by doubling the current expenses for your medical practice. Then you can use current revenue, cash reserves, a working capital line of credit, or a business credit card to help cover the total.
6. Marketing Campaigns
Growth means nothing without patients coming through the door. To drive appointments to your new space, you’ll need a ramped-up marketing strategy. That could include a new website, paid ads, community outreach, referral programs, or local sponsorships.
Your marketing budget should cover branding, updated signage, patient communications, and sometimes even PR campaigns. Especially if you’re operating in a competitive market, you must actively and strategically fill your expanded capacity.
7. Cash Flow Gaps
Even with careful planning, expansion often leads to a cash squeeze. You may still pay rent on your current location while setting up the new one, or have unexpected construction issues that delay your opening. You may also be paying new staff before patient volume justifies their role. Finances can be tight for 12 to 24 months after expanding your medical practice.
Don’t wait until the stress hits to plan your financing. A working capital loan or business line of credit could bridge these cash flow gaps. Applying in advance helps you negotiate better terms and avoid panic borrowing at high rates.
Plan to Thrive
Expanding your medical practice is a complex move. You have to prepare for hundreds of details and plan for unexpected or underestimated costs. But when you budget for expenses and arrange financing for the whole picture, you plan for your expanded medical practice to thrive.
1https://pubmed.ncbi.nlm.nih.gov/21383367/
