Planning for a Second Location
The tipping point for opening a second location is when the first location generates enough income each month to cover negative cash flows while the second location is ramping up, according to Allen.
“However, you need to plan for a second location basically from the first day you open the first location, meaning you cannot pursue a second location if your first location is not successful,” Allen states. “If you know you want to own multiple practices, then you need to be laser focused on the first location becoming cash flow positive quickly, and providing patients a great experience.”
Allen observes that a practice should wait about two years after opening a first location before applying for a bank loan for a second location. He also cautions about personal lifestyle choices. “Banks look very closely at a doctor’s lifestyle, even though the cash flows are good for the first location,” he says. “Banks will scrutinize school debt that has not been reduced, driving a $75,000 car and living in a large house. It is important that you are not funding everything in your personal life through debt. You do not want to be trapped in a larger lifestyle where you lack excess cash to make the investment into a second location,” he says.