To make a clear distinction between the concept of owning or running a practice, and establishing and growing a business, one needs to develop the acuity of separating the caring therapist role from clear business principles and investment opportunities which present themselves.
In the next few articles, I will be presenting a series looking at the various aspects of developing the business edge of your practice.
The business structure of your practice
Due to the fact that we as Healthcare Providers need to be registered with the Health Professions Council of South Africa (HPCSA) as our regulatory body in order to practice, we are also required to keep to the ethical and legal requirements as laid out by the HPCSA Regulations.
The HPCSA is quite clear on the manner and vehicle through which we can run a practice. It is important that we take cognisance of these rules before embarking on the process of registering a company at the Companies and Intellectual Property Commission (CIPC– the old CIPRO).
As a healthcare provider, we need to maintain direct liability for the treatment we provide. In other words, we can’t hide behind a “Corporate veil” should a patient want to sue us for malpractice. An owner of a Pty (Ltd) could have an aggrieved client take legal action against the company they work for rather than them as an individual, but we as healthcare providers are not afforded this alternative.
For this reason, we have the following options when establishing a practice:
1. Run your business in your own name, as an individual – Solus Practitioner
2. Run your business with a partner or partners – Partnership
3. Run your business in association with other healthcare providers – Association
4. Run your business with other healthcare providers as shareholders – Incorporated Company
There are of course pros and cons in each of these structures, which you will need to understand well before making your decision.
Often we find that practitioners start their practice as a one-man-practice, trading in their personal capacity not having any formal business registered. In these cases, it would be critical to introduce carefully structured and well planned strategies to monitor and track the performance of the business. Now this may seem obvious, but too often we find that personal expenses and business expenses are run from the same bank account. Books of accounts are not drawn up on a regular basis, and the business owner has no idea of the current financial status of their practice.
This can only be achieved through clear financial management, regular analysis of the business’s performance, and timeous reaction and realignment of goals on current financial indicators. The only crude measure of financial success of the practice may be the cash in the bank! Very often a response to this may be too late.
Although the SARS requirements regarding annual tax submissions in the case of a Solus Practitioner is that individual and practice income and expenses are submitted together after the February year end, it would be a good idea to run your personal and business finances separately throughout the year, only merging these prior to the annual tax submission, with good tax advice and reconciliation.
I think it is critical that we look at the business structure in which we practice with a long term view. Not only regarding its current structure to ensure a business approach, but also with the view of “Preparing my business for sale”. We should in fact start a practice with this in mind. In keeping with this motto, one looks at the practice as a business, seeing in the light of an investment, which will hopefully offer you good returns in the future, for all the hard work you put into its growth and development.
In the next part of this series, we will look at the various elements that you should consider when “Preparing your business for sale”, and how this can add value to your business.