DermatologistsDefine the market and the operating rationale
A useful rationale connects local demand to a concrete operating choice. For example, a site near a growing employment district might support afternoon and early-evening sessions if clinician availability and local scheduling evidence support those hours. A location with limited parking may work for a short-visit model but be less convenient for a service mix that depends on longer appointments. State the trade-off plainly. The goal is to compare feasible choices, not to make the selected address appear inevitable.
Set the space and equipment plan
Build the space plan from the work the team expects to perform. Map reception, waiting, consultation rooms, procedure rooms, storage, staff space, and circulation. For each room, state its intended use, equipment needs, cleaning or turnover assumptions, and the hours it can be staffed. A room count by itself says little about throughput. The plan should show how many sessions can operate at once and what support roles each session requires.
Ask a qualified facilities professional to test the proposed layout against building conditions, accessibility requirements, utilities, landlord obligations, and applicable permits. Separate essential opening work from enhancements that could wait. Obtain comparable fit-out estimates that state exclusions, allowances, schedule assumptions, and responsibility for overruns. Choose equipment to match the approved service mix. Record purchase and installation costs, expected maintenance, staff training and replacement timing.
Build the staffing and cost plan
Build a month-by-month roster for the new address. Show which positions are essential to open and which can follow demonstrated demand. Allow for recruitment, credentialing, onboarding, schedule coverage and the management time diverted from existing locations.
Separate build costs from recurring occupancy and operating expense. Deposits, design, equipment, network setup and signage, plus initial supplies may be due before opening. Rent and utilities, plus maintenance, plus staffing continue during a slow ramp. Shared billing or management teams may also need additional capacity. Show payment timing as well as total cost.
Build the staffing and cost plan
Budget employment costs beyond base pay. Include employer obligations applicable to the practice, recruitment fees, credentialing or onboarding administration where relevant, training, leave coverage, and the time existing managers spend setting up the site. These costs can land before the office produces meaningful revenue. Ask the finance lead to confirm the treatment of payroll taxes, benefits plus any local employment requirements. Keep assumptions consistent across the model, including whether owner or clinician compensation is included as a cash expense.
Model opening ramp and payer assumptions
Begin with capacity instead of a top-line revenue target. For each clinician session, estimate available appointment slots after setup and documentation, plus breaks, plus other predictable non-clinical work. Multiply by planned sessions and show the result by month or quarter of the ramp. Distinguish booked appointments, completed visits, and billable services. The three figures are not interchangeable. Cancellations, unused slots, scheduling patterns, and clinician onboarding all affect the number that can be delivered.
Resolve opening dependencies
Financing should cover both the build and the ramp. Determine whether funds come from retained cash, a loan, equipment finance, landlord contribution, or another source. Compare repayment timing and covenants with projected cash flow, and include fees and interest in the relevant scenario. Ensure that the practice has adequate liquidity for existing operations after funding the expansion. A location can show an eventual operating surplus and still create unacceptable pressure if the practice cannot meet obligations during the early months.
List dependencies in a register with an owner, target completion point, evidence required, and consequence if unresolved. Examples include landlord approval for the work, utility capacity, equipment delivery, payer participation and staffing, plus financing, plus technology setup. Keep dependencies specific. "Permits" is too vague unless the register names which approvals are required, who confirms them, and what date controls the build sequence. Review the register at each approval gate, and escalate a slipping critical item before it silently becomes an opening delay.
Set decision gates and review the result
Break approval into stages that match the commitments. An initial feasibility gate can authorize market research and preliminary design. A lease gate should require an approved site case, a costed scope, and an understanding of exit and commencement terms. A construction gate can require financing, permits, contractor pricing, and a schedule with reasonable contingency. An opening gate can depend on staffing, equipment, systems, payer arrangements, and a tested operating calendar.
For each gate, name the person with authority to proceed, the evidence they need, and the conditions that pause the next commitment. Define decision rules before results arrive. For example, the owner group might require minimum liquidity after funding, a maximum acceptable downside loss, and signed responsibility for unresolved dependencies. Set review dates for the first year and compare actual results with the original case using the same definitions and periods.
Illustrative worked example
Assume a practice budgets $420,000 for fit-out and equipment, $55,000 for pre-opening payroll and recruitment, and $38,000 in monthly fixed site costs once open. The plan models six months of gradual scheduling, with the first clinician sessions starting before all planned capacity is available. These are illustrative inputs, not market benchmarks. The owner should replace them with quotes, payroll assumptions, lease terms, and the practice's own collection history.
The example also shows why a single break-even month can mislead. Break-even depends on actual collections, variable costs, staffing plus the volume displaced from the existing location. If half of the new office's activity transfers from the original site, the practice may have a stronger geographic presence without an equivalent increase in total revenue. The case should therefore report the new site's contribution and the combined practice result, then compare both with the purpose set in the rationale.
Common mistakes to avoid
One common mistake is using the established office's waitlist as proof that a second site will fill quickly. The waitlist may include people who prefer the existing location, duplicate requests, or appointments that can be served by adjusting current hours. Test geography and willingness to travel with aggregate evidence, and discount demand that depends on unconfirmed assumptions. A busy practice is evidence of pressure, but not automatically evidence that a particular address and cost structure will succeed.
Another mistake is treating rent as the main cost. Fit-out, pre-opening expenses, management time and recruiting, plus financing, plus utilities, plus repairs, plus delayed collections all affect the cash requirement. A lease with a low headline rent may require substantial tenant work or a long make-good obligation. Compare the full cost over the intended term and model cash timing. Ask advisers to explain unusual clauses in language owners can relate to practical exposure.
Owners can also overstate capacity by counting rooms instead of staffed sessions. Three rooms do not create three streams of revenue if one clinician and one support person are the only available team. Conversely, hiring a full complement before patient demand is demonstrated can inflate the ramp deficit. Link labor decisions to a staged schedule and define the evidence that creates room for each additional shift or role.
A further error is treating payer participation or collections as settled before terms and operational details are confirmed. Include pending arrangements as dependencies, use conservative alternatives in the downside case, and make clear who owns follow-up. Also avoid an overly optimistic opening date built from best-case construction, recruitment plus equipment delivery assumptions all occurring together. A schedule with no float can be wrong as soon as one supplier or approval slips.
Finally, some cases have no explicit owner or decision rule after approval. Without a person responsible for monthly comparisons and escalation, early warning signs are easy to rationalize away. Before making commitments, name who owns the data, finance model, facilities work and staffing plan. Define what results trigger a change in hours, scope, or further investment. A review is useful only when it can lead to an actual decision.
Improve the quality of the demand case
Demand estimates should use more than a broad population count. Potential inputs include de-identified appointment inquiries by geography, current wait times, referral patterns, existing-site capacity, local employer or population data, competitor locations and travel time. Each source has limits. Inquiry counts may include duplicates, while broad demographic estimates may not reflect willingness to travel or the relevant service mix. State which inputs are observed and which are assumptions.
Where possible, test demand with low-commitment steps before signing a long lease. Owners might evaluate additional sessions at an existing location, short-term space, or a defined schedule at a nearby site. These options may not replicate a permanent office, but they can reveal travel patterns, staffing friction and appointment demand. Compare the cost of learning with the cost of committing early.
Review cash timing and downside exposure
The case should show the lowest projected cash point, not only the month the site becomes profitable. Include deposits, construction draws, equipment delivery, payroll before opening, payer enrollment timing, claim submission, collection lag and debt service. Stress a delayed opening, lower initial volume, higher fit-out costs and slower collections. A scenario is useful when it changes a decision, such as the maximum lease commitment, funding amount or acceptable start date.
Separate the new site's direct results from the combined group view. Some activity may transfer from existing offices, while other visits may represent incremental capacity. Model both possibilities and avoid counting transferred volume as new practice revenue. Show cash contribution after incremental labor and occupancy, then separately show shared overhead allocation so owners can see the assumptions behind each result.
Keep governance and accountability clear
Decide who can approve changes to the site budget, hiring plan and service schedule. Establish a threshold for owner or board review when costs, opening dates or projected cash fall outside the approved case. The project lead should maintain a current dependency register and report exceptions early. Finance should own the model version and reconcile actual results; facilities and operations should own their implementation milestones.
Keep a concise decision record with the options considered, evidence, unresolved risks, approvals plus next review date. This record helps a practice distinguish a deliberate change in direction from an undocumented departure from the original plan. It also gives future leaders a clear account of why the organization selected the location and what conditions were expected to support it. Before approving a location, confirm that the business case includes:
- A defined reason for the site and evidence that distinguishes local demand from existing-site demand.
- A room and equipment plan connected to staffed sessions and the intended service mix.
- A full pre-opening and ongoing cost schedule with timing, contingencies plus financing terms.
- A ramp model that tracks booked appointments, completed activity and charges, plus collections, plus cash separately.
- Named owners for lease, construction, hiring, payer setup, technology plus monthly performance reporting.
- Decision gates that specify what evidence authorizes the next commitment and what conditions trigger a pause.
After opening, review actual performance against the case at a consistent interval. Explain variances in operational terms, update the forecast, and document any change to hours, staffing, service mix, or further spending. Preserve the assumptions that changed so later decisions can distinguish a forecasting miss from a deliberate change in plan.
Questions about your own practice? Contact Richard@DoctorsInvestorClub.com.
