*Updated: Original Publish Date 3/4/2020 / Latest Version changed 7/14/2021
Many owners go into private practice Physical Therapy with the goal of having more than one location. At Breakthrough, we’ve worked with a number of owners who have multiple locations in their home state and are opening up de novo clinics continuously.
At my practice, Madden PT, there’s a process that we follow to help us think through the opening of a de novo clinic location. We just opened our third clinic about a year ago, and we made it to the break-even point by our second full month. And now, we’re operating at about 100% capacity with two full-time PTs and two full-time PTAs.
If you have the time, I actually recorded a video to walk through this subject!
This is a huge difference compared to when we opened our second clinic about ten years ago. We didn’t know how to do it the way we would today, and we struggled for a few years before getting it up to speed.
We’re planning to open two new locations in the next few months, and we plan on using the same process we used a year ago to max out these locations quickly.
3 Keys to Consider When Opening a De Novo Clinic (New Location)
Before you start to open a new location, there are three core things to think about that will guide your decisions:
- Location – It’s a tired cliché, but location really is the most important thing when choosing a new location.
- Pro Forma – Your numbers need to make sense before you decide to open a new location.
- Next Steps – You need a plan to hit the ground running when you open the doors to your de novo clinic.
Let’s look at each of these in more detail.
Location
When choosing a location, you’ll want to look at three things:
- Where people live – This is the location of your target market. Ideally, your target market is a female aged 45-64 who is likely making appointments for herself, her husband, her children, and maybe even her parents (about 70% of all healthcare appointments are made by someone fitting this demographic).
- Where people work – Most people want service providers that are close to their work or home.
- Where people shop – The closer and more visible you are to where people shop, the more impressions you generate.
To gain more insight into a location, we use the USPS Every Door Direct Mail map. Enter whatever ZIP code you’re considering for your location and see who lives in that area. This map tells you which areas are residential vs. commercial, the average age of household members, the average household income, and other details. We can also pull a FREE full area assessment for any location using our internal tools that will give you an idea of total addressable market by demographic in that specific area.
Once you learn about the people in an area, you can figure out where they work and shop and strategically choose your location.
Pro Forma
De Novo location success is also a numbers game. You’ll first want to look at the potential income vs. expenses of the new clinic, including the cost of the space – a Pro Forma for your Physical Therapy Practice. Next, you’ll want to calculate a target six months from your opening that will get you past the break-even point.
Now, step back and think about what you need to do to make those figures a reality.
We surveyed more than 300 private practice PT owners who were considering an expansion and asked them how many months they expected it would take to get an ROI on their de novo space. The first answer we got was from a practice owner who expected to invest anywhere from $50,000 to $150,000. That’s pretty expensive, especially given that we’ve opened new locations for less than $50,000 and done very well. This might make more sense if you’re in a large city instead of a place like Hershey, PA, where we are.
Whatever investment you decide on, the ultimate goal is to go from liability to asset as quickly as possible. As long as you’re still waiting to break even, your new location is a liability. But once it becomes profitable, it becomes an asset. We recommend making six months your target for turning your liability into an asset.
Once you go through the numbers, you’ll start connecting what you need to do to reach your target.
Here’s a sample breakdown:
Once you’ve calculated your six-month break-even point and potential earnings, you can work backward to connect the dots.
Immediate Next Steps
We run the numbers first so we know exactly how many patients we need to reach our financial goals. In the example above, if we calculate that our potential is 900 patients a month and the average plan of care is about ten visits, then we could say that we need about 90 new patients a month to reach that goal.
Now, your job is to figure out how to get 90 new patients a month. You’ll want to hit the ground running even before your doors open. We do “seeding” workshops before we open the practice to ensure we have patients in our facility on the first day.
We also use the Market Message Media Match Triangle, in particular the Media aspect. If there’s a daily newspaper or other local publication, we want to try it out. EDDM campaigns is another outlet to try. We’re testing different media with bullets (and then cannonballs) to see what gets the best response in that location.
The other thing we do is Facebook Targeting with our automation team. They research specific areas for us and help us figure out more about our location and audience. This helps us decide what might work for that audience, but it also shows us where we might be overlapping with other owners that are part of the Breakthrough family. (By the way, this is something that we do for all of the owners we work with.)
In Summary
We’re huge proponents of systems and processes here at Breakthrough, and that’s because they give us a better chance of repeating our results once we discover what works. We’ve used the framework outlined here to open additional de novo clinics for Madden PT and help other owners do the same.
Reach out to chat with our growth team or for more PT practice insights and resources, head over to our free resource center.
