Start, acquire or buy in: What are the pros and cons?

So, you’ve decided to take the leap and move into practice ownership? Now comes the next step — turning your dream into a reality and working out the best way to do it.

There are multiple pathways you can take into private practice: starting your own solo or group practice from scratch, acquiring an established practice or buying into a practice. While choosing the strategy that best suits your personality and vision is key, we outline the pros and cons of each option to help you make an informed decision.

Starting a solo practice

While there are many pros to starting a solo practice, two important benefits include the relatively low business risk due to working for yourself, and the fact that you will reap all the financial rewards.

You can also implement practice systems that suit your individual requirements, as well as the chance to be agile and flexible as opportunities arise.

On the flip side, inexperience in managing a business can be a disadvantage with a steep learning curve. As a sole trader there is limited scope for expansion and a re-structure may be required if you decide to grow the practice with other specialists. For example, restructuring from a sole trader into a company and/or trust.

Starting a group practice

Similar to starting a solo practice, taking this pathway means you can decide how the practice will run and what practice systems are implemented, to suit your own needs. Having multiple practice owners gives you the opportunity to build a collegiate environment and share the responsibilities, costs and resources. It’s also easier to scale up investment to grow the practice (either at the existing location or by adding other sites).

However, it may be challenging to get the other practice owners on the same page and agree with your proposed path forward. There is the risk of conflicts arising when juggling multiple personalities and, when the owners do not all agree on the growth plans/strategy, it can slow the growth of the business.

Changes in partners’ plans are par for the course and, although you may currently be on good terms with your co-owners, business relationships can sour. Having a clear ownership agreement in place can mitigate these risks.

Another disadvantage is the relatively higher initial start-up costs when establishing a group practice.

Joining an established practice as an associate

A big attraction of joining an established practice is that everything is in place and there is no set-up required. You will have an immediate referral network, and financial risk is limited. However, unless there is an opportunity to buy into the business, the financial upside can also be limited. It may mean you have minimal impact on shaping the direction or strategy of the practice, and have to live with inherited systems, staff and work processes.

Buying into an existing practice

Buying into an established practice provides some of the benefits of joining an established practice, while having some say in how it’s run.

There is no practice set-up required, your workload is guaranteed, and you have an immediate referral network at your fingertips. Typically, there’s also a faster track to profit distributions when you are asked to buy into the equity of the business.

However, this option also comes with some downsides. Your control and influence is likely to be lower than when running your own practice as you may be lower in the pecking order and have limited opportunity to shape the direction of the practice. Inherited ownership structures, decision-making and succession plans can also be a disadvantage, along with the inherited liabilities of the practice.

Assembling your team  

Whichever pathway into private practice you choose, you can’t do it alone. To maximise your chance of success, it’s essential to have a great team around you who understands your vision and can help you bring it to life. You will need a team of advisers to assist with business planning, funding, business and tax setup, legal documents, insurance, practice and administration operations, and choosing your property location.