My Startup & Equipment Costs

As a follow up to Pro Forma Part 2: Operating Expense Projections,

Estimating my startup costs was one of the most labor intensive, yet crucial, tasks I had to perform. I needed to figure out if I could even afford to start a practice in the first place. I didn’t want to be knee deep in financial obligations before I learned that I would be running out of money. Although ironically, it turned out that I still got pretty close despite my due diligence. Since I didn’t know anyone who had recently opened up a practice, I had to kind of make things up as I went along.  I called a bunch of vendors and spent countless hours online researching prices. The annoying thing is that most vendors don’t openly display their prices. Instead, they make you call them for a quote. The only company that listed their prices publicly were Veatch Instruments. I don’t recall how competitive their prices were, but they gave you a great starting point. I never bought anything from them by the way. eBay is also a very good resource to estimate costs, as well as to purchase smaller items.

As for all other items, I went on A LOT of websites looking up prices for office space, furniture, office and medical supplies, local licenses, computers, phones, incorporation costs, and EVERYTHING else that came to mind.  Despite my efforts, there were so many more additional costs that I had never anticipated.  So, keep this mantra in mind:  “You will always go over budget and you will always run into delays.”

Lucky for you, I’m going to share my actual costs with you. I purchased everything brand new.  All the items are in 2010 prices before sales tax.

Ophthalmic Equipment

  1. Zeiss Cirrus OCT: $71,000
  2. Topcon NW8F Fundus Camera/FA: $43,000
  3. Ellex Integre Photocoagulator Laser (purchased 3 months into practice): $36,000
  4. Exam Lane w/Haag Streit BM900: $33,000
  5. Ellex Ultra Q YAG Laser: $29,500
  6. Zeiss IOL Master 5.5: $25,000
  7. Zeiss Humphrey Visual Field 750i: $21,500
  8. Zeiss Atlas 9000 Topographer: $14,000
  9. Micro Medical Devices A-Scan/Pachymeter: $7,000
  10. DGH 8000 Scanmate B-Scan: $6,000
  11. Reliance 6200L Exam Chair (for procedure room): $4,300
  12. Tuttnauer EZ9 Autoclave: $4,000
  13. Medtronic Tonopen (used…and malfunctioning): $1,300
  14. Miscellaneous (lenses, retinoscope, trial lens set, stereo fly, etc.): $3,500

IT System

  1. Practice Management System: $15,000
  2. Electronic Medical Record: $8,000
  3. Server: $7,000
  4. PBX Phone System: $6,000
  5. Desktops/Printer/Scanner/Software: $5,000

Tenant Improvements

  1. Architect: $6,000
  2. Mechanical/Electrical/Plumbing (MEP) Design: $3,000
  3. Building Plan & Permit Fee: $2,500
  4. Data Cabling: $3,000
  5. Tenant Improvements: $47,500

Miscellaneous

  1. Furniture & Decor: $8,000
  2. Website Design: $2,000

 

As you can see, I wanted all the bells and whistles starting out.  Out of my $450,000 initial startup cost, close to $300,000 went to purchasing ophthalmic equipment.  As Howie had mentioned in Steps to Start a Medical Practice, you can go all out like me, or you can do what Howie did for 1/3 the cost. As always, the greatest thing about solo practice is: you can do it whatever way you like it!

 

As for all my other administrative startup costs, here’s what I spent:

  • Accounting: $100
  • Credit Reports & Background Checks: $250
  • Consultant Fee: $6,300 (NO! NO! NO! NO! NO!)
  • Domain Registration: $45
  • Dues & Subscriptions (AAO, hospital privileges, IPA, etc.): $1,500
  • Gas & Parking (deductible mileage): $200
  • Insurance (malpractice, general liability, builder’s risk): $1,400
  • IT Services: $800
  • Licenses & Permits (medical, DEA, county permits, ABO exam fee): $4,000
  • Loan Costs: $5,000 (I went with a few shady loan sharkesque companies)
  • Meals: $100
  • Moving Costs: $500 (I moved everything from my apartment to office over 20+ trips in my 2002 Lexus IS300)
  • Organizational Costs (incorporation): $1,200
  • Phone & Internet: $1,500
  • Postage & Mailing $250
  • Printing & Copying $400
  • Supplies (Clinical): $4,500
  • Supplies (Office): $3,500
  • Training & Education (books, meetings): $2,500
  • Travel: $3,000

 

Man, just going through these expenses brings back fond, yet painful memories.  I’ve definitely come a long way. Sad and scary thing is: after spending all this money, I had only about $30,000 in cash and another $10,000 in credit card limits left.  I would have run out of money if I didn’t see a single patient for 2 months. In retrospect, I should have signed for an office space with less tenant improvement needs. I built out my office from an empty shell, and I really didn’t think I was going to go this much over budget. Had I rented a move-in ready space, I would have had a more comfortable cashflow. Since the majority of my equipment were financed, buying less equipment would not have made a difference in how much free cash I had in the bank.  As always, you live and learn.

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