Higher stakes: Financing a start-up surgery center

Many of the questions posed in the previous section have applicability here, as do the sources for doing the financing. The differences are primarily that the dollars being requested are likely to be much higher, there is no established track record for the entity under consideration, and, as a result, the stakes are higher.

Where do you start? In the same place as if you are adding an operating room, but now you have to ask and answer many more questions. In addition, you will need to develop a business plan and that plan that describes several things:

  • Discuss why you are doing what you are doing.
  • Describe why it will work.
  • Describe whom you are doing it with and how much money each person or entity is investing.
  • Describe why you’re doing it as well (for example, more control, independence, return on investment or the local hospital has backlog of cases and cannot accommodate timely scheduling of patients).
  • How many physician investors will be a part of the business? What are their specialties? How many outpatient cases did they perform last year and the year before? How many cases will they realistically be able to transfer to the proposed new site?
  • What is the insurance market like in the area where you propose to establish this center, (INCLUDING MANAGED CARE PENETRATION)?
  • What is the position of the local hospital in relation to this new business venture? Is it a competitor? An investor? The landlord? An interested, but unrelated third party?
  • For the debt you’re request(ING), how much is for equipment, how much for build-out and how much for working capital?
  • How much total equity is being invested and what percentage of the total project cost does it represent (the higher the percentage, the greater the ability you will have to mininize personal guaranties?)
  • What’s the ownership structure?
  • Who (WILL BE) managing the center, what’s his(/HER) track record and is he(/SHE) an equity investor? (If not an investor, will he(/SHE) have a long-term management contract?)
  • Is there any competition in the area?
  • You’ll need to present five years worth of pro forma financial projections (cash flow, profit and loss, as well as balance sheets). It’s (MORE THAN) a good idea to provide month-to-month cash-flow projections for the first 12 months.

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