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28 February 2017

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Creating a business plan for your practice

Anthony Brand advises on how to develop the perfect business plan

Every practice should be thought of as a business and it is vital that these businesses set a budget, especially in the current uncertain NHS economy. 

The first step is to understand that the business plan and the budget should be developed as separate processes. Here’s the difference. The business plan is a statement of strategic objectives and an outline for how these objectives will be met. The budget is an essential part of the business planning – it is an estimate of income, costs and cash flows over a specified period. It should reflect the objectives set by the business plan and other events that are forecast to occur.

The budget will be drafted ahead of the business plan so that the strategy can be formulated. Once the strategy and business plan are agreed the budget can be fine tuned.

Start planning

Another misconception is that business plans are primarily for new practices or for raising money. They are, however, important for all practices. Given the changes in contracts, government policy, the NHS labour market and the economy in general,
a specific plan that confirms your key objectives is essential. It should outline how your practice will remain profitable, how many patients it will take to generate income at current contract rates, and how you are going to achieve your objectives.

It might help to look at what NHS England says about its own business plan for 2016/17.1 It sets out 10 priorities, organised under three headings:

1. Improving health – closing the health and wellbeing gap.

2. Transforming care – closing the care and quality gap.

3. Controlling costs and enabling change – closing the finance and efficiency gap.

NHS England chair Malcolm Grant says in the plan’s foreword: “Our responsibility is to allocate and invest these funds wisely to improve health and wellbeing, secure high-quality care, derive value for money for the public’s investment and create a sustainable future for the NHS.”

As a specialist medical accountant my responsibility is to help GP practices achieve the third point above.

The budget

Drafting the budget is the first step. Here are the main components.

1. Income and expenditure

Income and expenditure must be forecasted, broken down into the main elements, which should mirror the categories in your practice accounts.


  • Global sum.
  • Correction factor.
  • QOF.
  • Enhanced services – in detail.
  • Notional rent.
  • Reimbursements.
  • Other NHS income.
  • Non-NHS income.


  • Manpower costs (see below).
  • Premises.
  • Administrative/office costs.
  • Medical expenses (drugs and subscriptions).
  • Bank charges and interest.
  • Depreciation.

2. Manpower costs

Manpower is the only cost where significant changes may be made by the partners. Getting the optimum level is crucial to efficiency and profitability.

The manpower budget should be broken down into:

  • Non-partner doctor costs – salaried GPs and locums.
  • Clinical non-doctor costs – nurses, healthcare assistants, pharmacists.
  • Administrative staff – management, secretarial, reception.

Don’t forget to include the cost of employer’s national insurance and superannuation contributions, both of which are significant.

3. Benchmarks 

Compare your income and expenditure per patient and per partner with other practices. Looking at local norms will give you an indication of whether your budget is realistic.

An accredited specialist medical accountant should be able to provide you with benchmarking figures.

4. Profit allocation

Having struck a realistic profit forecast you should allocate this among the GP partners as agreed between them. This is also a good time to check that you have an up-to-date, signed partnership agreement.

5. Partners’ drawings

The profit allocation will represent the projected drawings and will take account of:

  • Superannuation contributions.
  • Tax and national insurance contributions (if saved in the practice).
  • Loan repayments.
  • Specific items (for example notional rent or seniority).
  • An agreed amount to be retained.
  • Cash.

Cash flow

With partner drawings calculated, it is now possible to feed all the above components into a month-by-month cashflow forecast. This also should take account of other changes such as:

  • Partner changes and capital repayments and introductions.
  • Changes in premises and loans.
  • Other likely circumstances dictating a financial impact.

Summary of two to three-year forecast

For the purposes of a business plan, your budget should include a summary profit and loss forecast for years two and three. Admittedly this will be educated guesswork based on the 12-month budget – but it will help the parties reviewing the business plan to focus.  

The business plan

The budgets will be a part of the business planning discussion and a revised budget may be created as a result. The following is how it might be created. 

What is it?

A consensus or agreement by the partners of how the practice should perform over a specified period – which I suggest is the year ahead and then the next two years in outline.

How is consensus reached?

All partners must be allowed to air their views and state their personal objectives and vision for the practice.

I like the idea of a partners’ away day or time-out meeting. A Saturday morning works well for GP practices. Here are some key points to consider when planning an away day:

  • Everyone who should participate does so, and is allowed to state their own objectives. If a GP is intending to retire in 12 months’ time, this is when they should tell everyone. 
  • A facilitator (perhaps independent of the practice) can help at the meeting to resolve conflicts and help put together the consensus. They are not there to lecture.
  • A written action plan is created.
  • A follow-up meeting is scheduled.

What should you talk about?

A SWOT analysis – strengths, weaknesses, opportunities and threats – should allow you to cover most issues. 

In looking at SWOT consider questions such as:

  • What do we do well? l What do we do badly or inefficiently? l What are our neighbours doing? Should we talk to them?
  • What forthcoming events do we need to plan for?
  • Are we paid for everything we do?
  • Are we sure that all services turn a profit?
  • How will contract changes impact on us?
  • Do we pay ourselves too much?
  • Are our financial controls strong enough?
  • What forthcoming events do we need to plan for?
  • What feedback do we get?
  • Do we need more patients? 
  • How will contract changes impact on them?
  • Have we got the right staff mix?
  • How good is staff morale?
  • When was the last time we took notice of staff suggestions?
  • Have we got the right partner/GP mix? 
  • What forthcoming events do we need to plan for?
  • Are our premises up to scratch?
  • Are we using our premises as much as we could be?

Inevitably the practice’s budget will scrutinised as part of this review. Benchmarking of performance against similar practices is of great value in pinpointing strengths and weaknesses.

Strategic planning pitfalls

Common pitfalls practices encounter
in strategic planning are:

  • Not involving everyone. 
  • Being unable to reach a consensus – not being able to write down the plan will result in failure. 
  • Failure to implement the plan – this is the biggest mistake.

Creating the plan

Once the budget has been prepared and the strategy agreed, the next step is to create a written plan. How long should the plan be? Well, it’s a plan, not
a work of art – so be concise so that everyone is inspired, not bored into inaction. Points to include:

  • An executive summary of action points.
  • Where the practice is now.
  • SWOT analysis.
  • Partners’ personal objectives.
  • Practice objectives and goals.
  • Forthcoming challenges in meeting those objectives.
  • Proposed action and responsibilities.
  • Financial implications (budgets).
  • Procedures for monitoring and review.

In summary

A business plan is only a plan, but it provides specific goals to work towards and can be a simple way for practice managers and their GP partners, even those with limited business knowledge, to take control of issues and reduce them to manageable tasks and ideas. But everyone must buy into it. As Stephen Hawking said: “Intelligence is the ability to adapt to change”.


1. NHS England Business Plan 2016/17.