If you’re just getting started in private practice, one thing that may be weighing on your mind is where you’re going to practice. You have the clinical experience and you’re ready to break off and start your own business, but you still have a lot to figure out, including the location for your office.
Choosing a location for your practice is one of the most important business decisions you will ever make. Not only is it a space where you will spend countless hours of your time, but it also has a significant impact on a client’s first impression of you. In addition, feeling at ease in your space has a lasting impact on the work that you do.
We’ve put together some tips to understand both the financial and functional aspects of selecting an office space. Whether you decide to rent, use a home office, or work exclusively as a telehealth provider, we’ve got you covered.
Determine What You Can Afford to Pay for Your Space
Are you ready to find an office for your practice? Before you sign a lease or mortgage, be sure to do a lot of research. The following tips will help you make an informed decision about your new space.
Step 1: Estimate your annual income
Both your projected income and the average cost in your area should be considered when you determine your ideal price range for monthly rent. We created an Income Calculator tool to help you determine how much you need to reach your ideal income. You can also factor in your anticipated office expenses to determine what works with your situation.
Keep in mind that you may also need to put down a significant amount for a security deposit and first and last months’ rent. Be sure to factor in those expenses and save enough liquid cash to cover them before you start looking.
Step 2: Determine the average cost per square foot for commercial real estate in your area
Most areas have an average price per square foot. For example, an office in a popular area may run $25 per square foot. Therefore, for 500 square feet, you would pay approximately $1,042 per month.
[Total Square Feet X Price Per Square Foot ÷ 12 (months) = Monthly Rent]
[500 X $25 = $12,500 / 12 months = $1,042]
If this is your first time exploring the market, a commercial real estate agent may be very helpful for navigating the process.
Step 3: Choose what type of lease works best for your business
Understanding your options will help you choose a lease that makes the most sense for your office. The three types of leases include the following:
- Gross lease (or full-service lease): With a gross lease, the tenant pays a fixed amount and the building owner covers the operational expenses for the building. The base rent for this type of lease is usually more expensive as the rent is intended to supplement utilities, maintenance, and property taxes.
- Modified gross lease: A modified gross lease provides flexibility to negotiate terms with the building owner. Negotiations determine how you cover operational expenses. The base rent is fixed based on the terms of the agreement.
- Net lease: A net lease requires a tenant to cover all or some of the space’s operational expenses. A triple net lease includes property taxes, insurance, and maintenance. A double net lease includes property tax and insurance. A single net lease requires the tenant to pay a piece of the property tax.
Bonus tip: You don’t have to do it alone!
Consider partnering with one or more colleagues to rent a space. Finding a business partner is a great way to maximize your real estate budget.
Alternative Options for Private Practice Office Space
If a traditional office space is out of your budget, or you’d rather wait until your business is more established to start renting, there are three other options you can consider.
Option 1: Co-working space
Consider renting a space from an office on days when it is not in use. These rental arrangements typically allow you to pay by the hour, day, or month. Some co-working spaces allow you to pay a certain percentage of your income instead.
Option 2: Home office
It’s possible the space you need is already around you. The most important thing to consider with this type of office arrangement is whether your clients will feel safe in your home. In addition, it’s important to have a space where their privacy will be protected.
Creating a home office has several pros and cons to consider:
- Savings: You’re already paying to live there, so this option has lower overhead costs.
- Access: You won’t have to worry about a commute.
- Control: Because it’s your space, no one else will get to dictate how or when it’s used.
- Professionality: The office must be clearly separated from your living areas to ensure that your clients view it as a professional space.
- Work-life separation: With your home and your office being combined, you may find that it’s harder to disconnect from work during your off hours.
- Boundaries: Just like you must separate your home and work life, you must make sure that your clients are aware of the lines you draw around your space.
Option 3: Telehealth
Opening a virtual practice is a great way to save yourself from the expense and upkeep associated with having a full-time private practice office. Prepare to invest in high-quality tech equipment in order to make sure you can provide reliable service to your clients.
At the end of the day, finding your dream office means understanding what you want in a space. Take the time to evaluate both the functional and financial implications, while also remembering it’s your decision and you should love whatever you choose.