The Best Investment a Doctor Can Make

Many doctors who build wealth do so by running their own practices. They focus on making their practice a successful business, spend less than they earn, and save the difference. From there, they invest those savings, first in their home and then in other assets. Over time, those investments grow and can outpace the practice itself, becoming the main source of cash flow and wealth. But it all starts with the practice. It’s the heart of the journey.

The Practice: Your Best Investment

Your practice is one of the best investments you can make—it provides solid returns with relatively low risk. Right now, practice values are low, which means returns are higher than usual. It’s not uncommon for doctors to see returns of 50% or even 100% or more.

For example, imagine a doctor borrows $100,000 against the value of their home. With that, they could start making an extra $100,000 a year in profit, in addition to their regular income. That’s a 100% return, and it’s quite common in the field. Plus, it’s relatively low-risk. The barriers to becoming a doctor—years of training and the ongoing shortage of healthcare professionals—ensure that demand for medical services remains high for the long term.

Doctors who build businesses out of their practices—relying on other healthcare professionals and support staff—tend to see the best results. In fact, some practices run smoothly and profitably even if the owner isn’t there every day.

That’s why we consistently encourage doctors to own their own practices and turn them into businesses. It’s a smart move for doctors at any stage of their career—except, of course, if you’re not working full-time. For older doctors nearing retirement or those with young children, it might make sense to work for someone else instead of taking on the additional responsibility of owning a practice.

Turning Your Practice into a Business

A common question doctors ask is: "What’s the best way to turn my practice into a business?" The answer isn’t always simple, as every practice is different. Some practices rely on bulk billing and high patient volumes to stay profitable, while others opt for private billing and focus on improving efficiency through staff and technology.

Some practices are located in prime areas, near shopping centers, benefiting from heavy foot traffic. Others are in more industrial areas, focusing on services for nearby businesses. We’ve learned that while it’s hard to predict a practice’s exact financial performance, good doctors generally make good profits.

So, what are some things that make the most successful practices stand out?

Charge More, but Be Smart About It

More doctors are moving from bulk billing to private billing, though most practices still bulk bill some patients. Our advice? Don’t shy away from raising your fees, and limit the exceptions. For patients who request bulk billing, direct them to the practice manager, who can assess their financial situation. For example, if a patient owns a home or has a job, they probably don’t qualify for bulk billing.

Increasing fees won’t always lead to a dramatic drop in patients. In fact, you might see a brief drop before patient numbers recover—and potentially even increase. As a result, your profits will go up, which increases the value of your practice.

Spend to Improve Your Practice

Doctors are typically good at keeping costs in check, but sometimes they don’t invest enough in their practice. Don’t be afraid to spend money to improve patient services. If you’re considering an investment, calculate the potential return. For instance, building an extra consulting room may cost $100,000, but it could increase your property’s value and generate an additional $5,000 in monthly fees. That’s a solid return on investment.

Other small investments, like better waiting areas, kid-friendly spaces, or quality staff, can also attract more patients and justify higher fees.

Hiring More Staff

It’s often said that the best practices are those with multiple doctors or health professionals. This helps spread the fixed costs and increases billings. If adding more doctors isn’t an option due to the shortage, consider bringing in other health professionals. They can still be profitable and help improve your practice’s overall value.

Once you have multiple "fee earners" working with you, your practice may qualify as a business for tax purposes, allowing you to take advantage of a lower tax rate. This can boost your ability to reinvest and pay down debt faster.

Less Competition = More Profit

The most profitable practices are often in areas with less competition. Rural or semi-rural locations tend to have fewer doctors, but they also have less overhead and lower wages. While you may not attract the same number of patients as you would in a trendy urban area, the lower costs and reduced competition make up for it.

Opening a practice in a less competitive area can be a great way to maximize profits, and the money you make can be reinvested in other ventures.

A Tip for Every Doctor

We recommend that almost every doctor own their practice—it’s a smart investment at any age. The only exceptions are typically younger doctors who are planning to start a family in the near future. At this stage, it might be too much of a commitment. However, once their children are in school, owning a practice can become a very attractive option again.

For older doctors—especially those in their 50s—retirement might be on the horizon. In these cases, it could make sense to step back from ownership and work as an assistant or enjoy a more flexible schedule.

The Family Home as an Investment

For many doctors, the family home is one of their most valuable assets. Homeownership is deeply ingrained in the Australian way of life, and for most doctors, it’s a major source of wealth. Over the years, the value of your home tends to appreciate, and regular mortgage payments build equity.

Our advice? Buy as much home as the bank will lend you and pay off your mortgage as quickly as possible. Doctors who follow this approach tend to do very well financially, and this strategy will likely continue to pay off in the future.

If you would like our help in buying or setting up your medical practice or with your taxes please arrange your FREE  no obligation meeting on the top right of this page.

Chris Tolevsky is a Specialist Medical Accountant with over 30 years experience in the medical and allied health fields.  He provides expert guidance on tax strategies, building and protecting wealth . If you’re interested in discussing how we can help you please book a complimentary consultation. 

Disclaimer: This article contains general information only . It is not designed to be a substitute for professional advice and does not take into account your individual circumstances, so please check with us before implementing this strategy to make sure it is suitable