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Tue 15 Jul 2008 04:00 AM

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In the first of a four-part series looking at the trials and tribulations of setting up practice in the Middle East, Medical Times goes back to basics to discover how to create a business plan that can survive and succeed in a high-risk, high-reward market.

In the first of a four-part series looking at the trials and tribulations of setting up practice in the Middle East, Medical Times goes back to basics to discover how to create a business plan that can survive and succeed in a high-risk, high-reward market.

Despite a reputation as a recession-proof economy, setting up a practice in the Gulf region has been largely the preserve of those with the biggest names and the deepest pockets.

But as the dust settles around brands such as Moorfields and the Cleveland Clinic, fewer patients appear to be leaving the region for treatment. When you combine this trend with a growing expatriate population, market demand is at an unprecedented high.

The landscape is changing tremendously so it’s extremely important that the first step is on-the-ground reconnaissance.

And now that the big names have blazed a trail through the GCC, there has never been a better time for physicians to set up practice in the region.

But as with many things in the Middle East, knowing the bigger picture means very little - getting down to the nuts and bolts of creating a business plan is far from easy.

Striking out on your own (or in a small group) in the Gulf can seem daunting, but the potential rewards are substantial. Saving lives shouldn't all be about profit, but if you get it right in the Middle East you could make a killing.

Minding your business

Creating a business plan is a fundamental process for any start-up, yet industry consultant Ziad Fares is always surprised by how flawed many medical proposals he reads actually are: "I see a lot of business plans from abroad written by analysts sitting at some desk writing them for a living - they talk about starting healthcare businesses here without even visiting the region personally and 90% of them are completely unrealistic."

It seems like stating the obvious, admits Fares, but the best piece of advice potential start-ups can take on board is to develop and catalogue local knowledge. "It is especially important in this part of the world where extreme differences can occur within a few months," he explains.

"The landscape is changing tremendously almost weekly so it's extremely important that the first step is on-the-ground reconnaissance."

Despite the changing regulatory landscape - or perhaps because of it - the region still has a reputation for unwieldy bureaucratic processes.

Whether they are already working locally, or considering moving here from abroad, many physicians are put off by the GCC's reputation for red tape and mute ministries before they even get started.

It is a stereotype that no longer holds water, insists Fares, at least in his dealings with Health Authority Abu Dhabi (HA-AD).

"There has been an obvious shift in the mentality of the Health Authority in entertaining questions, in addressing concerns, and in responding to issues," he states.

"The licensing process is not impossible. I have submitted quite a few business plans online and I can't say I have had a significant problem - you don't need an infinite amount of signatures any more."If physicians find it difficult to get past the initial stages of licensing, the likelihood is that it is a lack of detail and clarity on their own part that is holding them back, claims Fares.

"There is a large supply of business plans because everyone knows that there is demand - the key is to be as comprehensive and as clean in presentation as possible," he recommends. "If you can differentiate on quality, you will do just fine."

Small print; big difference

If nothing else, spend some time speaking to other local physicians who have been successful in practice and see what it is they went through personally.

Keeping a close watch on regulatory developments is crucial for start-ups. If you don't know the rules of a game, there is little chance of you excelling at it - and the same applies to success in healthcare.

"Take for instance the recent move in Abu Dhabi to health insurance," says Fares, "or the new upgraded standards for specialists, or for continuing education - these are the drivers that significantly affect any business plan in healthcare."

It is also important to recognise the difference between what is announced as regulatory policy, and what is actually happening at the business end of government procedures. They are not always the same thing, suggest Fares.

"It feels like we've just woken up to healthcare modernisation - putting down regulation is one thing, enforcing it is another."

For many physicians setting up a practice in the region, locality might just be one of the issues on their mind. Making the leap from employee to practice owner can be the biggest business decision a physician takes in their career.

The Middle East might hold its own, unique challenges as an economic arena, but entering the world of business is a serious departure for medical professionals in itself.

And it is uncommon for doctors not to experience at least some teething problems, argues Ed Parkhurst, founder of US-based Prism Consulting Services. "Good, sound business advice is important and doctors can be very reticent to seek it," he complains.

"Physicians are trained to be able to make decisions without consulting with anyone else - if nothing else, they should spend some time speaking to other local physicians who have been successful in practice and see what they went through."

The best laid plans

Physicians are capable individuals and developing a business plan is unlikely to prove beyond many of them.

Yet for a profession based on accurate diagnoses, medical professionals are often surprised by how unpredictable the Middle Eastern market can be and underestimate how short a shelf-life most market forecasts have.Subsequently, Ziad Fares believes, even the best-researched business plans are routinely made obsolete by a lack of cost flexibility and an inability to react to a changing economic climate.

"There are many, many reasons why business plans need to be dynamic and need to be continuously updated in this part of the world," he says.

Fares recalls a business plan that he recently helped write, detailing the construction of a hospital: "Just eight months ago you could assume a range of cost figures to build the hospital - right now this cost figure has increased by 25-30% and the bottom line of the project has been dramatically affected; we're having to accept much lower returns on investment."

The rising cost of construction materials is just one of the common complaints being heard around the Gulf at the moment. Day-to-day inflationary pressure is another.

Physicians would also do well to keep a close eye on factors such as housing allowances and wage demands for employees - as they can fluctuate wildly in the Gulf.

The demand for healthcare is apparent in the region, but a start-up that is not attuned to the Middle East's economic pressures might find itself starting from a position of weakness that could be impossible to turn around.

Healthy figures

Although physicians might feel that their industry is unique, a successful start-up in healthcare can be gauged by the same metrics as any sector: the numbers. If they don't add up, you don't get paid.

Launching a practice can be such an overwhelming experience that sometimes the figures will be the last item on a doctor's consultation schedule and the easiest to ignore.

Farrukh Zain is head of business banking at ABN-AMRO in Dubai and stresses that getting your finance straight from the outset is absolutely essential.

"When you are starting a clinic you should be very focused about the financial goals you want to achieve," he says.

"How are you going to measure success? How will they document these goals? And how will you keep setting financial goals?"

THE FACTS: MT's business plan essentials

Local area networking: Google can only tell you so much - if you want to know your market, you have to be on the ground.

Regulate to accumulate: Licensing in most GCC countries is constantly being overhauled - stay on top of it, or you risk being buried in bureaucracy.

Firm opinions: Being a doctor is not the same as being a director so ask for advice - you may be heading in the wrong direction.

Hold to account: Second opinions are essential when it comes to finance - going it alone could be disastrous.

Zain notes that physicians will often concentrate on marketing and boosting patient numbers, believing that financial targets can wait until the supply is there to measure against.

"The reason why people go into business is to make money," he states flatly.

"That is why it is so important to get the financial side of things sorted in the beginning - they need to set their financial targets on a short term, a medium term and a long basis."

Getting your sums right does not mean that you should be making money from day one. A common misconception for start-ups in every sector is that profitability can be achieved from the outset. Profit margins are earned, not simply created, insists Zain.

"Because the biggest costs in a new business are always upfront, and you don't have the revenue coming in, you can expect to be in the negative for at least six to eight months up to a year," he says.

Knowing when your business should start to turn the corner is partly down to experience, but mostly about rigorous, old-fashioned analysis.

"You need to do your homework right, but in most cases you should be beginning to turn a profit after eight months," he says.

Even in markets that are ripe for investment, earning money is not an easy process. While Zain fully expects there to be exponential growth in the healthcare sector, he warns doctors that they have to be absolutely clear about what they want to achieve before investing in the Gulf's medical industry.

"You need to remember that it doesn't matter how good you are at your profession - when you start a business you become a businessman and that is where you have to be very careful that you get the right advice."

THE FACTS: Free zone vs Partnership

Details can vary across the Middle East, but in broad terms physicians have two options when it comes to starting a business: find a local partner, or a find a free zone.

While a successful choice of the former can depend on a number of factors, Ziad Fares maintains that knowledge of the healthcare industry is the greatest prerequisite.

"This is a market that is so wide and involves so many aspects that you need to find a partner that understands these complexities," he states.

From the outside looking in, however, setting up in a free zone such as Dubai Healthcare City looks like the ideal option for medical start-ups. With 100% ownership and the capability to repatriate profits, free zones look like a no-brainer.

They are, admits Fares. If you can afford them: "Setting up in a place like DHCC is extremely expensive for the small practices - I think that is one of the main reasons why DHCC is to a large degree still empty."

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