Hello Doctor,

I am a Doctor who has been running a small clinic for over 10 years. It’s doing relatively well. I have been saving and feel I should buy a plot and build a hospital to be able to compete with the other clinics in my area. However, my fear is, if I do so, I can only afford the cost of the plot and not the investment in equipment and furnishing. My bankers have been courting me to lend me money to do both but the interest rate is rather high. I admit I haven’t been taking proper records. But from my accounts, I am worried the loan may leave me with huge debt, which might cost me my savings. What should I do?  Worried Larry

 

Hello Larry, Business is tough lately and one must consider doing something different to be able to retain and get new customers.

I have been to clinics recently and I have observed that the majority of the patients are middle income earners who are on Medical insurance from the insurer.

The same applies to the bigger medical centres and hospitals. I perused through their invoices for common illnesses and I understand why clinics are thriving – the costs are out of this world! An infection treatment doesn’t go below 150,000 Uganda Shillings.

In many average clinics, Caesarean section which many women are either resorting to or are being advised to settle for, costs are between 1,000,000 Uganda Shillings and 3,000,000 Uganda Shillings.

In this case, the surgeon takes home 500,000 Uganda Shillings or thereabout, leaving about an equal amount for the clinic or hospital and the anesthetist.

These doctors choose which clinics to use to perform their surgeries depending on the facilities and proximity to their clients. This is what makes a difference in these medical centres.

I, therefore, appreciate why you feel compelled to build a hospital. It’s necessary. A bigger clinic with better facilities will get you into this lucrative business.

I am, however, uncomfortable when you want to involve bank loans.  Money is very expensive in Uganda. For you to invest in bricks and concrete, you will be keeping capital idle. Servicing the loans might erode your cash flow.

We don’t want you to be the next entity to be advertised by auctioneers for public auction in the Newspapers.

Many such hospitals that have invested heavily in construction are sometimes rumoured to be going against professionalism to just pay their loans. You don’t want to be the doctor that prescribes an unnecessary surgery simply because you need to pay a bank loan.

Looking around, there are many buildings in this city which are empty especially from the 3rd floor onwards. These rich men have already invested in buildings.

Why not lease from one of them, then use savings or borrow if you must, to buy equipment. The equipment will generate instant revenue and be able to pay back the loan. The returns on the building costs aren’t very quick.

My belief is a good loan is that which is used to buy an asset. An asset, to me, is one that brings in more money than it takes, hence leaving a profit.

Let the rich who have extra money invest in buildings, and you invest in what you are good at, medical care. Everyone wins!