February 27, 2023
The IRS publishes tax return data each year on the roughly 28,000,000 sole proprietorships in the U.S. We analyzed the 182,906 tax returns that were filed in the Medical Office industry to pull out some key statistics and insights to help our customers ensure that they are creating realistic financial projections for their Medical Office.
We hope that this data will be helpful for you as a “reality check” for your financial projections and business planning process. We hope you create a forecast for your unique situation and plan, and then use this data to make sure your projections seem reasonable based on industry averages.
Here is what we will cover in this article:
Learn How to Use this Financial Data
If you are creating projections for your startup business, or you just want to see how your existing business stacks up to industry averages, you can take your income statement and compare key ratios and percentages for your business compared to this industry average data.
How many medical offices in the US are sole proprietorships
There are approximately 182,000 medical offices in the US organized as sole proprietorships. We specifically analyzed 182,906 companies based on the 2019 IRS tax return data.
Average annual revenue for medical offices
The average annual revenue for all sole proprietorship medical offices in the U.S. was $150,355.
Average annual expenses for a medical office
The average annual expenses for all sole proprietorship medical offices in the U.S. was $82,871.
The raw dollar amount is less important here, the important thing to note is that all expenses for a medical office amounted to 55% of total revenue.
Average net profit margin for a medical office
The average net profit margin for a medical office was 45%.
How much can I make by owning a medical office?
If you are wondering how much you might be able to make by owning your own medical office, you can get a good idea by creating a revenue projection based on the number of doctors you plan to have in your medical practice. Then you can estimate the number of patients per physician and the total patient spend on medical services per year. That will give you total revenue, then simply multiply that by 45% (the net profit margin) to come up with a forecasted profit as the owner of the business.
Top 10 expenses for a medical office
Based on the tax returns of 182,000+ sole proprietors operating in the medical industry, the following were the 10 largest business expenses as a percentage of revenue.
Average labor cost for a medical office
The average medical office spent 13% of revenue on labor costs. Learn more about specific medical office staff positions and costs.
Average material cost for a medical office
The average medical office spent 4% of annual revenue on material costs. This would be for things like disposable supplies used during routine services or material costs for any procedures performed at your office.
Average rent expense for a medical office
The average sole proprietor medical office spent roughly 4% of annual revenue on rent.
Average insurance cost for a physician's office
The average sole proprietor medical office spent roughly 2% of annual revenue on insurance.
Important Details about the Data
I want to point out a few key items about the data:
- You can download this data for free from the IRS website.
- The data includes 182,906 medical practice sole proprietorships in the U.S. in 2019. This will include businesses with a single doctor, but could also include a business with many physicians.
- This data will include businesses that operate full time, and businesses that only operate on a part time basis.
- Because of this, you should take the raw numbers for revenue, expenses and profit with a grain of salt, but the percentages can still be quite valuable when trying to forecast expenses for your business.
- This data includes businesses from all across the country, keep in mind that revenue and expenses can vary greatly based on your specific geographic location.
- We used 2019 data because we felt it was most likely to be representative of a “normal” environment for the industry. COVID-19 caused disruption to almost every business in 2020 and 2021, so we wanted to utilize “normalized” data.
If you have any questions about the data or how to utilize the data in your financial forecasting process please don’t hesitate to reach out to us!