Here we are in the first month of a new year, which many of us consider a time for a new start and a time to make the changes in our businesses and life that we have long dreamed of.
The months leading up to the new year, as well as the first months in a new year, are sometimes characterized with grim economic predictions, patients cancelling appointments or postponing treatment plans, and seasonal flues causing staff to be away. In other words, it may be a worrisome time for you, the business owner.
If your practice struggles from one or more of these scenarios, your profits will also be falling. Unless you have a plan – (you do have a plan don’t you?).
November and December proved to be very busy for me with numerous practice owners calling for help in their businesses. They all want to set themselves up for a more profitable year. They are clearly motivated to make changes, with the necessary structure and strategies to be successful at making them.
There are two obvious strategies you can use in difficult times. The point of this article is to demonstrate that one strategy, finding ways to increase your practice gross revenues is far more effective in the long term than the other strategy, cutting your practice costs, which will have a limited effect on your bottom line.
Let’s discuss The Two Strategies:
- Cut your practice costs
- Find ways to increase your practice gross revenues.
Strategy No 1: Cut your practice costs
Of course, it’s always a good idea to review and track your costs regularly.
A physical therapy practice has two sets of costs. “Fixed Costs” are those that remain pretty much the same month to month, the biggest of which is usually staffing costs, closely followed, in many practices, by lease costs.
By their very nature, fixed costs are hard to reduce, and with inflation, you might even find them hard to maintain at their current level.
Your Options Include:
- Reducing the amount you pay your staff or reducing your staff numbers
- Reducing your lease related costs
- Reducing your service contracts
- Reducing your professional services fees such as Accountancy, HR etc.
- Buy cheaper coffee (No!)
The rest of your costs are “Variable Costs” because they are linked to the practice gross. These costs include: the costs of receivables, associate remuneration, supplies and equipment.
Your options include:
- Collecting your receivables, keeping them as low as possible each month, and as short term as possible.
- Cutting Associate remuneration
- Reducing your purchases of supplies and equipment or using cheaper materials.
- Cutting your business support personnel costs.
These variable costs, together with your staffing costs, are usually the largest costs in your business, and small savings will make a difference. I’m sure you will understand that shaving percentage points from some of these costs is hardly going to make you popular with the people that are pivotal to your success. I’m not saying don’t do it; I’m saying if you are going to choose to cut in these areas, be aware of the effects it will have on morale and the quality of the services that your practice can deliver.
If you are able to cut fixed and variable costs by 5% (quite ambitious), the effect on your profit in the business will be minimal.
Strategy No 2: Find Ways to Increase Your Practice Gross Revenues
This obviously means increasing your patient numbers and the demand for your services.
How can this be accomplished with the challenges you are experiencing?
Below are strategies that will work to increase your revenues and profits in the immediate and long term:
Strategies That Work
1. Make your client journey remarkable every time and thereby boost your client referrals.
2. Engage your team members in your practice vision and plans, thereby, creating a culture in which they support and share your dreams and goals.
3. Find ways to communicate the value of your physical therapy services to the marketplace effectively.
4. Differentiate your fees for regular, simple physical therapy services from fees for more specialized services.
5. Increase your client numbers by:
- Reactivating dormant clients
- Reactivating dormant treatment plans
- Increasing treatment plan uptake
- Increasing treatment plan value
- Increasing referrals to other professional team members
- Increasing the effectiveness of your marketing
6. Strengthen your relationships with referring partners such as physicians, other professionals, and community agencies.
7. Extend your opening hours.
8. Extend your service offerings.
When you implement these strategies, you will see that increasing gross revenues is more effective for the long term than cutting costs. Doing both will clearly give the best results. Either way, if you want to be one of the winners during the first quarter of 2012, then you better have a plan to implement now or be willing to watch your profits fall further…
And if you would like some help with growing your practice by working with a professional business coach with a proven track record….
Simply email me to set up a 15 minute consultation to explore the possibility of working together.
