Let’s talk medical practice finances…
As a practice owner, how do YOU define success?
Of course, your answer may take on many different forms… and the definition of “success” will vary greatly by practitioner – feelings of accomplishment, making a difference in the lives of patients, having the freedom to make your own decisions, etc. So, let’s better define the question a bit in the context of medical practice finances.
How do you define your practice’s financial success?
Too many practice owners believe the top line is what defines success. The checks are coming in and that’s what matters, right? The problem with that theory is that too often the more the practice makes, the more it spends, leaving little or no profit. Let’s be direct – this is not the definition of a successful practice!
A successful practice is a profitable one.
How much profit should your practice be making? Depending on the level of annual revenue, the profit should be between 5% – 20%.
Let’s perform a quick assessment of a $2 million practice. For a practice of this size, Operating Expenses should be no greater than $1.3 million and the profit no less than $200,000.
Let’s look at a few ways this $2 million practice can increase their profit.
1. Increase efficiency. More revenue leads to less efficiency, i.e. less profit, so let’s prioritize efficiency. Continually ask “How do I get two times the results with half the efforts?” TIP: Look toward good processes and technology to automate time consuming and repetitive tasks.
2. Get more new patients in the door! Continue to advertise but focus that advertising spend on the service that is most likely to attract NEW patients. Once in the door, you have the opportunity to deliver exceptional care and develop a strong relationship – cared for patients are happy to pay over the long-term. Continually attracting new patients is key to achieving healthy medical practice finances.
3. Freeze Debt. Resist the temptation of taking out more loans. Let your business live within its means and strive to fund your practice’s growth from retained earnings/profits.
4. Cut costs. Figure out the things that drive your profit and dump the things that don’t. The goal is to cut costs…not eliminate the practice.
a. Print out a list of all the current expenses and categorize them into three options:
i. Unnecessary for delivering patient care (immediately dump these expenses)
ii. Necessary for delivering patient care BUT can be replaced with a better option
iii. Absolutely necessary for delivering patient care
Do you recall the clip in Apollo 13 where the Space Center has to figure out a way to fit a square peg into a round hole? Innovation by necessity. Growing a highly profitable practice might seem difficult to achieve, but it CAN be done.
Have questions? Like to talk with a business expert about the unique challenges and opportunities your practice is facing? We’re here for you. Contact the experts at STAC Bizness Solutions today!
