In times of slowdown practices often ask themselves, “What do we need to grow?” Conversely, practices with strong and steady growth ask, “What do we need to do to continue to grow?” For both, the thinking may be to recruit new providers, add new technologies or service lines, or expand to new locations. To avoid making a hasty—and likely an ill-advised—decision, practices entertaining growth opportunities should base such decisions on analysis and research, followed by planning, before launching. Let’s explore each of these decision-making processes to ensure thoughtful, well-reasoned business decisions are made during these challenging times.
Step 1: Analyze
Before offering something new, practice leadership should ask themselves a broad range of questions and then analyze their answers and the resulting data. Topics—and related questions—to consider are:
- Procedures. What are the most frequently asked-for “foundational” procedures within the practice? Consider the marketplace and if practice providers are at max capacity for those foundational procedures. Are schedules full, and what is the timeline for the next available appointment? What practice procedures are the most profitable? If unsure, a procedure value per hour analysis (see sidebar) may help to determine what procedures are most profitable. Growing the practice’s patient base for its most profitable procedures or maxing out its most profitable procedures is logical before investing in something new.
- Patients. Are the practice’s patients loyal? Analyze whether they are coming in regularly and at a recommended frequency. Are patients going somewhere else for services that the practice does or could easily offer, and why? This requires some thoughtful listening, discussion, and maybe even a survey of the practice’s best patients.
- Internal motivation. Is the desire to grow or add to the service menu based on current financial health and opportunity, or is it reactionary to outside influences whether it’s the general economy; the desire to be the first; or the attractiveness of something new that’s either unproven, too good to be true, or a lookalike (e.g., the “shiny new penny”)? This will illuminate whether leadership is reacting to some external force rather than driving action based on internal direction and what makes sense to leverage.
- Leverage. What can the practice afford to invest or borrow to fund the growth? Also, is that amount enough to successfully launch the desired growth opportunity? This is the most vital aspect of the analysis—it’s not what the practice can afford to spend; it’s what it cannot afford to lose and the fiscal responsibility to successfully invest in a solid launch.
- Feasibility. What additional resources are needed to support the proposed new offering? Consider whether more physical space, providers, support staff, or office supplies and equipment are needed. All these resource considerations are part of an internal break-even feasibility analysis to help set goals and strive for the art of possible.
Step 2: Research
Do not limit research to one dimension. Research requires both internal information—like that gathered in Step 1—and external information, with its source being a key consideration. Knowing that, below are some external areas practice leadership should focus on in their research effort when considering growth opportunities.
- Market trends. Avoid considering what is popular in the media today—because a short-term spike doesn’t necessarily equate to genuine opportunity—rather focus on where inquiries and their traction are strong and steady. It’s easy to do a general and localized keyword internet search to get a sense of market trends.
- Patient interest. Are patients repeatedly inquiring or asking for a specific offering? If so, it may be time to conduct a patient survey to gauge broad interest. While survey results are subjective in nature, that external data is a factor—though not the basis—for a decision.
- Industry review. Innovation is often a subject of industry review whether in the form of pamphlets, articles, or discussions. While peer interest or support of a new technology or treatment seems like the right reason to make a decision, it is only valid when one’s own practice analysis aligns with the opportunity in terms of patient support and financial feasibility.
- Advisor input. Seek expert advice. Engage the trusted consultants, accountants, and other professionals the practice retains who know the practice and can objectively advise leadership before a final decision is made. If all research is conducted by practice leadership, any advisor review will likely consist of minimal time but maximum value, helping leadership make an educated and fully vetted decision.
Step 3: Plan
Once all necessary research and analysis is conducted, and only if the opportunity still looks promising, should the next step be taken: planning. Planning is the most often over-looked element when considering launching a growth opportunity. Questions to ask to flesh out a rollout plan include:
- Who are the target patients (good candidates and/or good loyal practice advocates)?
- What is the marketing plan to reach that audience, and what resources will the practice need to invest in to create awareness, interest, and engagement—in other words, valid inquiries?
- What is the return on investment (ROI) related to retaining that internal patient/annuity or gaining a new patient who can become an annuity?
- What’s the best pricing model for patients?
- What is the timeline to marketable launch?
- What investment is needed for the first six months of operations?
- What is needed in addition to marketing, staffing, time, and resources to fully support the new opportunity?
- What is the expected ROI for both the internal and external market, and what is the internal break-even amount and timeline?
A well-thought-out, comprehensive plan is needed to properly target and attract patients and create a positive patient experience to make the contemplated growth opportunity viable. It’s only then can leadership believe in the opportunity, embrace it into the practice culture, and offer it to patients with confidence.
Procedure Value Per Hour Explained
Practices often ask, “What is the profit on a procedure?”, thinking that profit defines profitability. The reality is that there are two variables to take into account for valuing any procedure: time and money. Simply put, consider these two equations:
- Profit: Cost to the patient less cost of goods = gross profit
- Profitability / Procedure Value Per Hour: Cost to the patient less cost of goods (gross profit) divided by time.
Putting these equations into numbers, let’s consider a $1,000 procedure cost to the patient and a $480 cost of goods. The gross profit is $520 for the procedure alone. Now consider if that procedure takes 30 minutes to complete. Taking that $520 gross profit and dividing it by the 30 minutes for the procedure, the procedure value per hour is now $1,040 ($1,000-$480 = $520/.5 hour = $1,040). Time can also extend to include the time to perform the procedure consultation and the actual successful conversion rate for a more finite value.
From the example above, it’s clear this concept of procedure value per hour is a sensitive analysis, and it demonstrates how incremental changes in any variable can result in a dramatic change to the procedure value per hour.
Step 4: Launch
With a solid plan in place backed by earlier research and analysis, now is the time for action—to launch. Some practices will execute a soft launch with staff, family, and friends, while others will do a mass launch. No matter the type of launch the practice moves forward with, in this phase it is still essential to ask questions and collect data (daily); this time on the following:
- Reception. Who is trying the new offering?
- Testimonials. Of those patients, what is their input on the experience and the resulting referral generation?
- Results. What is the practice thinking, feeling, and seeing in terms of actual results?
Keeping tabs on these metrics is key to measuring short-term success, adjusting where necessary, and planning long-term growth strategies. A new practice offering that soars and then flattens or falls is the shiny new penny; a new offering that continues on a strong and steady growth path is one that will take the practice to the next level. If practice leaders have done their due diligence, then they should be confident that the new offering will be an asset, complementing and enriching the practice.
Ultimately, only the practice and its leadership can decide what is the right new offering to launch. While the motivations to pursue a growth opportunity may vary among practices—e.g., address patient wants or needs, invite new patient populations, or be a market leader—the best business approach to vet an opportunity is to analyze internal factors, research external considerations, and create a thoughtful rollout plan and responsive launch strategy. Take the time to properly assess potential growth opportunities, and with that, be confident in the great likelihood of success no matter the times.