What’s your business plan for 2017?
Responses may include, “I want to make more money,” or “I want more vacation,” or perhaps “I want to see less patients.” Regardless of the reactions, chances are that the wishes won’t become reality unless you have a specific plan to accomplish them. Every year, business owners should take the time to sit down and do a little planning, just to make sure that the new year will be a good one for business.
Many practice owners are so busy working in their businesses that they don’t take the time to create a formal, written plan for a new year. Our industry is fraught with new obstacles, so a formal plan and established goals can help ensure that the business is on the right track. Wishing and hoping that business will go well really isn’t enough in this competitive and challenging world of hearing health care.
It really doesn’t matter if the business is a startup or 30 years old, a written business plan is necessary to keep the business on track. A well thought out plan can force business owners and operators to think realistically about the outlook for the coming year. Too many owners don’t bother to write a business plan because they feel it is too much work and unnecessary if they aren’t looking for financing. But, actually, a good business plan can infuse new life and direction into a business and provide a means to be proactive instead of reactive when obstacles occur.
Jack Welch, retired chairman and CEO of General Electric once said, “Control your destiny or someone else will.” In business, controlling your destiny means having specific plans, roadmaps, and budgets. A good plan defines a set of goals and defines the actions necessary to achieve those goals. However, a plan must also have the flexibility for intervention when something isn’t working or when unexpected disruptions in the market necessitate change. The plan should be fluid and open to change. Sometimes you can pound a market that isn’t working and exhaust your budget. It’s like trying to fit a round peg into a square hole, and, of course, that just won’t work. As one example, Lego started by making wooden ducks. A few years later, after a fire burned down the factory, management switched to making plastic toys and the interlocking bricks spawned a multi-billion dollar business.
It can seem overwhelming to approach the decisions you’ll be making now that will shape your business in the future. An ambitious target can serve as an ideal of what the business could be and it is okay to embrace such vision, but it’s also important to anchor the vision to reality so as to increase the likelihood of success. Like any effective target, objectives of the plan must be SMART—specific, measurable, agreed upon, realistic, and timely. The practice of creating SMART objectives will help to identify obstacles and potential threats to the business.
I know many of you may be wondering how you will have time to undertake what may seem like an overwhelming task of developing a plan. Creating such a plan doesn’t have to take a great deal of time, if you have some performance goals in mind. In addition, there are many resources available on the Internet to help (www.sba.gov/tools/business-plan or www.bplans.com are two resources). Start with an outline and then develop an action plan of how you plan to reach those goals. A plan without specific goals is no more than wishful thinking.
If you are having difficulty getting started, begin by asking yourself these questions.
Were You Happy with Your Bottom Line in 2016?
It doesn’t matter how much gross revenue the business generated, it’s what’s left at the end of the year that counts. When business is thriving, it is easy to overlook or ignore costs that may be out of line, but when business slows down, you can’t afford not to keep a close eye on the cost of doing business. Review your profit-and-loss statement and look for any increased expenses compared to the prior year. Several small increases can create a big problem in cash flow.
When Did You Last Review Your Pricing from Your Vendors?
It should go without saying that every business owner should periodically review vendors and suppliers to make certain that they are offering competitive prices and delivering quality service. In most audiology businesses, manufacturing partners are a very important part of the business. However, it’s wise to review those relationships periodically to make certain that there haven’t been any major price increases. This investigation can also serve as a good way to review the prices you are charging patients to make sure your margins are in line with the cost of doing business.
In most audiology practices, the biggest expense is the cost of goods (COG) sold, which in most cases is hearing aids. If your COG is more than 35 percent, contact your suppliers and attempt to renegotiate prices. If a price reduction is not possible, try to negotiate free shipping, extended warranties, or extra receivers at no charge, or simply investigate other suppliers and their pricing.
Are you examining invoices closely to make sure your pricing hasn’t changed or that you are getting charged for items that you aren’t charging your patients? It is easy to lose track of small price increases in a busy practice, and small increases can really cut into profits.
What Does It Cost to Staff Your Business?
Staffing needs should be considered in the planning process. It’s good to recognize any deficiencies early on in the fiscal year so that appropriate adjustments can be made. Also, keep in mind that finding, hiring, and training the “right person” can take a lot of time, so it’s a good idea to get on the ball as early as possible. The second largest expense in most practices is the cost of employees, especially if you offer benefits such as health-care insurance, paid time off, and 401K accounts.
It’s also prudent to analyze salaries to make certain they have kept pace with the average wage for the job. You can find average pay scales for specific positions by geographical location in the Occupational Outlook Handbook. If your employee costs are too high, investigate whether it’s possible to combine duties and reduce the cost of staffing. While care must be taken to maintain good customer service, it may be possible to eliminate duties that don’t contribute to getting or keeping patients.
Do You Retain the Majority of Your Patients?
I have read that as many as 50 percent of patients who purchase hearing aids do not return to the original provider for future products and services. Making a concerted effort to retain your current patient base is good for business. Do you stay in touch and schedule regular visits? While staying in touch with your patient base may take some time, it will be worth it. Some patients leave an audiology practice because they relocate or pass away, but the majority of them leave because of a perceived attitude of indifference.
Many audiologists concentrate the preponderance of their resources and energy on searching for new patients, while often ignoring the opportunities that exist with current ones. Since the cost for acquiring a new patient is almost five times more than that of retaining a current patient, it’s critical to the profitability of a practice to maintain a relationship with a patient for as long as you can or preferably, forever.
Is the Cost for Your Space Occupied Reasonable?
If you are purchasing the building in which you reside, check out whether reduced interest rates may represent a significant savings in mortgage payments. If you are renting, perhaps you could negotiate a discount in price per square footage, or in the triple-net costs you may be paying. Fees for phone and Internet services can vary greatly by provider, and comparing rates may result in significant savings. A friend of mine quit her cable company for a week, and when she called to reinstate her services, she was considered to be a new customer and was given much better rates that resulted in significant savings.
Was the ROI on Your Marketing Worth the Investment?
Marketing can be a conundrum for most business owners. What will work? What won’t work, and how much will you have to spend to find out? Marketing is important because you need it to grow a business, but it can be a huge endeavor and one that’s difficult to fit into a schedule when you are also seeing patients and running the business.
Marketing costs can get out of control very quickly. There are innumerable mediums to place your message, so it’s key to measure and monitor what you are getting from every dollar you spend. If you are still paying for Yellow Page advertising, STOP. Many consumers use Internet directories, but traditional, Yellow Page advertising is Out and social media is In. It’s possible to reach a large audience with Facebook and other social mediums for a much smaller cost than traditional outreach marketing.
What About Your Equipment?
The planning process should include an evaluation of equipment needs and the determination of whether any capital investments need to be made. Many business owners are so caught up in the day-to-day activities that go along with running the business that they sometimes forget to do periodic equipment checks and make sure that they have what they need to maintain the business and provide the best care for patients. Audiology is immersed in technology and it is important to have up-to-date equipment. A quick analysis of current equipment will allow time for appropriate budgeting if new equipment or repair of existing equipment is needed.
Does Your Total Accounts Receivable Exceed One Month of Average Gross Revenue?
One of the fastest ways to get into a cash-flow crisis is to provide goods and services to slow-paying customers, and that includes insurance companies. If payment gets too slow, it may be necessary to discontinue participation with certain third-party payers. While this may seem like a drastic move, if you aren’t getting paid or if you are providing services at dramatically reduced rates, it may be costing the business more than it is benefiting it. It’s okay not to participate with every discount program. If the fees aren’t paying for your time, it’s time to discontinue participation.
Another option to improve cash flow is to offer financing or small incentives when patients pay in full at the time of order. If you accept credit card payments, shop around and make sure you are getting the best possible rate. Some of the best advice I ever received was from my accountant many years ago: “Get your money up front. You don’t have the money of a bank so don’t try to act like one.” Wise words of wisdom that have served me well over the years. When patients ask if they have to pay now, I simply say, “Yes. Payment is expected when services are rendered.”
What Are You Giving Away that You Should Be Charging For?
Many audiology practices that dispense hearing aids bundle services into the cost of the aids. However, the number of Internet discount programs and direct-to-consumer sales are increasing exponentially, and more third-party payers are only paying for a small number of follow-up visits. If you provide care to a patient, and the cost wasn’t bundled and covered up front at the time of purchase, you must charge the patient for your time. You may consider offering comprehensive service plans or extended-warranty programs to patients. Hearing aids are an investment and patients are often willing to protect that investment, especially if the professional they trust feels it will benefit them.
Once you have written the plan and put it into place, it’s a good idea to review it every three months to see what is working, what needs to be changed, and what may have caused the change. The business may be doing so well that it’s necessary to accelerate the goals to more closely align with what is actually happening in the business. Don’t get lulled into an “all or nothing” mentality. Creating and maintaining a successful business is about consistency and momentum. Visions can come and go, but if they are created with a clear and well-defined roadmap, success is more likely.
Good business starts with the step of developing a clear vision and a good plan for the future. Take that step and start working on your plan today.
The fourth issue of 2016 in Seminars in Hearing features great information on private practice. You can subscribe to the journal.
If you are looking for a thought-provoking and interactive session at AudiologyNOW! 2017 in Indianapolis, I recommend attending FS 312 “Are you Feeling Stress Keeping your Practice Viable,” to be held Friday, April 7 from 3:00 to 6:00 pm.