Tips Of All Sorts

I came across a tidbit today that does a great job of describing the difference between running a business and running a holistic practice. It’s from Rich Dad’s Cashflow Quadrant, the second in the Rich Dad series of books:

"Those who are true “B’s” (Business Owners) can leave their businesses for a year or more, and return to find their business more profitable and running better than when they left. In a true self-employed type business, if the “S” (Self-Employed) left for a year or more, the chances are there would be no business left to return to.

So what causes the difference? Saying it simply, an “S” (Self-Employed) owns a job. A “B” (Business Owner) owns a system and then hires competent people to operate the system. Or, put another way, in many cases the S (Self-Employed) is the system. That is why they cannot leave."

Rich Dad, Poor Dad was one of the first books (The E-Myth is up there, too) that initially woke me up to the difference between self-employed practitioner and business owner. I’ve written about this before, but I thought the way Kiyosaki put it was quite effective.

And as I’ve noted before, you don’t have to make the leap from practice to business, but the rewards can be well worth it.

Recommended Reading
Rich Dad, Poor Dad, by Robert T. Kiyosaki
The E-Myth Revisited, by Michael Gerber

PS – If you’re going to grab any of the E-Myth titles, get the The E-Myth Revisited. The E-Myth Physician is pretty weak, and doesn’t have much to offer beyond the originals…

Related Posts
Is Your CAM Practice a Business?
Transforming Your Alternative Health Practice Into a Business

“I’ve got an opportunity to buy some patient files from another chiropractor, but I think the price is high. How do I know how much to pay?”

Good question. Let’s assume for the moment that buying files in general is a good idea. (I think it is.)

Valuing a practice – or any business – can be quite complicated. There are companies and professions dedicated to the process, and most are reluctant to “give away the cow” as they say. Between that and the fact that there’s no single, correct answer, it’s tough to find good info online.

Business values are affected by many factors, such as profit, revenue, the economy, real estate, debts, goodwill, branding, patents and assets to name a few. Let’s assume we’re just talking about files for the moment – you can always get some advice from your accountant or lawyer on equipment and other assets.

I can’t tell you how much to pay from your question alone, but I can tell you what makes files worth more, and what makes them worth less. These factors apply to just about any alternative health practice – nauturopathic, TCM, acupuncture, massage, homeopathic, etc.

Age
The longer since the last visit, the greater the chance that it’s a “dead” file, and you won’t see the patient. A patient who was seen last week is worth more that one who hasn’t been in since last year.

Visit frequency
A full house beats three of a kind, and a patient who comes once a week beats one who comes once a month.

Acute vs Preventative vs Chronic
Patients who come regularly for good health are worth more than those that just come for a back pain, or a car accident. And of course, though it sounds opportunist to say it, a patient with a long-term chronic condition is worth more to you than the one-time acute visit.

Competition
If you’re the only game in town, the files are worth less because a) the patients have nowhere else to go and b) the other chiropractor has no one else to sell the files to. Conversely, if there’s a lot of competition, the files are worth more to you – they’ll help your practice, and keep those patients at your office instead of your competition’s.

Practitioner similarity
If you’re a subluxation-based chiropractor, for example, and you buy files from a chiropractor who isn’t, your modality may not jive with the patient, and you could lose them. The closer the other chiropractor is to you in terms of treatment modality, the more success you’ll have converting the new patients.

Vendor participation
The more willing the doctor selling the practice is to assist in the transition, the higher your conversion rate. A doctor who wants to hand you a box of files and walk is not as helpful as a doctor who will help transition the patients, and give their “blessing” to the new arrangement.

Referrers
Patients who refer are worth their weight in gold. This is generally tough to tell, but some chiropractors track their referral sources.

Now the big “but”: it’s generally very difficult to get the information I’ve mentioned from vendors. So what tends to happen is a lot of talk about “gross this” and “net that” and “two years this” and “x percent of that”. This is where many CAM practitioners start running for the door.

Is there a way to simplify things? I think so…

Next time: crunching the numbers. (Part 2)

(Click here for Part 1)

When you buy a practice, you’re making an investment – you’re putting your money somewhere in anticipation of it multiplying. So just like stocks, mutual funds, or your savings account, you want the best return on your investment (ROI).

The simple formula for ROI is:

ROI = (benefits/costs) x 100

If you spend $10,000 (your “cost”) on stocks, and those stocks are worth $12000 at the end of the first year (benefit), that’s a 20% ROI.

My general rule of thumb is that I like purchased files, at a minimum, to pay for themselves in a year (100% ROI). That means after 12 months, the files are paid for, and starting to generate a true profit.

That’s just my number – you can use whatever makes sense to you. I’m just comfortable with that range. Unlike stocks or real estate, patient files may go stale a little sooner, and you can’t necessarily turn around and sell them again, so the ROI concepts are a little different. If a patient you’ve “bought” hasn’t come to see you in the first year (or much sooner), there’s a good chance they never will. So I like high rates of return.

From here, you can use two numbers:

• How much is an average patient worth to you in a year?
• In the practice for sale, how many patients have been seen in the last 12 months?

Let’s say you have an opportunity to buy a practice that has 500 files, 200 of which have been seen in the last 12 months. As a chiropractor, you might know the average file is worth $350 a year. (I’m making this up, but have a look at your numbers. Take your annual revenue and divide it by the number of live files that year for a rough estimate.)

200 files x $350 (your average) = $ 70,000 in annual revenue. Now just divide that figure by your desired ROI, and you’ll get the price you should be willing to pay for the files less than one year old.

For example, if you want to get back all the money you spent on files, plus make a healthy profit in a year – say a 150% ROI, you’d want to pay no more than $70,000/1.50, or roughly $47,000.

What about the fact that there are 500 files? My inclination is to ignore anything older than a year, but that’s affected by the market, your industry, how effective you are at marketing, and just how plain good of a CAM doctor you are.

Reader W., a naturopath, is facing a staff ultimatum: “I need a raise or I quit.”

What’s the best thing to do?

a) Give In
b) Do nothing/ Call the Bluff
c) Negotiate
d) Accept The Resignation

This situation is more common than you think. Keep an eye out for it in your practice, as it often comes in more polite form – something like, “I can’t seem to make ends meet with my current paycheck. I’m so sorry, but I’m going to have to leave unless I get X.”

Here’s your answer: any time a staff member uses “quitting” as leverage to attain something, the only viable option is to accept the resignation.

No matter how polite, this is a form of bullying on the part of the staff member. They may truly need the cash, and they may not be playing hardball consciously, but the long-term impact on your practice will still be negative. Here’s why:

They’ll Do it Again
Once they see that the tactic works, your staff will use it again for something else in the future. It’s simply the way our brains are wired – positive reinforcement is a powerful tool.

They’ve Already Decided They’re Willing to Leave
In most cases, the person has already accepted the idea of leaving. Even more likely, they’re probably looking for another job right now. They’ve got one foot out the door.

They’re Likely Uninspired at Work
If they really loved their job, they’d find another way to ask for a raise, one that doesn’t come packaged with the or else clause. This is why ignoring the situation or calling the bluff may not work – the original ultimatum is an indicator of a larger problem. As soon as they play the “I’ll quit” card, they’ve shown their hand – if they haven’t got one foot out the door looking for more work, they’ve certainly got half their mind somewhere else.

They’re Setting an Example
If you’ve got a staff of more than one, giving in to this type of negotiation tactic sets a precedent in your practice that may lead to more difficulties down the road.

Although letting someone go is possibly the hardest part of being an employer, it’s also one of the highest impact decisions you can make in your practice. It may seem rash to simply accept their resignation, but in the long run, you’re always better off with the right person in the job. It may help to think of it as helping the other person find what they really need – giving in and keeping them on staff isn’t likely to make them happy.

Or else scenarios are harbingers of future problems with staff. The double gift of the ultimatum is that it let’s you know things aren’t going to work out, and it offers you the easy way to let the person go: they’ve offered the resignation; you just have to accept it.

After the post on marketing with integrity, I thought it’d be useful to provide an example of putting the principles to work.

Referrals from existing patients are critical to growth. Good patients tend to refer other good patients, and that cycle is an important one for growing your practice with the kind of patients you want. If you read the post on marketing with integrity, you'll know that aligning the type of patients in your practice with your health care and business philosophy is important.

For many practitioners, though, the tough part is generating those referrals while maintaining a level of professional integrity. How do you ask for those referrals without feeling…squishy? Let’s put some integrity into the problem and see what happens.

Be Honest
Your patients don’t necessarily have a good grasp of how busy you are. In fact, they have a tendency to believe that when your practice is even a little busy, you don’t want new patients. However, they’re only seeing a slice of your day – they’re not there on the days that the schedule has a four-hour gap.

The solution is to let them know, and really, there’s nothing wrong with simply telling them. Don’t burden your clients with the sad story of your mortgage arrears, just be willing to say that you’d like more business. This one is most easily done in person, particularly because patients will often ask about your practice, or comment on the level of activity in your waiting room. This is a perfect time to mention that you’re always accepting new patients.

Be Welcoming and Grateful
If you’re going to request referrals, do it warmly and gratefully. Instead of putting “new patients accepted” on your door, why not “Happily Accepting New Patients Since 2003”? Make sure you and your staff see each new referral as a gift, and don’t forget to track and thank your referrers. Those “thank-yous” aren’t just gratitude for the increased business, but gratitude for the trust that a referral represents.

Skip the Discounts, Incentives and Two-For-Ones
While you may be able to generate some office traffic with a “bring a friend and get two free supplements” offer for your existing clients, it’s frequently the wrong choice. When you offer financial incentives for referrals, patients may begin to refer for the wrong reasons. (That and it may be against the rules of your regulatory body, if you have one.)

Referrals that come as a result of the value of your service tend to be referrals that match your vision and your practice style.

Instead, Offer Something Risk-Free
In fee-for-service health care environment, many people may be reluctant to refer because they don’t want to take the risk that what you do won’t work, or the practitioner-patient connection just might not be there. Offer a risk-free referral – a no-charge, no-obligation “meet the doctor” visit, for example. This is integrity – you’re offering to demonstrate your value right up front. You don’t have to treat people on this visit, but offer to meet them, hear their problem briefly, and let them know if you can help.

It’s important to get this on paper – a card or note, etc. Many people are reluctant to ask for this type of thing, but will be quite comfortable bringing in a printed offering.

Announce An Expansion
Marketing a new product or service always seems less “cheesy” when it’s done in the form of an expansion. This is particularly well-suited to existing patients – you don’t need to sell them on your practice to the same extent. It’s the “here we grow again” approach – instead of “50% off chiropractic visits”, try telling your existing patients about a new expansion in facilities, staffing, systems, modalities, testing, products or colleagues.

Related Posts
Marketing with Integrity, Part 1