Many private practice owners are so busy doing their therapy work that they never really have the time (or take the time) to step back and look at their practice from an investment perspective. You need to think of your practice as an investment. You’ve invested time, energy, education and resources into it. You’ve also built up a list of clients, services, and referral sources.
Unfortunately, many business owners only start looking at their practice in this way once they’re ready to exit and retire. By then, it could be too late. If it’s not too late, then retirement may be delayed so that you can work to build value in your practice.
This article is Part 3 of a 3-part series titled “Is Your Private Practice Worth Anything?” In Part 1 and 2 we covered the following drivers of a business’ value:
1. Financial Performance – Part 1: June 2019 Newsletter
2. Growth Potential – Part 1: June 2019 Newsletter
3. Switzerland Structure – Part 1: June 2019 Newsletter
4. Valuation Teeter Totter – Part 2: July 2019 Newsletter
5. Recurring Revenue – Part 2: July 2019 Newsletter
6. Monopoly Control – Part 2: July 2019 Newsletter
Here, in Part 3, we will cover the last 2 of 8 drivers of a business’ value and why each driver is important. As you read through this, think about ways you can build value into your practice.
7. Customer Satisfaction: What is the likelihood that your customers will re-purchase and also refer to you. Naturally, a business with high client satisfaction and one that receives referrals will be worth more than one that doesn’t. Referral business lowers the marketing costs necessary to acquire a new client.
Do you know if your clients, or referral sources, are truly happy with you or your services? Would they refer a friend or family member to you? If you haven’t done so already, then it may be wise to develop your own client satisfaction survey. You will want to ask relevant and insightful questions around the ideal client experience. Pointed questions, as well as open-ended questions can be very insightful.
You can also track whether your clients are referring others by asking how new clients heard about you. Track every response so you know how many potential and new clients come to from former clients. A business with high client satisfaction will be worth much more than one with low client satisfaction. Many people will buy a business because of the business’ name and reputation in the community.
8. Hub & Spoke: How would your business perform if you were unexpectedly unable to work for a period of three months. This driver of value measures the likelihood of your business surviving should you be absent or unable to work. What happens to your clients in your absence? Who picks up for you when you are unavailable?
Businesses that can function seamlessly in your absence will be worth significantly more than if it depends solely on your presence. If you don’t have a contingency plan, then now is the time to develop one.
While it may be extremely challenging to substitute another therapist in your absence, there are things you can do to improve this value driver. For example, are you the only one that answers your phone or schedule appointments? If you are absent (e.g. on vacation) who is delegated with this task? Are you the only one that does your bookkeeping, process paperwork or pay the bills? Can this be delegated to someone else so that all of this work isn’t dependent solely on you?
Delegating some tasks will add layers to your practice and this is more attractive to a potential buyer.
Hopefully, this 3-part series has provided some food-for-thought as you think about ways to add value to your practice. There’s no better time than now to begin thinking about these things. Refer back to the June 2019 Newsletter for Part 1 and July 2019 Newsletter for Part 2.
Until next time, I want to wish you a successful and prosperous September.
I can be reached by email at email@example.com or phone at (314) 250-3865 and (314) 272-0727