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 clinicians only start looking at their practice in this way once they’re ready to exit and retire. By then, it could be too late and 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 1 of a 3 part series titled “Is Your Private Practice Worth Anything?” Here, in Part 1, we will cover 3 of the 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.
1. Financial Performance: People want to buy, or invest in, businesses that produce revenue and have healthy profits. Healthy profits are produced when there is strong revenue and expenses are well understood and managed. Along with healthy profits, a valuable business keeps good records and records are kept in a professional way. Poor record keeping is a risk to any potential buyer.
In this day and age, everyone is able to use electronic software to keep their records. It is inexpensive and allows integration with your payment provider and financial institutions. Paper records make it difficult to find things quickly and they require physical storage. Administrative efficiency often equates to better financial performance since there’s more time available to spend on profitable endeavors.
2. Growth Potential: Does your business have growth potential? What is the likelihood of growing your business in the future and at what rate? If your business is just you and you are the vehicle by which you provide service to your clients, then the ability to grow your business is capped at the number of hours YOU can work in a day, week, month and year. If you build a practice that is more than just you, then you are building a practice that can scale and expand beyond your annual working hours. People want to be a part of, and invest in, businesses that have potential. Think about this…what would be more appealing…investing in a business that is stagnant and is solely dependent on the owner or one that is diversified and growing - impacting more lives each year?
3. Switzerland Structure: How dependent is your business on the owner, one employee, one type of service, one referral source, or one marketing approach? Basically, one of anything.
If your practice consists of just you, then what happens to your practice when you are unable to work? Valuable practices are still able to function even if you are unable to work for some time. Likewise, valuable practices have many different customers, services, marketing approaches, and referral sources. Having just one of anything means that all of your practice’s eggs are in one basket.
The Switzerland Structure (independent) is the way you need to structure your business especially if you want to maximize the amount you can sell it for in the future. A potential buyer wants to know that your business is not linked to (1) important variable that can send the business into a downturn should that variable go away.
Think about how you can, either now or in the future, build a practice that isn’t too dependent on any one variable to survive. A good place to start is to think about how your private practice can still generate revenue while you are on a week’s vacation. This doesn’t necessarily mean that you have to build a group practice.
What if you build something that provided value to customers without YOU actually needing to be present to do so? For inspiration, think about these items below and how they provide customers great value without depending on a human to provide it directly:
a. Paid subscription to your YouTube Channel which provides OnDemand exercises to help treat anxiety (e.g. How to meditate for beginners)
b. Self-study courses (e.g. self-study courses for parents to learn about their child’s needs at each developmental stage or how to help your child with anxiety)
c. Therapeutic tools – can you be a reseller of therapeutic tools or perhaps you create one that doesn’t yet exist
Someone once said necessity is the mother of invention. Well, most private practice owners wait until it is too late to invent and transform their practice into a business of value. Don’t wait too long, NOW is the best time to think about building value. Dedicate some time to think about this, get creative and daydream.
If you could wave a wand and make your practice the way you want it, then what would it look like. When imaging your dream practice, think about the times you’ve thought “If only I had time, I’d really like to add X to my practice.” Or, “If I could provide my clients with Z, I really think it would help their healing process or therapeutic experience.” No matter what have fun with it - the sky’s the limit.
Stay tuned for next month’s newsletter where I will cover the next 3 drivers of a business’ value. And remember, it can be extremely helpful to have a “thinking partner” in this process. I invite you to reach out if I can be of help in any of the (3) areas covered above. Until next time, I want to wish you a successful and prosperous June.I can be reached by email at firstname.lastname@example.org or phone (314) 250-3865 and (314) 272-0727