January 2024 news
Planning for success and succession
For many practices the last 3-4 years have made us learn about living with uncertainty and in an environment that has limited the amount of control that we have over our business and personal day to day lives.
So, looking ahead to the future how do make sure you have a profitable and sustainable practice business in 2024 and beyond?
Start strategic planning
If you haven’t already started the first step is to start planning now. Many practice owners wear several ‘hats’ – owner, director, clinician and sometimes manager. And often, like many professionals, they spend most of their time working in their practice wearing their clinician hat and very little time working ‘on the business’ wearing their owner/director/manager hats. Planning is probably the most important task of any business owner/manager. It helps to consider and challenge the issues of today before they become problems of tomorrow. It also allows the business to establish goals and benchmarks to monitor future practice performance against and to quickly identify and resolve problem areas.
Strategic planning is about deciding what important issues your practice will face in the future. For instance, you might identify workforce, technology advances, growth and profitability, or succession planning as key issues. Once you’ve identified these, you can then set about developing your road map of how you will deal with them.
Have a revenue growth plan
The value of any business is usually determined by the expectation of future profits, so a key component of any business planning process is the budget and financial plan. To increase profitability, you need to increase revenue and/or reduce costs. Reducing costs may provide a short-term fix to increase profitability but many practice costs are unable to be easily reduced so you will need a revenue growth plan to sustain increased profitability longer term. To help build profitability and business value you will need to:
- determine your income expectations – as owners working in the practice as well as a return on investment for business ownership;
- know the true cost and profitability of all clinical service providers in the practice;
- ensure the patient/client register is accurate and you are receiving all funding due;
- have a clear (and profitable) fee schedule for all services; and
- make sure that all services (and consumables used, or goods sold) are charged for and invoiced at the correct rate.
Planning is an on-going process, and any formal plan should be a ‘living document’. Successful business owners and managers are constantly working “on the business” - making sure the business measures its performance to plans, goals and financial budgets on a regular basis and taking corrective action where necessary.
If any of the owners are looking to exit the practice in the next five years, then succession planning should be top of your list. It’s also prudent to have a plan for this even if you aren’t planning for an owner to exit. What if something unexpected happens? Do you have a practice or shareholder agreement in place that deals with exit of a principal through various means, including sale, death, or compulsory exit through default?
Based on our conversations with younger clinicians that are interested in practice ownership, we know that aside from clinical aspects they are likely to look at things like:
- the existing ownership, business model and governance structure
- how like-minded and functional the owners are as a leadership group
- the responsibilities and obligations of the working owners
- the quality of business management and staff
- whether the practice has good management systems and processes.
If you planning to sell part or all your practice, you should ask what will make it more attractive to a potential purchaser?
- should you consider amalgamation with another practice?
- are the premises modern with a long-term lease, and do you have an equipment replacement plan in place to ensure the practice is not run down?
- is the patient/client base and services provided likely to be attractive to future buyers?
- is your practice changing with the needs of your patients, your profession and technology advances?
- do you have good staff, management structures and systems in place?
We have information of strategic and business planning to help with this process on HealthyPractice at Planning (healthypractice.co.nz)
Other recent articles
14 November 2023
This month we are looking at some topical issues. The removal of the option to include 90 day trial periods for Accredited employer work visas. And how to handle closedown periods and annual leave.
10 October 2023
This month we farewell one of the HealthyPractice team and look at what employers should do when they receive a resignation.
19 September 2023
Pre-employment checks. All recruitment processes are time consuming and costly, so you want to make sure you are recruiting the right person for the correct role.
Join other practices already using HealthyPractice.Register now