Countless financial gurus, business advice columnists, financial planners and authors of hundreds of business related books are quick to point out the mantra “pay yourself first.”
If you’ve been around for any period of time you’ve had lean times in your chiropractic business. You might even have had times where you couldn’t afford to pay the bills and had to stop paying yourself, violating this oft-repeated rule.
But once a business gets moving and is able to make payroll, they quickly forget about the “pay yourself first” advice and move into a move focused on growth. Flush with victory past the survival stage, the chiropractor is now hell bent on growing the business.
This is where the next critical business focal point in. It’s even more important than paying yourself first because if it’s adhered to, paying yourself won’t be a problem. Unfortunately, it’s ignored even MORE than the pay yourself first rule.
It is simply this: Profits Before Growth
Why Profits Must Be Your #1 Concern
For all who witnessed the Dot.com bust, we can easily see what happens when you forgo profits in favor of growth. Hundreds of dot.com companies that were “the next big thing” saw the bottom of their bank account when they discovered they had no real model for producing positive cash flow. In turn, there wasn’t going to be any way these businesses could sustain themselves and pay for their massively growing work force and heavily leveraged assets. On the surface, these companies got bigger but their revenues didn’t keep pace. You know the end of the story.
Because profits must be paramount for ANY business to succeed, your chiropractic practice is no different. Unfortunately, this is where our lack of business savvy begins to handicap practices that could be so much more.
Avoiding Three Big Profit Killing Mistakes
1. Abrupt Associateships –
Some chiropractors practice as if they are Jeff Bezos of Amazon.com who famously stated that growth was his aim and that “he’ll worry about profits later.” As soon as they have a busy month or two or three and life in practice becomes a little hectic, they immediately start thinking about hiring an Associate to help them “handle the growth.”
The chiropractors naively assume their demand will never end and they need helping hands to handle it all. Unfortunately, they don’t consider whether they can actually afford to pay the Associate – particularly if the demand fizzles out and numbers dip back down to their not-so-glorious levels.
What no one seems to ever remember is cash flow. If they did, the comments that Mr. Bezos made would have to be seen in a different light as Amazon has amazing cash flow so it certainly can afford to grow. Do a quick cash-flow check to see if you’re ready by answering this question. Can you afford to pay your Associate AND not make a dime extra for six months? If not, you may be risking profits at the expense of growth and end up with a soured Associateship for both parties involved.
2. More New Patients – another mistake that chiropractors make is their insatiable focus on getting more new patients. While it is obvious that we all need an influx of new patients to survive, the “back end” of what happens afterward is more critical to our profitability.
For example, when we bring in poor quality new patients (those who don’t pay much or at all, don’t stick around, or don’t refer) we negatively impact our practice at least as bad or worse than no new patients at all. Why? Because of our new patient mania, we lose focus on managing our current patients. A big influx of new patients also exposes weaknesses in our systems and what our practice (and staff) can or can’t handle. At that point, we not only lose out on the poor quality new patient, we begin dropping the ball (and the profitability) on our current patients. Bad news for the patients – and your profits.
3. Seeking Shiny Objects – Another costly mistake is the constant search for the “shiny new object.” Rather than analyze your current offerings and see how profitability can be improved, these docs seek something new and spectacular that will push their profits higher. Unfortunately, in the process they violate one important rule: adding more potential to untapped potential doesn’t actually get you anywhere. Put another way – it’s easier (and more likely) to tweak an already successful service for more profitability than to start one from scratch and have it outpace and outprofit your current offerings. This isn’t to say that you must be resigned to doing the same old things. But exercise caution whipping your practice in every direction chasing the latest of everything that has a chance to increase profits, while ignoring the easy pickings in your own back yard.
The Paradox of Simple Success
For over thirty years, I’ve continued the pursuit of reading a book a week to improve my business, my relationships and my life in general. While the collective knowledge that I’ve gleaned from these readings may be diverse in its scope, one common factor never ceases to amaze me.
Beneath the catchy titles and glowing reviews, the wisdom imparted in the best of these books is remarkably basic and simple. The paradox of this phenomena is that the application of these basic principles is extremely timely, relevant and future paced – simple success that’s both basic and forward-thinking by design.
In other words, rather than recycle tired old tactics, the best business wisdom imparts the basic wisdom that is tried and true and applies it to the present situation in innovative strategies and unique formats.
And in doing this, they keep to the simple formula of profits first, then growth. Not surprisingly, the most successful chiropractic businesses on the planet follow the same formula. Hopefully, this article will stimulate some thought on how you can too!
Bonus! Strategically Design Your Practice for Better Profits
For chiropractic business owners who are looking for additional ways to boost your profits, I’d encourage you to join me this week for our FREE Elevate Your Chiropractic Online Workshop. We’ll be discussing the four foundations for chiropractic success that lead to increased profits, increased freedom and increased fun in your business. Click the link above to register for the workshop and hope to see you there!