The #1 piece of doctor-to-doctor advice for transitioning from a traditional practice to a DPC membership practice is “Keep your expenses low!”
While keeping costs contained is a wise approach for any new business, investing in the success of that business is another story.
One of the biggest downfalls in a business is if the owner views everything that costs money as an expense. This mind-set can keep the business in survival mode rather than thriving in a growth mode. If you can’t afford to invest in a business, you can’t afford to be in business.
Let’s Review Some Simples Definitions First
Overhead Expense:
Overhead expense is the ongoing cost of running a business. Rent, utilities, and insurance are just a few examples. These expenses must be paid regardless of how many members are in the practice. “Fixed” overhead expenses are the same each month, whether revenue goes up or down. “Variable” overhead expenses may vary based on usage. Medical supplies would fall into this category since the more patients you see the more supplies you’ll need.
Investment Expense:
Investment expense is spending money to make money. An investment expense should result in some type of return. That is, money invested results in one of the following returns on that money:
- More income-producing activity
- Increased productivity or efficiency
- Increased profitability
- Enhanced customer service
- A greater competitive advantage
What are examples of smart investments for a membership practice?
Let’s consider three areas requiring substantial investment.
Hiring
Labor costs are one of the biggest expenses for a practice. Investing in hiring the right person — one who may command a higher than average salary, can be an excellent decision.
A capable hire can improve how smoothly and efficiently the office runs. A well-qualified staff person committed to the practice long-term can translate into reduced staff turnover costs.
If they have good communication skills and are customer service-oriented, members will feel good about coming to the practice; happy members will spread the word to others. Investing in the right staff member can help convert more prospects into members, retain those members, and help grow the practice.
Technology
In our digital era, technologies are a standard cost of doing business. When used strategically, technologies can pay back your business in multiple ways.
A better patient experience (such as using an app to improve communication) facilitates word-of-mouth marketing, which attracts more members. Relying on technology to do some of the work allows staff to focus on more income-generating aspects. A more productive office reduces the need to hire additional staff.
Marketing Strategy
Marketing costs fall under “overhead expense” when you pay money in exchange for a particular service. For example, getting business cards printed is a typical cost of doing business.
Investing in marketing strategy however, can yield significant added value. Usually the return on that investment is in the form of additional revenue, and on a long-term basis.
One investment example is to hire an expert to determine how to best set the practice apart and develop pricing which supports the practice. Or create a compelling brand identity with a name, tagline and logo that captures the essence of the practice.
The guiding principle in considering marketing strategy will be your return on investment (ROI). If you pay $1,000 for marketing services one month and earn $1,800 in revenue from those services (by bringing one new member into the practice for example), your immediate gain or return on that investment is $800. Plus, for the customer lifetime of that one member, the return could be ten-fold or more.
There are a multitude of investments to consider when transforming or creating a new practice. By understanding the distinction between overhead / investment expense you can better plan your budget and strategies. You will feel more confident in making business decisions and know you are building a strong foundation for the long-term success of your business.
Could you be a happier doctor?
Is becoming a happier doctor – by transitioning to a membership practice – right for you?
Thousands of doctors have transitioned over to this model. The result: thriving practices that free physicians up to have the types of practices they dreamed of when they went into medicine in the first place. In other words—happier doctors and healthier patients.
What about you? Diagnose yourself. Take the quiz here & get your score!
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Latady Physician Strategies, LLC helps physicians convert to and grow Concierge, DPC and Hybrid practice models that allow them to treat their patients the way they want to be treated, while rediscovering their enjoyment in practicing medicine.
Call or email me with your questions about exploring and transitioning to Concierge or Direct Care medicine.
781.275.1415
