Creating Business Value
IN BRIEF
PRACTICE MANAGEMENT
Dr. Michael Perusich
Chiropractors often see their businesses in 30-day cycles as we are often more concerned with monthly growth and income rather than practice value.
Long-term value is the price of your practice listed on your balance sheet. It helps you build net worth and creates the anticipated price someone might pay to buy your practice in the future. Let’s look at some aspects of Chiropractic business that develop clinic value.
First is the concept of “risk vs reward.” A practice that develops a high percentage of its revenue from insurance reimbursement (high risk - low reward), will have a lower value than a practice that is mostly cash-based (low risk - high reward).
The result is, a cash-based practice may have a higher value than an insurance practice, even if not collecting as much. This happens due to the risks of
declining reimbursement and the potential for audits which can result in recoupment of fees, which aid in declining the value of the practice.
In addition, the insurance practice is susceptible to developing fewer long-tenn patients, as they often reject non-covered services. By contrast, the cash practice will have patients who are more willing to pay out-of-pocket, which results in more annual visits and therefore more clinic revenue.
Additionally, there is a distinct bellcurve that happens in Chiropractic practice. We start-out on the upswing of the curve, building our practice and its value.
The first years of practice are spent developing our patient base until we reach capacity. At that point, we are at the peak of the curve which represents the highest revenue point in practice. After that apex, we begin sliding down the backside of the curve.
Over time, our ability to maintain peak capacity becomes limited. The wear and tear of practice take its toll on us physically, our patient-base be-
gins to age with us, and we begin to slow the practice. As a result, our practice value begins to decline.
Finally, take a look at your physical clinic. Is your building outdated and in any kind of dis-repair? Was avocado green in-vogue the last time you painted? Do your adjusting tables need new vinyl and are they in proper working order? All of these considerations can rapidly de-value your practice.
The good news is that when armed with the knowledge and tools to build value, we can beat the naturally-declining value curve to maintain our practice worth. It makes good financial sense to understand the value of your practice and how to best maintain it over time.
Dr. Michael Perusich is a solutions-focused advisor with more than 35 years of success across the healthcare and consulting industries. His broad areas of expertise include coaching, training, content development, and motivational speaking. Dr. Perusich is the CEO of Kats Consultants, LLC. where he and his team offer a unique platform of business knowledge and tools for today’s serious Chiropractic entrepreneur to maximize success. You can reach Michael at 407-308-5590 or at katsconsultants.com
