The Way to Business Success for Private Practice Owners
How do you Turn your Private Practice into a Successful Business?
As many professional practice owners find out, it’s one thing to open your own practice. It’s something entirely different to build a successful business with healthy finances and happy clients and staff.
As talented as you are, knowledge as a lawyer, therapist, accountant, or health provider doesn’t directly translate to successfully running a business where you’re responsible for managing people, expenses, and processes in addition to bringing in new business.
Success doesn’t come down to only having drive or talent. It also requires business knowledge and a plan. Today we’re going to help you close that knowledge gap so you can move from private practice confusion to strong and sustainable business.
As a business coach for professionals, I’m here to help you become a stronger leader and business owner so you can build success in your business and your life. Let’s start with a foundational formula that gives you a step-by-step process for evaluating your business's numbers.
Introducing “The Way to Success” Formula
I’m sharing one of my business coaching tools, adapted from a concept called the “Way to Wealth” from Brian Tracy. When you address all areas of this formula, you’ll have a blue-print for success in your business without needing an MBA to get you there. (Nothing against MBAs, I have one myself, but instead of getting a MBA, just hire one!).
Note that I have changed the name slightly to the “Way to Success” because I know that sometimes "wealth" is not the objective in all professional or healthcare businesses. Instead, objectives may be to help as many people as possible, to provide exceptional services, or to have flexibility between work and home.
Whatever your goals, this formula applies. Inside this resource, you’ll learn a little about each area of the formula and then you’ll have the opportunity to dive into some questions that will help you make progress in your private practice business.
Using this formula as your guide, let’s walk through…
# of Clients - leads, conversation rate, client retention
Revenue - thinking about pricing and volume
Profit - how much you make factoring in your revenue and costs
I encourage you to grab your computer or a pen and paper and start writing out answers and action steps as you move through this resource. Let’s begin with your clients.
BREAKING DOWN THE NUMBER OF CLIENTS IN YOUR PRIVATE PRACTICE BUSINESS
A foundational number to understand in your business is your number of clients. The target is to have a clear idea of how many clients you need to meet your goals and budget. With the target number of clients in mind, you’ll need leads, must convert them to clients, and then retain them within your practice.
So let’s better understand your number of clientss by looking at your leads, your conversion rate, and retention.
Understanding your Leads as a Private Practice Owner
Getting Clarity on Your Leads
Here are some questions to guide you through the process of understanding your leads for your professional private practice. Answering these questions should give you both clarity and help you brainstorm some action items moving forward.
Who are your ideal clients?
How are your lead generation activities reaching them?
Where are your current leads coming from?
What metrics are you tracking regarding leads?
What lead-generation activities are paying off?
What lead-generation activities are not paying off?
What do your website metrics tell you about your leads?
What do your social media metrics tell you about your reach?
How much time per week do you spend on lead generation?
What is your budget for lead generation?
As outlined, lead generation needs to be intentional in terms of time, processes, and financial investment. That’s because so many outcomes in your business are related to getting the right number of clients in the door, which starts with your leads.
This brings us to the next step: How do you turn leads into clients?
Conversion to a Paying Client
Once you have leads, you need to consider how many of them end up becoming your clients or patients. The ability to turn interest into action is called conversion.
You calculate this conversion rate by taking the total number of leads and dividing it by the number of people who say “yes.” For example: [Total number of free consults]/[number of people who booked a service]
[Number of people attending a webinar]/[number of people who followed up for a service]
[Number of people who called or emailed]/[number of people who booked and kept an appointment]
Getting Clarity on Your CONVERSION Rate
Here are 10 questions to guide you through the process of understanding your conversion rate. Answering these questions should give you both clarity and help you brainstorm some action items moving forward.
What is your conversion rate per lead generation channel?
What is your ask of your leads when you get them?
How do you cater to the different leads you get?
What is your response rate to the leads you get?
How long does it take for a lead to become a client?
What different things are your leads looking for?
How is your offering differentiated by the types of potential buyers you have?
What is your follow-up schedule with leads?
What is your drip campaign with leads that don’t buy?
What conversion metrics are you tracking? Is this enough?
Reflecting on these questions should help you find areas to address to turn more of your leads into paying clients.
Think About Retention of Clients in Your Private Practice
Why do clients continue?
Why do clients leave?
What is the average lifecycle of a client? The range?
How are you planning for retention/discharge to fill the funnel?
What feedback are you collecting?
What patterns do you see with retention by employee/provider? By price point? By funder?
If people only bought once, why?
How do your clients know they are appreciated?
What retention metrics are you keeping?
How can you improve your retention metrics?
Looking at leads, conversion, and retention gives you the first piece of the formula for knowing and improving your number of clients. Now you’re going to use this information to understand your revenue.
GENERATING REVENUE IN YOUR PRIVATE PRACTICE
Revenue is the amount of money your private practice or business takes in. You need to understand how much money is coming in before you can figure out how much money you can use to pay yourself or to spend.
As you can see in the formula, revenue is directly related to your number of clients, pricing, and volume. Let’s explore this further.
Understanding Pricing in Private Practice
After gaining and keeping clients, the pricing of your services will determine your revenue.
On the other hand, you want pricing to be fair to your clients, representative of your actual time spent, and competitive within your market.
Getting Clarity on Your Pricing
Here are some questions to guide you through the process of determining your pricing. Answering these questions should give you both clarity and help you brainstorm some action items moving forward.
How does your pricing compare to your competition?
When was the last time pricing was reviewed?
What are the restrictions to your pricing?
What are your client's buying patterns by price?
What other products, services, or packages could you offer that optimize price and service?
How could you innovate your pricing structure?
How can you check your assumptions and biases about pricing?
How can you modify your assumptions and biases if these get in your way?
What does pricing look like in other markets? Should you look at these?
How have you protected your pricing from industry or system threats?
As you work through these questions, you might find that pricing your work is deeper than just dollars and cents. Pricing is nuanced and it’s tied to your inner beliefs and values as a business owner. It’s no wonder so many private practice owners struggle with pricing!
The last piece for calculating your revenue is applying your pricing to your volume. Let’s look at that number next.
Volume for Your Private Practice
Answering these questions should give you both clarity and help you brainstorm some action items moving forward.
What is your average number of sessions per client? The range?
What packages do you offer that include volume?
What volume do people need? Are they getting that?
How are you selling or packaging volume?
How are you getting people to commit and attend?
What are the barriers to higher volume services?
What else could volume look like for your business?
How can you remove assumptions or biases from other sectors or experiences to make the right choices for your business?
How can you innovate volume to offer something new?
How is pricing better or worse in other markets? Should you look at these?
Exploring your numbers around volume might lead you to think about staff productivity, cancellation policies, and scheduling. You’re going to need to think about how to balance pricing and volume to get the revenue you need for success.
Now you should have a rough idea of how much revenue you’re going to generate based on your number of clients and pricing, and what variables are going to impact that revenue. However, you still don’t know how much money is in your business. That’s because you need to deduct your costs before you know your profit as the owner. So let’s do that next!
CALCULATING YOUR PROFIT
Once you have your total amount of revenue, it’s time to subtract out the expenses of doing business. This is how you get to the amount of profit in your business. This number will help you make a host of other decisions around spending, hiring, and even your own pay and ability to enjoy time off.
And as a quick reminder, the goal is to be profitable. This means you need to make more than what you spend to run this business. Alright, let’s dive into this final step of the equation.
Costs of Goods Sold for Your Private Practice
Taking the time to answer these questions should give you clarity and help you brainstorm action items moving forward.
When was the last time you reviewed the cost paid to those providing the work?
How often should you review your cost of goods sold and consultant/employee-related costs?
What are you paying the people doing the work? Is this competitive?
What other structures exist for paying providers? Should a different model be considered?
How much is turnover or retention costing you? Are you monitoring this?
Who is your highest revenue consultant/employee? What can you learn from them?
Who is your lowest revenue consultant/employee? What can you learn from them?
How can you adjust your recruiting to accomplish your profit goals?
Who are your ideal employees/service providers? How can you find them?
What does un-billable time cost? Are you measuring this?
As you can see, for professional businesses, the costs related to those providing the services are more than just payroll versus billable hours. If you want to drive change in this area, you’ll likely think about pay, recruitment, contract specifics, and retention.
Operating Costs of a Private Practice
So now’s your chance to open your business books and review your expenses to find out how much you're spending and where you’re spending it.
Getting Clarity on The Operating Costs of a Private Practice
Here are some questions to guide you through evaluating your operating costs. Grab a pencil and dive in. These questions are designed to give you clarity and help you identify some action steps.
How much is your overhead? By %?
How often do you budget for overhead?
How often do you review overhead and how this is trending?
What changes can you make to overhead to streamline or reduce costs?
How would adjusting the support provided to employees/service providers (up or down) change revenue?
What operating activities are you doing that should be delegated?
When was the last time you reviewed your own vendors and their pricing?
What discounts might be available for you as a vendor/tenant based on volume, relationship, or history? Have you asked?
In summary, wise decisions regarding operating costs directly affect profit. This doesn’t mean you want to cut costs just to make more money. Rather, it’s a balance between having the budget available to support your business's needs and paying for operating costs that don’t impact its health.
The Success of Your Private Practice Business Starts With You!
The “Way to Business Success” formula does a powerful job of leading you through the different elements that impact your business success. We’ve seen how each variable plays an important role in the overall outcome.
One of the challenges of running a business as a private practice owner is the dynamic nature of the business where variables are changing frequently. However, once you’ve developed a system for the key areas of business success, your business will run more smoothly and you’ll be better prepared to make or adjust to changes.
If you want help working through the formula, reach out to me. I’ve helped clients with everything from big-picture thinking to nitty-gritty numbers and policy. Learn more about my business services or reach out for a free consult call.