Whether you’re brand new to practice ownership or you’ve owned your practice with decades, you’ve probably been told, read, or heard somewhere the importance of having a solid business plan. Usually included as one of the many components is a mission and vision statement. These are meant to serve as guiding principles for how the practice makes strategic and tactical changes, team members serve patients, and the business model of the practice.
However, I believe the one question that should even preclude those questions and statements is the following: what is my purpose and intention as a practice owner? Said slightly different and more concisely, what are you solving for as a practice owner and why do you own a practice?
I can pretty easily identify whether practice owners have thought of this question by asking two questions:
- What is your current ratio of in/on/out of the practice (clinical/admin/free time) and is it in alignment with your personal goal?
- With a combination of clinical salary and owner distributions, how much total income do you need to harvest from the practice to live your life with joy and on purpose while also building wealth towards financial independence?
Spoiler alert: not too many ODs are confident in their answers to both of those questions. Some are really clear on one or the other, but a lot of ODs aren’t sure about their answer to either one of them. And I believe herein lies the first problem that needs to be solved with practice ownership.
It’s no secret that running a practice takes a lot of hard work. I’m fond of saying that the only thing that’s constant in practice ownership is change, and I believe most owners would agree with that statement. Most often, changes (whether proactive or reactive) require decisions to be made.
In the absence of having a vision and mission for the practice, making those decisions can be harder than it should be. My business coach has a keystone phrase that I’ve learned and has been a guiding principle in the way that I run my businesses: “When the vision is clear, the decisions are easy.”
But who’s vision are we talking about in the aforementioned question? Is it the vision statement that we created when working on our business plan? Or is it our personal vision that we had when we set out on this entrepreneurial journey and decided to embark on the quest of successful practice ownership?
I would opine that the latter influences the former. What I mean is that it’s important for practice owners to first identify what role they want the practice to serve in their life and, consequently, in what role they need to show up in the practice to fulfill that role.
The great equalizer that influences the role that an OD plays in their practice time. Time cannot be created nor destroyed; we simply spend this finite currency. The return that we get on time is the outcome of the decisions that we make with the opportunities presented to each of us.
What do I mean by the previous statement? I’m illustrating the concept that with each decision we make, we must think of it through the lens of “benefits and exchanges.” If an OD chooses to close down their practice on Wednesday afternoons because they don’t want to miss their kid’s soccer matches, that decision affords them the benefit of being there to support their child and share in those experiences. In a single-OD, “solopreneur” practice, the exchange for this decision is a reduced patient load which results in lower revenue. In an enterprise-level practice with multiple associate ODs and where the owner doctor isn’t seeing patients clinically (and therefore isn’t paying themselves a salary for working IN the practice), the owner must manage doctor time much more precisely to ensure that profitability of the practice is sufficient to meet their own personal income needs. The benefit of this approach is more flexibility in their schedule and time to work in the business. The exchange and risk is growing a practice to the level where profit alone from the business supports the income goals of the owner.
If we can agree that earning top-line revenue in the practice is a product of three factors, we are equipped with the information needed to influence the rest of the dollars in our practice. Simply put, it is the product of the revenue per pt seen x number of pts per day x doctor days per week. This will produce the top-line revenue of the practice, and it is incumbent to the practice owner to manage the practice to the profitability number they desire to provide for the intentional life they aspire to live.
What if we flip the profit-loss statement on its head, though, and work from a bottom-up approach? What if we take the intentional time to determine the income we desire to make from our practice first and use that number to influence how we build the business and where we spend our time in the business to earn that return on time? It’s this sense of intentionality and thinking that I want to inspire through this and future columns in eyeTHRIVE.
Intentional action: spend the time to understand, in rough dollar amounts, the amount of personal income you need your practice to produce and compare that to the number of hours you plan on working IN and ON the practice over the course of 2023. This will equip you with your effective hourly rate in the practice, and will be one of the factors that will influence your business decisions as you map out where you will be spending your time in 2023 and beyond to effect the best return on time and effort in your practice, and thus your life.