Building a Business Plan: Part 6
When Crafting Your Plan, Remember to Add Value to Your Practice
This article by By Terry Flanagan, DC, DABCO, MPH, MBA first appeared in ACA News • Volume 2 • March 2006

A value driver is anything that drives revenue to the bottom line – this may include the cost structure of your practice (financial resources), operational office systems (system resources) and investment in a trained staff (human resources).

Financial Resources
After developing the financial portion of your business plan, you should realize that a chiropractic practice is primarily a fixed-cost business – the cost of being open for business does not change with the number of patients treated or the amount of services provided. What does change, however, is the amount of fixed costs attributable to each patient and service. The fixed cost is apportioned across the active-patient population; as more patients are treated, the fixed cost per patient decreases.

Inventory is another factor to consider. While there may be a small investment in inventories such as nutritional supplements, orthopedic supports or X-ray film, a DC’s largest inventory investment is his time. Time spent not producing billable services is lost inventory. Sitting around (unused inventory) drives up costs and, as a consequence, drives down profits.

Leveraging your time effectively increases the amount of available “doctor inventory.” Efficient patient movement through the office, consistent time management during the patient encounter, and appropriate utilization of ancillary services (therapeutic modalities, massage, etc.) will maximize your availability and increase revenues. Consider your “available time” when making decisions about the type of practice you want or whether to join a particular health plan. Increasing how much you do can increase contributions to your fixed costs and, as a result, drive profits to your bottom line.

System Resources
One of the other ways to determine the financial value of a business is to assess its ongoing operations. Established and effective office systems add value to a practice. Efficient systems for scheduling, billing and recall will stabilize day-to-day operations. In addition, patient support systems (HIPAA, documentation, etc.) provide a practice with some shielding from lawsuits. Doctors and their staffs should also consider developing desk books to document the procedural steps of each job in the office. Desk books allow current staff members to rotate when they need to cover new positions and/or ease the integration of new staff members.

Human Resources
One of the most valuable resources a clinic has is its management—never underestimate good leadership. The doctor is responsible for the culture of the organization; for crafting, communicating and implementing a strategy; and for positioning the clinic to meet future challenges and needs.

Studies of successful businesses identify common trends and skills among successful managers. These include the ability to set objectives, organize groups, motivate, communicate, self-manage, and focus on the core business.

The causes of failure have also been outlined: “winging it” (inattention to detail; not doing your homework), lack of priorities, delayed decision making, tolerance of ineffective subordinates, refusal to seek advice or help, losing sight of the core business, and failure to recognize market changes. The true value of your business is not how well you work…but how well your practice works.

In my first article in this series, I defined value as the ratio of cash flow to risk (Value=Cash Flow/Risk). By writing a business plan, you define and outline your future direction: You assess a number of practice options, determine which ones fit your plan and develop a workable model. By previewing your future and, more important, by considering and choosing between available options, you minimize your risk of failure. You have invested a lot in your career. Reducing risk is the fastest way to build value for your practice, and for yourself.

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