| In the last article we talked about the importance | | | | When you do sell your practice, you will discover |
| of customer service on dealing with patients, | | | | something very interesting. The equity - the real |
| particularly new patients. We talked about the | | | | value of your practice is to be found in the |
| importance of making a good impression to start | | | | patient files. It is in the projected revenue stream |
| the relationship off on the right foot. | | | | from patient care that your buyer will receive. It |
| I think it is very helpful to look at businesses | | | | is not in the value of the equipment, unless you |
| other than medical practice as a source for good | | | | have equipment that costs in the millions of |
| practice-building ideas. All businesses have the | | | | dollars, such as an imaging center. Typically |
| same challenges - finding good customers, | | | | purchasers of practices look to heavily discount |
| retaining them longer, selling them more of the | | | | hard assets anyway to leverage their way in to |
| services and products they need, delivering on the | | | | the deal. |
| promise to the customer, providing excellent | | | | The value of your practice is "goodwill" value |
| customer service and getting referrals. Why not | | | | predominantly, meaning what is the likelihood that |
| learn from all the hard work and research that is | | | | new buyer can get the same revenue stream out |
| going on all around us in the business word? | | | | of the existing patients. How do you calculate |
| The dry cleaning industry provides a very | | | | that? Well the calculations can get pretty complex. |
| instructive lesson when it comes to dealing with | | | | On our website, coaching members get access to |
| new patients, clients or customers. Have you | | | | the formula that Purdue University developed in |
| ever seen the coupons sent out by dry cleaners? | | | | conjunction with the IRS for valuing businesses |
| They offer incredible discounts - 2 for 1, 3 for 1 | | | | and practices. |
| and more - just to get you into their store. They | | | | But for simplicity's sake, let's look at a simple |
| know that if they get you to come into their | | | | practical model for estimating goodwill value. |
| store 4 times they have become your default | | | | Goodwill value is the product of the number of |
| choice for a dry cleaner. After that you will | | | | active patients in your practice times the lifetime |
| become their customer for life unless you move | | | | value of a patient in your practice. This calculation |
| or they ruin your clothes. It's that simple. | | | | is very helpful for figuring cash flows and for |
| It's the same thing in your practice. After a new | | | | understanding the metrics you should be |
| patient visits you a few times and likes you they | | | | reviewing in your practice. If you want to sell |
| make a choice, consciously or unconsciously, that | | | | your practice, this calculation will not help you - |
| you are their doctor. Here's a little secret about | | | | consult your CPA or business valuation advisor for |
| patients: they hate having to find a new doctor. | | | | help. |
| They want to like you and trust you; it's easier to | | | | The formula for lifetime patient value is as follows: |
| stay with the same provider than go on looking. | | | | Lifetime Patient Value (LPV) = Average Collection |
| Can you imagine having to fill out the new patient | | | | per Patient Visit (C) x Average Number of Visits |
| paperwork, and opening up your life story to | | | | per Patient per Year (V) x Average Number of |
| perfect strangers over and over again until you | | | | Years a Patient is Retained in Your Practice (Rn) x |
| find the "perfect" doctor? Patients don't have time | | | | your Referral Ratio (RR). |
| for that. | | | | By focusing on the metrics of C, V, Rn and RR |
| So your goal with the new patient is to make a | | | | you are now focusing on building equity in your |
| good impression -consciously and deliberately - and | | | | practice. You are not just increasing your cash |
| continue to do so to get that patient to stay with | | | | flow, you are building your net worth and creating |
| you as long as you are in practice. Think of the | | | | a retirement strategy for yourself. Too many |
| new patient as someone who will be at the party | | | | doctors labor without an exit strategy. The time |
| you throw when you retire and sell your practice. | | | | to think about your exit from any venture is |
| To expect anything less is to do a disservice to | | | | before you get in, not when you are stuck and |
| the relationship. | | | | out of options. |