10 Principles of Profitability

Profitability starts with a mindset. Here are 10 Principles of Profitability that are the foundation for success:

1. Develop a Profit Mindset
   Mindset is more than just a way of thinking, it’s “setting” one’s mind to deliberately think in a specific manner. It’s organizing your thoughts to focus on profitability and then using that framework for every decision made and action taken for the business. Having a profit mindset means evaluating everything in relation to its impact on the profits of the practice.Profit is not a dirty word. Don’t get lost in the day-to-day operations. Focus on structuring your practice to be profitable.
2. Put Together a Professional Advisory Team
   Your team should include a CPA, an attorney, a banker, and a business development coach who can work with you on marketing and business development. These well-trained professionals can help you “get it right the first time”, saving countless hours. Tap into their networks for the resources you need. Doing it alone costs more in the long run, both financially and in robbing you of a myriad of lost opportunities. If you are occupied trying to do the work of a CPA, you will not see the opportunities in front of you.
3. Set-up and Monitor the Right Systems
   Your practice requires that certain systems be in place and running efficiently if you are to be profitable. Systems allow a standardized approach to the basics of managing your practice. They provide the metrics you need to monitor production, and they serve as an early warning system when subtle changes are occuring within the practice, helping you to identify trends and issues early.Your practice should include include systems for:
   • scheduling*
   • case presentation* (presenting your recommendations to the client)
   • financial policies*
   • billing*
   • payment and collections*
   • customer service*
   • patient flow
   • needs assessment
   • proposal development
   • filing

   Every business should have in place those with an aesterick (*). You may add to this list based on the structure and functioning of your practice. If you have standard documents that your practice routinely produces as part of the service provided, you should have a template, outline or document plan for each one.

   Avoid thinking that, since you’ve done it so many times you could do it in your sleep it doesn’t need to be written. As you grow your practice and bring on more help, you will want the approach you’ve developed over the years to be standardized. Training a new employee is not the time to try to remember all the steps and nuances to convey to another.

   You must document your systems: the policies, the procedures, the steps, the forms, and even sample scripts for certain procedures. As has long been said, “if it isn’t in writing, it doesn’t exist”, and nowhere is this more true than with your systems.

   If the system is in the staff members head, it walks out the door when they do, leaving the next person to guess and fill-in-the-blanks. Not a profitable move.

4. Know the Profitability of Each Service You Offer
   Don’t stop at calculating the cost to deliver the service or product. Include all expenses involved in providing that service, such as your overhead, administrative and marketing expenses, the hourly rate of anyone in your practice who is involved with delivering that service, and of course your own hourly rate. You may be surprised to learn that what you thought was a cash cow is really only marginally profitable. Rank your services (and products) in order of profitability. You need to know what’s bringing in the cash and what isn’t.
5. Eliminate Low-Profit Service Offerings
   Don’t let anything become a sacred cow. Be willing to ruthlessly evaluate what each service actually brings to the practice. Eliminate that which is not highly profitable. Don’t delude yourself over “volume”. It does not substitute for profits. Make sure any “loss leaders” are actually leading to higher back-end sales. Be aware of the “high maintenence client” – assess whether what they “cost” in resources (including time spent hand-holding) more than pays for itself in profits or profitable referrals specifically from that client.Work to increase the profitability of each service you keep. Trim costs. Look for efficient ways to deliver the service. Don’t sacrifice the wrong thing while making these decisions (such as eliminating staff training) but do make sure every dollar spent in providing and delivering the service is a dollar that leads to profits.
6. Make Cash Flow a Priority
   Set-up your business systems to support cash flow as a priority. This means that you invoice promptly, you have payment and collections policies, you take all forms of payment, you utilize a third-party financial service that provides financing for your services so that you get paid in cash upfront and the client is re-paying the loan to that third party (some may refer to this as outside billing), you use recurring payments via credit card, etc. In short, you do everything possible to get paid promptly – in cash – for your services.Cash should flow out of your practice only after a deliberate decision-making process that includes a review of all options, including whether or not you need to spend those dollars at all.Stay on top of your cash flow. This is a key indicator.
7. Vigorously Eliminate the Profit Drainers
   Every business has profit holes. Some are pin-pricks with a steady drip, others are huge gaps with roaring amouts of cash pouring through. Work diligently to identify and plug them in your practice.
8. Invest In Your Staff
   They are key to your success. If they are not skilled, if they turn-off your clients, or if they do not support your vision, your practice suffers. Hire only the best, even if it means taking a bit longer to get the position filled.Have in place a thorough orientation program. Don’t simply depend on the staff to “teach them the ropes”. Have a designated person(s) and a specific plan and timetable for teaching your new staff member the systems you have in place. You should have already reviewed your vision and gotten buy-in during the interview process. Expect support of your vision and adherence to your policies. No matter how talented a candidate, never hire someone who does not share your vision.Investing in your staff means:
   • Competitive wages
   • Strong benefits and incentives
   • Opportunities for career development (career ladders, continuing education, etc.)
   • Regular performance evaluations with plans for further professional development (or improvement if needed)
   • Professional surroundings and atmosphere
   • Sincere interest on your part in their contribution as team members in your practice
   • Conveying your vision and goals for the practice, teaching them how to measure success, and rewarding them for achievement
9. Imagine a Worst-Case Scenario and Have “Plan B” In Place
   Suppose the market suddenly changes and your clients have another, more desirable alternative for achieving their goals (faster, cheaper, new technology, new field entering/serving the market, etc.)?What if you lost your best client (who was responsible for a significant percentage of your revenues)…or your strongest staff member resigned…or your contact at the supplier left and you no longer got such favorable rates?What if you were in an accident and unable to practice for three months – what would happen to your practice, your staff members, your own financial situation?”What-if” should always be in the back of your mind along with “Plan B” for how you’re going to handle it. Don’t allow anyone or anything to become indispensible.Involve your staff in identifying areas that need a back-up plan and in developing the plan. Put it in writing. Everyone should know what happens when the unexpected occurs. Since the unexpected, by definition, cannot always be anticipated, have a system for decision-making under those circumstances.

   One really big question: Who steps in to make or endorse decisions when you cannot?

10. Have a Really Big Vision For Your Practice
    Whatever your original goal – double it. Thinking small gets you nowhere. Give everyone something to go for and you will be amazed at what can be achieved. You get what you expect in life – and in business.Bonus Principle:
11. Reward Yourself
    You have taken a risk in being in business. Reward yourself for the work you’ve done, the decisions you’ve made and the lessons you’ve learned.

Profits are not a by-product. They are the result of planned and deliberate actions. Follow these 10 Principles of Profitability and you’re on your way to a well-run, productive and profitable practice that is a rewarding experience for both you, your staff members and your clients.

You deserve it!