The strategic planner: Time is money
What is your time worth?
By Tom Deters, DC

You worked hard in school, started your own practice and built a respectable patient base. But now what? All small businesses face the same challenge: How do you bring scale to a one-person show — or a two- or three-person show for that matter?

There are limits to your time, your office space and the number of patients you can see. Even if you are not at 100 percent capacity and are continuing efforts to build your practice, you want to make the most efficient use of your time and energy for the highest return. This is especially true when you’re market-ing your practice or investigating a new revenue opportunity (such as new products or additional services to your patients).

This can be a tough enterprise. Most doctors I talk to don’t know what they earn per hour, nor do they do any type of time analysis before evaluating new opportunities or forecasting their current operations. While return on financial investment is critical, return on sweat equity is even more important to determine the potential of the business and the longevity (or burnout rate) of the doctor.

‘SOFT’ DOLLARS ARE HARD

Most people in business are looking for ways to swing deals while minimizing costs. As a result, they trade “soft dollars.” Soft dollars can be time, resources, discounted services, intellectual property or good old-fashioned back-scratching.

When an accountant does tax preparation for his plumber so that the plumber fixes his sink for free, this is a soft-dollar deal. That is not to say that soft dollars aren’t expensive!

Business incurs two real costs: an absolute dollar cost and an opportunity cost. Opportunity cost is the resource expense (time, money and effort) that could have been used in another way to grow or support other aspects of your business.

In the case of the accountant mentioned above, his opportunity cost is a few hours’ work — hours that he could have billed another client at his normal rate. We presume that the value of the plumber’s tax preparation was equal to the value of the accountant’s plumbing repair, and therefore the exchange was mutually beneficial.

If this was not the case, then the opportunity cost exceeded the value of the service received for one or both parties. The point is that opportunity cost (and soft-dollar expenses) should be monitored and budgeted as carefully as are direct expenses in your budget.

WHAT IS YOUR TIME WORTH?

How do you market your practice? How much of your time do you spend speaking, promoting, screening or doing other promotions? In your efforts, do you calculate the amount of financial return you expect from your time?

What do you make an hour in take-home pay? Let’s say you pay yourself $100,000 per year. The average chiropractor treats patients 30–39 hours per week. Assume you spend an additional 10 hours per week on report writing, adminis-tration and paperwork, for an average total of 45 hours per week.

If you work 50 weeks out of the year, you work 2,250 hours. Your hourly rate is $100,000 divided by 2,250, hours or $44.44.

But how much is your time worth in terms of revenue to your practice? If your gross annual collections (not billings) are $400,000 and you work 2,250 hours per year, an hour of your time is worth about $178 of practice revenue.

One of our goals in business should be to not just increase our total revenue, but also to increase our revenue per hour worked. How can you increase that number? Evaluate how you spend your time and other resources and what return you want for that effort.

CHECK YOUR EGO AT THE DOOR

In business, it is usually best to make decisions based on external factors. Decisions or choices based on internal factors such as emotions or ego are often less than maximally efficient and can be expensive in terms of both absolute dollar and opportunity costs.

As captain of your ship, you are in charge of your practice and your business — it is also your responsibility to run it as best you can in order to serve as many patients as possible. That means honestly evaluating where you put your time and money.

Here is a real-world example. Dr. “Golf” wants to sponsor a prestigious local Pro-Am Golf tournament. He thinks it will be “good for the practice” by increasing his visibility and recognition in the community and will attract new patients because “lots of golfers have low back pain.”

Dr. Golf has a booming practice and is on target to collect (not just bill) $1,000,000 this year. He works more hours than most — about 50 hours per week or 2,500 hours per year. So, he earns $400 of revenue per hour.

On the day of the tournament, Dr. Golf will spend eight hours at the tournament (and hence close his office on a Saturday, foregoing six hours or $2,400 in revenue). He will spend $10,000 in sponsorship and $250 in food and drinks (not to mention $200 of personal income on new golf shoes and balls).

The total hard-dollar and opportunity cost to his practice is roughly $12,650. If his eight-hour investment is to break even, let alone show a return, he will need to attract and treat a lot of new patients.

So, if you want to spend $10,000, (plus, plus!) to sponsor a prestigious local Pro/Am Golf tournament because you love golf, great! Just do your homework, and make sure exercising your personal passion doesn’t come at too high of a price to your practice.

SOUND CRAZY?

I’m sure that many of you are reading this thinking that the above example is crazy, but I talk to doctors all the time who are just as inefficient with their time and resources as Dr. Golf was.

For example: Dr. Dietary, who does little or no patient education on the benefits of chiropractic care and whose patient-retention numbers are weak, may be using his time inefficiently if he spends five minutes telling every patient why they need (and should buy) supplements.

This is not to say that supplements may not be important, but from a business perspective that time might be better devoted to cultivating return visits.

Similarly, Dr. Fitness, who spends eight hours per week in her local gym doing free seminars and demonstrations yet only gets a few new patients a month is not increasing her revenue per hour worked.

FORCE MULTIPLIER

We have all heard of various ways to increase efficiency through management techniques, increased delegation, new software and the like. At the risk of sounding cliché, the greatest and most powerful force multiplier in your office is your mind. With discipline of thought, reflection on your business and time spent thinking strategically about your direction and operations, you can not only grow your revenue and profitability, but also increase the efficiency of that profitability.

For further information on seminars, workshops and consulting on strategic practice development by Dr. Tom Deters, visit his Web site, www.tomdeters.com, or e-mail him at info@tomdeters.com.