Roughly 50% of businesses ‘plan to fail’ with insufficient business plans and strategic objectives
Data provided by the Bureau of Labor Statistics reveals that roughly 50% of businesses fail within their first five years of operation. By year 10, survival rate dips even more, with only 30-35% of companies able to keep their doors open after a decade of serving consumers. Are you among the chiropractic practices “planning to fail” with insufficient business plans and strategic objectives?
The good news is that health care businesses tend to have a higher survival rate when compared to those within other industries. The question is: what are you doing to ensure that you’re among the resilient and able to serve patients long term?
Strategic objectives: common reasons for business failure
One of the best ways to avoid business failure is to recognize the factors that have the greatest ability to incite this downhill trend. Some of the most common reasons businesses fail include:
- Not having enough working capital to sustain day-to-day operations
- Ineffective pricing strategies
- Poor business management
- Lack of proper planning and strategic objectives
- Underestimating your marketing needs and costs
Addressing each of these issues can help you build and grow a successful chiropractic practice.
Developing a realistic business budget
No two businesses require the same level of funding to sustain daily operations. That’s why it is necessary to make a list of the reoccurring costs associated with running your individual chiropractic business.
For example, Chiropractic Economics’ 22nd Annual Salary & Expense Survey revealed that, on average, doctors of chiropractic spend $22,775.85 per year to lease or buy their health care facility. Factoring this expense into your budget is critical to ensuring business longevity.
Other day-to-day expenses to consider include those related to utilities, equipment maintenance, office supplies, insurances, and employee pay and benefits. Also note one-time expenses that are likely to occur in the upcoming year, such as the purchase of new equipment or building renovation. This tells you how much capital is needed to stay in operation.
Effective price-setting strategies
Pricing is a slippery slope because, on one hand, you want to outprice your competition but, on the other hand, you still have a business to run. How do you stay competitive while still turning a profit?
The first step is to do a bit of research and learn what others in your area are charging. Offering slightly discounted rates can increase your patient base. Just don’t go too low for too long or it could create the opposite effect and hurt your practice financially.
Also look at the unique value your practice offers patients. This enables you to set your prices a bit higher for these services. Review your rates regularly so you don’t wind up operating off an outdated fee schedule.
Tips for successful business management
Even though your primary objective is to improve patient health, if you don’t successfully manage your chiropractic practice from a business standpoint, you’re not going to stay in operation long enough to provide positive long-term results.
The U.S. Small Business Administration offers a variety of courses designed to help you develop solid strategic objectives and become a better business leader. Among them are Small Business Employee Recruitment and Retention. Sales: A Guide for the Small Business Owner, and Marketing 101: A Guide to Winning Customers.
Coursera also offers a number of online business management courses from which to choose. Some are available at no cost and others require the payment of a small fee.
Creating a comprehensive business plan with strategic objectives
The main purpose of creating a business plan is to provide a step-by-step course of action for building a profitable practice that meets (or exceeds) all of your desired goals. Without this type of plan, decisions are made without strategic objectives and a clear understanding of their consequences.
A comprehensive business plan includes nine basic elements:
- Executive summary – a brief summary of your practice
- Company description – the problem your practice solves; who you serve
- Market analysis – who your competition is and how you are different
- Organization and management – your business structure, both legally and internal organization
- Services and products – what you offer patients both in services and products
- Marketing and sales – your strategy for obtaining and retaining patients
- Funding – if you need funding, what you need it for and how much
- Financial projections – your cost-related needs for the next five years
- Appendix – attachments of all supporting documentation
Creating a plan that covers all of these areas takes time. But just as you would never construct a house without a thought-out blueprint, building a business without the same leaves you with a wobbly structure that is unable to withstand the test of time.
Determining marketing costs and needs
If you want to stay in business for the long run, you must continue to draw awareness to your practice and services. This is where marketing comes in.
Today, a large emphasis is placed on digital marketing efforts. The internet offers expanded reach, often at costs lower than those associated with traditional marketing methods such as direct mail, television or radio ads, and leasing space on billboards.
A CMO Survey found that, post-pandemic, companies are spending as much as 11.4% of their revenues to reach consumers online. A large portion of this expense is being directed toward social media, which many respondents indicate is boosting their company’s performance.
Once you understand some of the most common pitfalls in business, the next step is to implement a plan that prevents you from making these same mistakes. This enables you to achieve more longevity with your chiropractic practice, making you one of the few who is able to survive long term.