While discussing the impact of the economic downturn on the state of his long-time practice, a colleague made a comment that really hit home with me: “High water hides the stumps.”
I knew immediately what he was talking about. Past years have been kind to most hearing healthcare practices. Demand for the services we provide and the products we dispense has been high and our margins have been good. While patients will always need to hear better, I believe we are facing a time when they may not want to hear better—at least not enough to tap into their reduced financial resources to address their hearing problems. With this in mind, I had to wonder,
“Are there any stumps that need eliminating in my practice?”
When business is thriving, it's easy to overlook costs that may be out of line. However, with the economy in turmoil and recession on the lips of every newscaster, this is a good time to review the cost of operating a business and to reduce as many costs as possible. Here are a few relatively painless ideas that may help.
Review everyday expenses: Even if you aren't having a cash flow issue, it pays to keep an eye on your everyday business expenses. First of all, consider the cost of the space you occupy. If you are purchasing the building where you practice, reduced interest rates may offer an opportunity for significant savings in your mortgage payments. If you're renting, maybe you can negotiate a discount in your monthly payments.
Fees for phone and Internet services may vary greatly among providers, so comparing rates can result in significant savings. See how much you are spending on yellow page ads and assess how many patients they attract. Many consumers use Internet directories, so you may be able to cut spending without hurting business.
Can you reduce your shipping charges? The U.S. Postal Service, Fed Ex, and other carriers get quite expensive. Consider combining shipments or charging patients when superfast service is requested. Don't use snail mail if you don't have to ! Instead of doing things the old-fashioned way, evaluate which items can be e-mailed. Not only will you save money on postage, but you'll also be saving time.
Analyze your largest expenses: In most audiology practices, the biggest expense is the cost of goods sold (COGS). According to a recent Wall Street Journal article, the economic crisis is prompting many business owners to re-examine contracts with suppliers, and in many cases renegotiation is resulting in significant savings. Consider contacting your suppliers and attempting to renegotiate prices. If a price reduction is not possible, try to negotiate free delivery or extended warranties.
Also, be sure to examine invoices closely to make certain your pricing hasn't changed. And see if you are being charged for items that you aren't charging your patients for. In a busy practice it's easy to lose track of small price increases.
The second largest expense in most practices is the cost of employees. Can you combine duties and reduce the cost of staffing? While you must take care to maintain excellent customer service, maybe you can eliminate duties that don't contribute to getting or keeping patients.
Watch your cash flow: One of the fastest ways to get into a cash flow crisis is to provide goods and services to slowpaying customer—and that includes insurance companies. If payment gets too slow, it may be necessary to discontinue participation with certain payers. While this may seem like a drastic step, if you aren't getting paid or if you are providing services at dramatically reduced rates, it may be costing the business more than it is benefiting it.
Another way to improve cash flow is to offer financing or discounts when patients pay in full at the time of order. If you accept credit card payments, shop around and make sure you are getting the best possible rate. Small cost-cutting moves can add up to big savings and a more profitable business. But consider ways to increase income as well.
Look for sources of lost revenue: What could you charge for that you are now giving away free? It is commonplace for hearing care practices to bundle services into the cost of hearing aids. However, with more Internet discount programs coming online and many insurance benefit plans paying for services but not hearing aids, it may be time to include professional services in the cost of hearing aids.
Also, are you offering comprehensive service plans or extended warranty programs? Hearing aids are an investment, and patients are often willing to protect that investment.
Finally, if your bottom line is shrinking but you're unsure how to assess the status of your business, don't hesitate to hire a business consultant. Sometimes, an outside look is just what a business needs to identify the stumps that need to be eradicated. And, if you're looking for some great new ideas, I recommend attending Jim Niekamp's featured session first thing Thursday morning, April 2, at AudiologyNOW! in Dallas.