Private Practice Success Newsletter

June-July 2006, by Lynn Grodzki, LCSW, MCC (Master Certified Coach)
www.privatepracticesuccess.com

A Business Turnaround Plan

For the past several newsletters, I have been charting a trend reported in the January issue of Psychotherapy Finances showing an industry-wide downward slide in the incomes of mental health clinicians in private practice for the past 5 years. Their survey reported that therapists in full-time private practice are fighting a losing battle against managed care, which is becoming more prevalent, even though the average managed care fees remain low.

The bad news is compounded by the findings that the self-pay market is sharply eroding. Self-pay clients fell from a 2000 high of 44% of therapists’ caseloads to just 26% this year. And to add to the difficulties of operating a practice, the cost of expenses (rent, utilities, phones, billing, advertising, marketing, websites) remain unchanged from prior years, at a hefty 30-45% of a therapist’s total income.

I have been hearing from many full-time therapists who feel the results of this trend. Business is down and they are worried. But rather than feel hopeless or overwhelmed when business falls off, you can see it as a wake up call to become more entrepreneurial. Let me help show you how.

This month, I introduce a business model you can adopt if you are feeling the financial pinch. This business turnaround plan helps your practice become more focused and disciplined, always a good strategy in times of trouble. It is useful for any service-oriented business owner in the midst of a downward slide, who needs to take action now to turn things around.

When you confront a problem you begin to solve it. (Rudy Giuliani)

The first step is to confront the facts. Take some time soon and do a quick analysis of your situation. Don’t avoid this even if the news is worse than you imagine. You need to know the truth.

1) What did your business earn for the past few years? Given the past 6 months, what can you project for this year?
2) How many client hours are you working now, compared to the past year?
3) Where do your referrals come from now? Where did they used to come from? What if anything has changed?
4) Has anything else happened that you can point to that affects your business situation?
5) What is going well? Any aspects that are expanding or growing?

A successful life is one that is lived through understanding and pursuing one's own path, not chasing after the dreams of others. (Chin-Ning Chu)

When business times are tough, a small business needs to streamline. You need to maximize all of your resources toward a single goal. I want you to focus, and shape your existing practice into a leaner and more profitable venture. The business turnaround model I suggest is adapted from Jim Collins' book, "Good to Great." It is part of his “hedgehog” concept, his way of helping corporations stay competitive in a tight market by avoiding being foxes (crafty creatures who know how to do many things) and instead becoming hedgehogs (keeping it simple by doing one big thing well.)

Get a piece of paper and draw three equal sized circles that overlap or intersect with a common center: a Venn diagram. The first circle will contain the soul of your practice—those services that you are passionate about offering. The second circle will contain your brand—those aspects that connote your expertise, reputation, and excellence. The third circle is your economic engine—those services or products that are consistently profitable and generative.

The point at where the three circles intercept—where passion, brand, and profitability overlap—will become the new focus of your streamlined business. Here is an example of how this worked for one senior therapist:

Her first circle, the services she felt most passionate about, were couples counseling and working with teenagers. She loved both of these services and considered them the backbone of her practice.

But her second circle, her reputation or brand, was just one item: the work with teenagers, usually anorexic and bulimic girls. Few in the community knew that she also offered couples counseling. In a more affluent market, I would have encouraged her to build her brand as a couples counselor as well, to diversify. But given her current situation, with her private practice earning only half of what she needed to earn to survive, she did not have that luxury or extra money to invest.

A big part of financial freedom is having your heart and mind free from worry about the what-ifs of life. (Suze Orman)

To help her find what Collins' calls the economic denominator, the most profitable of all her services that can be repeatedly generated with the least amount of expense, we cost out each service she offered, looking for any obvious or hidden profit drains. Her third circle contained 3 items.

The most profitable service was each hour she spent with teenagers. She could charge out of pocket for this specialized service, and it carried the least expense since referrals flowed in well with little marketing; she needed no additional training or supervision to offer this service.

The couples counseling was less profitable. Her sessions were not in demand, and she did accept more insurance-based payment or sliding fees. She also sought additional hours of peer and paid supervision to feel competent as a couples counselor. A third economic engine item surprised her: the classes she taught as adjunct faculty at a local nursing college paid well, with few additional expenses. Since the topic of the classes were adolescents, it fit with her first circle.

When she looked at the area of overlap between the three circles, it was clear to her that for the next year, she should focus on her work with teenagers. This best represented her passion, her brand, and her profitability. She agreed to streamline her offerings, and primarily promote her work with teens when networking, advertising, seeking referrals and to keep open to building her practice in this one way.

There is no elevator to success. You have to take the stairs. (Anonymous)

Month by month, I helped her to stay on track. Implementing her focused action plan was very hard work. I asked her to consistently do more in outreach in terms of marketing and networking than she wanted. She needed support and encouragement to stay on task, especially with no apparent results from the first two months of marketing. She used unfilled client hours for practice building efforts. We reframed problems into opportunities, brainstormed, commiserated when times were tough, but I always asked her to take next steps. It took 6 months, but at that point she could see that her income was up, her expenses were down, and she was on a new track, having turned her business around with a combination of focus and discipline.

Next time: more strategies to help you stay focused, motivated, and profitable.

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Books by Lynn Grodzki, published by WW Norton. To order, click on each book.

	The Business and Practice of Coaching By Lynn Grodzki and Wendy Allen (2005) An estimated 30,000 coaches have entered the coaching profession in the past five years, but unfortunately, the majority report they are unable to earn a living wage from their coaching services. This book shows you how, using a coaching approach to the business of coaching.
	Building Your Ideal Private Practice By Lynn Grodzki (2000) The best-selling guide to what you need to do and who you need to be in order to have a highly profitable, personally satisfying private practice. Often called the "private practice bible" this book has become a resource for tens of thousands of your colleagues.
	The New Private Practice:Therapist-Coaches Share Stories, Strategies and Advice Edited by Lynn Grodzki (2002) A groundbreaking look at the profession of coaching through the eyes of 16 successful therapist-coaches who tell you how to become a coach, what to charge, and show you how they coach their clients.
	12 Months to Your Ideal Private Practice: A Workbook By Lynn Grodzki (2003) This planned, motivational workbook will help you build the practice you desire. The workbook incorporates fresh ideas, new exercises, further skill sets and much more to give you a direct experience of being carefully coached by Lynn, month-by-month, for a full year.

More next time,

lynn@privatepracticesuccess.com
See the website for additional articles, information about individual coaching, and upcoming classes.