Structured For Success

In a conversation with a practice owner this week we talked about business performance in physical therapy and personal training practices. I made the comment that most practices are not structured for success. That comment raised the question to me, "What do you mean by structured for success?" Good question!


First let's define success... It involves five elements: reputation, profitability, scalability, sustainability, and giving back to the community served. If one achieves those five elements satisfaction will likely also be found.


It seems that too many practice owners are satisfied with making a wage. Too many overlook the need and benefit of earning a profit and a return on investment for their financial and time investments and for the risk they take in launching and operating a business. Profit is that return on invest. It is important and prudent. We focus on the success factor of profit because it is the fuel that makes the the other four elements possible.


"So, how does one structure for success?"


Structuring is multi-faceted. There are matters of the legal structure of the business including, contracts, partners/members, rights, responsibilities, obligations, understandings, tax status, capitalization, governance, etc. There are operational structures related to marketing, utilization, productivity, staffing, billing and collections, communications, etc. There are also matters of financal structures such as budgets, loans, line of credit, leases, fees, discounts, provider contracts, compensation, distributions, and profit.


Profit is too often an after thought, i.e. what's left over at the end of the year. It gets far too little consideration. How little? I find very very few practice owners that know what their profit margin is. And, it is equally rare that an owner can tell me what their intended profit margin is for the year. Here's a simple test for you? What is your current profit margin for the year and what was it intended to be? If your answer is, "I don't know", then you are not structured for success and you are not alone.


Profit is not something one can manage directly because it represents the sum total of all of the decisions one makes. Profit represents your score in the game of business. it tells you how well you're playing, how competitive you are, and what league you are playing in. As a point of reference, 25% of practices earn 10% profit or less. The remaining 75% earn more - the top 25% of practices earn much more!


Why? Because they are structured for success. All of the moving parts of the business are aligned, and integrated toward one end - superior service and profit. Practice owners need to stop making excuses and being embarrassed to talk about profit. Sure service comes first, but service without profit is foolish. Even not-for-profit organizations recognize the need and appropriateness of operating with a surplus (profit). Nonprofits can get by for a while on a smaller margin (profit) only because they have a tax advantage and the ability to accept charitable contributions.


Without profit one can not grow and provide better and better services to their community. Profit rocks!


Here's the underlying insight one must understand. Unless there is an intended profit target and unless one knows whether they are on target or off, they can have no idea what decisions need to be made or what solution to a problem is optimal! And, unless such decisions are routinely being made proactively in a timely fashion one can assume that there is no one managing the business.


The budgeting and managing of expenses are particularly critical since they are the only financial variable that management can actually control. Volume and revenue are dependent on the decisions of others to engage one's services. Bottom line profit is simply the calculation of the difference between one's top line revenue and their middle line expense. Thus, how expenses are structured and managed in relationship to conservative revenue expectations are critical to profit achievement.


It all begins with planning. Planning begins with an honest appraisal of how well the business side of the practice is currently performing in comparison to other practices. How competitive is it? Only then can one learn what is possible. Only then can the practice be structured for success. Only then can one find structured success.


Restructuring can take anywhere from a few weeks to a year or so, but it is the most important thing one can do for their practice, for their staff, for their community, and "yes for themself"!


Back in the 1800's Webster's dictionary defined Success as: prosperous, fortunate, happy, kind. It's important tonot forget the elements of fortunate (blessed) and kind (grateful) in our understanding of success. It is also important to keep in mind that prosperity favors those who are pro-active and prudent in their preparation. And, happy like profit is an outcome that can not be controled directly.



Are you structured for success or just getting by?



All The Best!


Bob


(c) copyright 2009
Performance Builders

Quotable

"Nobody has ever measured, even the poets, how much a heart can hold." - Zelda Fitzgerald

Are you challenging the hearts of your team?

"If the business is not growing its because its not giving!" Bob

To what is your business giving?

Capturing Hearts and Minds

In conversation this week with a client the discussion shifted to employee motivation and the role that compensation has in it. The context was "pay for performance" which is premised on the assumption that professionals are motivated by money. Well, that's not entirely true.


The science is in... professionals are not primarily motivated by financial reward. Of course if compensation is inadequate money matters but beyond that the three key motivators are autonomy, mastery, and purpose. These are the matters of performance that lay the foundation for service, scalability, and sustainability in practice.


Professionals desire independence in the services they provide, they want the opportunity to acquire and to be recognized for superior skills, and to be working for a purpose that is larger than themselves and the organization they work with.


That should come as no surprise but it is an understanding too often overlooked. ... not just by employers but also employees.


With autonomy comes accountability. One must live with the consequences of their choices and actions. Those consequences have clinical, social, and financial implications. Productivity and contribution have consequences pertaining to compensation and job security - those things are inherently linked to autonomy.


With mastery comes commitment, practice, objectivity and the willingness to teach others. One must be willing to sacrifice and invest time and money to earn skill mastery. It's not good enough to claim mastery, it needs to be recognized by others who have the knowledge and experience to recognize mastery.


With purpose comes expectation and obligation. One must find the passion and persistence to make a difference, to take risks, advocate, lead, and contribute by example. One is expected to achieve that which they set out to do. Purpose is not left at the side of the road. Purpose does not go on vacation. Purpose gets one up early on a Monday morning and keeps one up late at night. Purpose means advocating for a cause... standing up to be counted... speaking the truth... delivering value.


Is autonomy, mastery, and purpose critical parts of your business / professional culture? If not, why not? If yes, what can you do to inspire and mentor others to realize their professional promise and potential? Are you capturing hearts and minds?


Coming back to where we started... "Pay for Performance" has high likelihood for failure in many practice environments. The discussion needs to begin around autonomy, mastery, and purpose. Only then can the conversation move toward compensation. The conversation needs to be anchored in the big rocks of trust, value, purpose, principles, and a service with performance culture.


When the time for compensation discussions finally arrives do yourself a favor and focus not on "pay for performance" but rather "variable compensation" based ones contribution to the business and those it serves through autonomy, mastery, and purpose.


Only then can heads and hearts be connected! Performance Matters!


All The Best!


Bob


(c) Copyright 2009
Performance Builders

Quotable

"You get the best efforts from others not by lighting a fire beneath them, but by building a fire within." - Bob Nelson

Compete

I had an interesting conversation with a new client this week about market competition. The challenge was this... The client's practice was in a midsized market with many competitors, plus additional competitors in surrounding communities. The conversation wasn't about how to survive but rather how to grow and thrive! To the client's credit they wanted to grow! I love spunk!


Its tough to grow in a crowded market in which referral patterns and loyalties are well established. It's unlikely they are going to grow using traditional "me too" strategies of yellow pages advertising, newsletters, prescription pads, office calls - you know the drill. Such activities may be an incidental part of one's marketing activities but they are not the seeds for growth when everyone else is doing the same things.


There's an old marketing truth that says, "When everyone else is zigging there can be a lot of value in zagging." What does zagging look like in your market?


For this client we identified two unique high impact growth strategies that taken together hold strong potential for being a game changer in their market. Both were chosen because of their potential positive impact on growth in a crowded market and because they were a good fit for the practice's long term vision, values, and resources. The concept behind the strategies was simple, "If you can't win the game everyone else is playing, create a new game that you are uniquely equiped to win."


Our marketing conversation took place in the context of a larger discussion that included benchmarking the practice's current performance operationally and financially, establishing new performance expectations, implementing a real-time performance tracking and management system, and the formation of a long term marketing strategy. Their team is motivated, competent, and willing to work hard. I think their prospects are good despite a competitive market.


Only time will tell, but I've got advice for this practice's competition - "Keep an eye on your lunch because I know a practice with an appetite that is getting ready to eat it for you!


Bob



(c) copyright 2009
Performance Builders

Quotable

"It doesn't matter how much you want. What really matters is how much you want it."
- Ralph Marston

The Loyalty Trap

I've been having an interesting series of conversations over the past couple of weeks with three different health practice owners who share a very common problem in their operations...


The problem boils down to a few not uncommon characteristics that play off eachother within the practice.


1. The practice is small and is structured around friendships and informal business "arrangements"


2. The practice lacks sufficient performance benchmarks and operational controls and thus is not structued for success and doesn't realize it.


3. Finances get tight and it becomes evermore difficult to make ends meet.


4. Loyalties suffer and team members enter into competitive moonlighting business arrangements.


The result is predictable:
> Both parties become frustrated, trapped, and feeling "owed something"
> Trust and loyalty is undermined
> Business and personal relationships erode
> Good intentions and opportunities are lost
> All parties suffer


It is important to realize that this type of situation often spirals out of control It carrys with it the seeds of failure and can easily erode into an abusive business relationship.


It's critical to differentiate the borders between friendship and business. So to it is critical to establish shared business expectations, responsibilities, and obligations, and accountabilites.


Businesses need to be run like a business.


Ideally businesses are set to be run like a business from the start. Too often they are not. When they are not it is important to get them back on track as quickly as possible.


When that is done there is usually some fallout - its regretable but often inevitable. Its likely to get unpleasant before it gets better. Confrontation, threats and harsh words are likely to occur. Procrastination will only make matters worse. The stakes are high.


If you find yourself in such a situation it's important to find a mentor - someone who understands the business and can help you step back and see the big picture, long term and separate business from emotion.


My advice: Face reality. Avoid blame. Get competent advice. Take action. Follow through.


A business that is not structured for success will rarely find it.


Bob


(C) copyright 2009
Performance Builders

Quotable

"Good instincts usually tell you what to do long before your head has figured it out." - Michael Burke

Between "Yes" and "No"

Getting to "YES" is a classic business book on the art and science of negotiations. It explores various negotiation situations and discusses ways to find common ground, expand common ground, and increase the odds of a successful outcome - i.e. getting to yes.


Of course the title assumes that the parties are not already at "YES" or at least have not realized it. If they are not at "YES", then one must assume they must be at "NO".


"NO" is the word that stops opportunity and possibility in its tracks. "NO" is a word that tests relationships. "NO" is a word that sets up barriers, ends things, shuts things down, begins confrontations, fuels arguments, disappoints, and creates uneasiness. As a result, "NO" often doesn't get said out loud. In some cultures, ethnic and business, "NO" is considered bad manners and is actively avoided not out of dishonesty but out of respect.


Of course not saying "NO" does not mean "YES". In such situations the potential for present tense disappointment and confrontation is traded for the certainty of future tense disappointment and confrontation. It introduces grayness into relationships, a high likelihood for passive aggressive behaviors, and dishonesty.


That reality is where buyer's remorse is rooted. It is where relationships become doomed. It is where growth and forward momentum is ground to a halt and where trust is eroded and lost.


"How can I believe your “YES” until I hear your “NO”?
The implied "YES" always has risks in negotiations and even in casual conversations that may not be immediately recognized as a negotiation - a reality readily evident in family relationships - "well you didn't say "no"."


If your transaction or relationship is important. If the outcome of your interaction has long term implications. If the risk of engagement is significant. ...Then, getting to "YES" and "NO" is equally important. Doing so establishes boundaries, sets up guardrails, and digs the ditches on either side of the road of engagement. It establishes the basis for trust. It shows respect for both parties - the other and yourself.


Sustainable business relationships are founded on trust. Trust is rooted in being able to take people at their word. "YES" and "NO" are liberating. They are the cornerstones of trust. Be sure you say them and listen for them in the interactions that are important to you! There is strength in the space between "YES" and "NO". Find it... exploit it.


Bob



(c) copyright 2009
Performance Builders

Mediocre or More

"Sometimes I worry about being a success in a mediocre world." - Lily Tomlin


There's an interesting contrast in the fitness and rehabilitation industry. Ask professionals from these market sectors how they would rank themselves against their peers and you will find that about 90% of them rank themselves in the top 10% of providers. Of course this means that respondents are kidding themselves and thus failing to see opportunities for self improvement. Usually along with the ranking are some sort of comments about how what they do is "special" and that they have a "special" relationship with their clients/patients. ...There is also a common reference as to how patients/clients often bring baked goods or special treats. Curious.


In contrast, its also interesting to observe how frequently business performance is benchmarked against the average for the industry as if that were good enough for a high performing professional committed to excellence and continuous improvement. Who cares about average? Why wouldn't every professional aspire to performing in the top 10% from a business perspective. Doing so provides greater reward, recognition, competitive advantage, service capacity, and influence for the good of the community served. Let's face it, most providers don't know what top 10% even is. Honestly, most providers don't know what their profitability is. I know because I ask them.


While the contrast is interesting to note, both deny reality. All professionals are exellent in some areas and not in others. There are dozens of potential points of comparison. In business performance benchmarks alone, I look at over 3 dozen points of comparison. Opportunity and reward may be found in those areas that one is less than excellent. Opportunity may also be exploited in those areas in which one is excellent. What is important is understanding how one actually is performering in multiple dimensions.


Of course there is no shame in not knowing. On the other hand there is no professional rationale or justification for not wanting to know and not taking efforts to find out. In doing so one steps onto the path to top performance.


Are you ready to claim the promise and potential that is within you? Are you ready to claim the leadership role and reward you deserve?


Bob


(c) copyright 2009
Performance Builders