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The Chicken or the Egg: Balancing Growth Considerations in Your Healthcare Organization

By Stewart Gandolf, Chief Executive Officer

chicken or egg marketing questionOne of the most common dilemmas facing healthcare practice owners is negotiating the delicate balance of priorities and timing required to successfully create and manage the growth of the business.

Marketing consultants often refer to this as the "Chicken or the Egg" question because, as a business owner, you have to determine whether you focus first on patient and case-generating marketing strategies or whether you first invest in your operational service model so that you can deliver well on the patient demand that you hope to create from your marketing strategies.

If you already have excess capacity to handle more patient and case volume, this is a moot question - for now, at least. You obviously focus on marketing strategies to generate the additional patients and cases that you are already able to service within your current capacity.

Whether you are already close to your current maximum service capacity or not, the objective is obviously to continue to grow your business to that size. But it gets tricky when you come close to reaching your current capacity because now you have a decision to make.

Do you maintain your business at your current capacity or do you continue to grow?

The fiction of "status quo"

Even if you choose to maintain your current size of practice, you have to remain proactive and understand that "status quo" is a fictional concept in organizational ownership. You still have to anticipate changes in your industry, your specialty, your competitive environment and other market forces that could affect your business, including decreasing reimbursement rates, increasing malpractice insurance premiums, changes in governmental regulations, changes in your personnel, or even changes in your personal life that can affect your goals, motivation, energy and commitment.

You always need a forward-looking business strategy to maintain your current level of activity and revenue. Even the most successful businesses always experience attrition in their customer base and changes in their sources of business, so you can never really stop focusing on growth, even if your goal is to simply maintain previous levels of success. You can never afford to take anything for granted, even in times of apparent stability.

A successful business operates on the same concept as a shark in the water: Move forward or die.

Careful timing of your growth strategy: anticipation is key

If your goal is to grow your practice beyond your current capacity threshold, then you need to have a reasonably predictable strategy for generating more new patients, cases and referral sources. You also need to be able to anticipate how far in advance you need to add personnel, equipment, space or other operational systems to support and service new growth that takes you above and beyond your previous level of maximum service capacity.

If you add to your operational capacity too soon, you reduce your operating profits because your new growth is not keeping pace with your additional overhead. If you wait too long to add to your service capacity, you risk disappointing your customers with a reduced service quality and capability. You also simultaneously stress your existing personnel (and yourself) trying to keep up with the additional growth in new patients and cases.

Many businesses have initially succeeded and then become victims of their success by misunderstanding or underestimating the requirements of controlled growth. The quality of service that was at the core of their previous success deteriorates until their prior reputation of excellence transforms into a reputation for poor service. Sometimes, this can happen very quickly, before the business owner(s) realize what is happening or how fast.

Experienced business owners and managers work to keep growth of additional business slightly ahead of operational cost increases (but not too far ahead). They don't add capacity too soon because that can be an expensive proposition, often including additional fixed costs that must be offset by additional revenue.

But they watch closely for the stress point at which they see a consistency of more new business than their current capacity can handle. Even while watching, they are preparing in advance to "pull the trigger" quickly and install necessary additional operational elements when the business hits that stress point.

Imagine your business as a rubber band. You want to be able to stretch the rubber band almost to the breaking point without actually snapping it in two. Then you want to switch to a bigger rubber band - quickly.

The role of planned marketing in successfully managing business growth

Whether the goal is to maintain current levels of revenue and activity or grow to new levels, a well-conceived marketing plan is a critical component for success.

A marketing plan is all about anticipation. It is a forward look at the future direction of the practice. Marketing plans are generally developed and revised annually in successful businesses.

New, quantifiable, measurable goals are established for the marketing plan for the upcoming twelve-month period, based on current practice health and trends, performance of current marketing strategies, new practice services and/or providers, current market conditions, including changes in competition, market size or profile, regulations, insurance reimbursement changes (if applicable) and any other considerations that might affect the new plan.

The new marketing plan identifies new marketing opportunities, strategies, tactics, timing and budget requirements. An effective marketing plan is an essential element for successful controlled growth in any business and healthcare practices are certainly no exception.

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