Strategic planning creates value for every business – small, medium, or large. Essentially, it’s a process to figure out where your practice is going and the best route to get there. A strategic plan defines who you are as a practice and outlines concrete actions to achieve your goals.
Despite their importance, many healthcare practices find it hard to create a strategic plan for their business. They’re either too busy wrapped up in the day-to-day operations or are intimidated by the work required to establish a good plan.
In this article, we define what a strategic plan is, why strategic planning matters, and three themes all healthcare practices should include in their plan.
What is a Strategic Plan?
A strategic plan describes the company’s current state, desired future state and how to go from one to the other.
The components of a strategic plan usually include:
- An executive summary.
- A company description.
- Mission, vision, and purpose statements.
- SWOT analysis (“SWOT” is an acronym for strengths + weaknesses = internal; opportunities + threats = external).
- A description of your business goals and an outline of how to achieve them.
- A 6–12-month action plan that highlights specific initiatives, who will carry them out, a timeline for doing so and key performance indicators (KPIs) to track progress.
If reading the above components makes your head hurt, you are not alone. Most owners dread the cost, time commitment and complexity of the ‘to do’ list, especially if they lack resources. Yet, implementing a strategy needs to be concise, flexible, timely and functional.
“Strategic Planning is not a lengthy action plan. It’s the evolution of a central theme through continually changing circumstances.”—Jack Walsh
What to Include in Your Practice’s Strategic Plan
Below are three central themes all practices should have as part of their 2024 functional strategic plans.
- Reduce risk to fixed costs. Said another way—how can you lower the cost of every transaction in your practice? Here are some ideas:
- Create a new labor model that allows your practice’s Gross Margin to be >45%.
- Create a new service delivery model that allows your practice’s Gross Margin to be >45%.
- Reduce bad debt.
- Validate pay sheets and billing daily.
- Increase your pricing to preserve margin. Pretty straight forward.
- The second part to this theme is shift your revenue mix (% of total revenue by service stream—EHB, Auto, WCB, Disability, etc.) to the highest gross margin$ service stream. In most provinces, EHB and Auto have the highest fee for service rates and as such should make up >80% of your overall revenue.
- Liberate working capital via A/R, A/P, inventory, and cash. Ways to achieve this include:
- Optimize accounts receivable through timely invoicing.
- Delay accounts payable by extending payment terms.
I have yet to work with a practice owner that has told me their net income is too high (>25%). Most practice owners have a normalized net income of <10% and would benefit immensely from integrating the above three themes into their 2024 plans.
Owners should also continue to pay attention to retaining team members and always be on the look-out for new ways to grow sales. These two components are important, but the perfect pairing for the above three themes would be enhancing the performance and productivity of your team members.
Said another way…build a high performing operating model with 4 main imperatives and overlay them on the three central strategic plan themes:
- Formulate a team based operating model.
- Upgrade both your clinical and administrative talent. Make bold moves to ensure the future viability of your practice.
- Prioritize around your clients and the experience your brand creates for them.
- Instill a culture of accountability and ownership across your entire team. Find team members that crave feedback and want to be high performers.
At ELEVATE, we exist to enable practice owners to create greater profitability in their businesses, which in turn creates greater agency for owners over their wealth creation. We’re always happy to jump on a 30-minute call to explore how we can help create value for your 2024 functional strategic plan.
