How to Maximize the Margins in Your Weight Loss Practice
— By Karol Clark, MSN, RN
There are no guarantees in life or in business. That’s why it is especially important to focus on strategies and actions that will maximize your weight loss practice margins now and in the future.
No doubt, it takes ongoing strategic decisions and discipline to ensure profitability in your weight loss practice — particularly over the past few years and moving into a somewhat uncertain future in an unstable economy.
If you have been in business for any length of time, you have seen or experienced a few different revenue scenarios. High gross revenue and high profit margin, high gross revenue and poor profit margin, low gross revenue with low profit margin, low gross revenue with higher profit margin or anything in between. Bottom line, a low (or lack of) profitability can be quite painful and provoke various responses from a high determination to succeed to anxiety and the inclination to sell out, merge, or close your doors altogether.
There is a difference between “profit” and “margin.” Essentially profit is the money remaining once all expenses are subtracted from the gross revenue in a business. It is reported as a dollar amount. Margin relates to a business’ gross profit divided by its sales and reflects the amount earned in profit per dollar of sales and is reported as a percentage.1 Bottom line, you want to be profitable with as high of a profit margin as possible. You also want to implement profit strategies that address the current unique weight loss practice market environment as well as those that are effective over time.
Benefits of Maximized Margins for a Weight Loss Practice
Having a larger profit margin results in more stability as well as a competitive advantage over other practices since you can reinvest to attract new patients, build a cash reserve, better serve your patients and attract/retain an outstanding team. It also gives you greater peace of mind knowing you are poised to better handle what the future may have in store for you and your business.
Weight Loss Practice Profit Margin Influences
Before we get to the ‘how’ to maximize your margins, it is important to review what influences them in the first place such. Depending upon the size and complexity of your organization, the degree of influence can vary. Profit margin influences include:
- Organizational Vision, Values & Focus: Your vision, how you exemplify your values and what you focus on is what will be influenced (for better or for worse) in your practice.
- Overhead: Expenses that your practice incurs to run the business such as administrative costs, rent, insurance, and utilities. Often thought of as “fixed” expenses.
- Operating Expenses: Expenses your practice incurs that are essential to run your business such as labor and supplies. Often thought of as “variable” expenses.
- Cost of Goods Sold: For a weight loss practice, cost of goods sold generally refers to the cost of items purchased for resale such as nutritional products.
- Insurance Reimbursement: The money paid to you by insurance companies you contract with for services provided.
- Billing/Collections Procedures: Your process for billing and collecting payment from insurance entities and/or patients.
- Team Effectiveness: How efficiently and proficiently your team performs.
- Inventory Practices: Your process for ordering and utilizing products and supplies — hopefully with minimal waste.
How to Maximize Margins in Your Weight Loss Practice
Below are nine ways to maximize the margins in your weight loss practice. If you have some, or many, working well, lean into them and leverage them to be even more impactful in your practice. If like many practices, one or more requires attention, simply start with the one that you feel is most frustrating or you know requires action and move on from there. Taking purposeful action is the best remedy for any feelings of overwhelm.
1. Have a Maximized Margin Mindset & Focus: It is so easy to get caught up in the day-to-day business of patient care that maximizing margins takes a back seat. It is obviously not only about the money, it is about having a practice that is sustainable so you can better serve the patients that need you most while also taking care of your family of team members. The best way to do this is to have an abundance mindset and focus on your profitability. And, once you have predictable financial systems and regular reporting in place, you can focus your attention intently on patient care while simply monitoring financials with your internal manager(s) as well as external experts and making changes as necessary.
2. Get Strict about Financial Budgeting & Reporting: Goal setting, projections, budgeting and reporting are additional necessities that can be overlooked. This tends to occur more often in smaller practices where fewer team members may wear many hats. Completing annual goal planning, projections and creating an operating budget are essential so that you have a way to monitor the financial health of your practice, instead of just your bank account. It is also a way to see where costs are sky rocketing, how much you have to save/reinvest, and identify where you can create cost efficiencies. Everyone on your team should understand your big picture of goals and have specific performance indicators they measure regularly for their position that contribute to profitability and goal attainment.
3. Flex Your Profit-Making Leverage: You can manipulate profitability by selling more of your services/products with the highest profit margin, increasing the lifetime value of your patients with a higher retention rate and purchase of products/services, and lowering expenses that are negatively impacting profitability.
4. Review/Revise Marketing Strategies: Track your return on investment for any paid marketing and make changes accordingly. Now is the time to be sure you stand out in a crowd. Content marketing can be a great low/no cost way to do this. Another low cost initiative is growing and nurturing your e-mail list of current and prospective patients so you are top of mind and trusted when they are ready to seek weight loss services.
5. Optimize Your Team: Begin to think of every position in your practice as either revenue generating or time saving for another revenue generator. You may just think of providers as revenue producers but other positions can be revenue generating as well. For example, the receptionist who takes new patient calls, qualifies them and schedules consults. Or your dietitian who promotes your weight loss products and drives resulting sales. If not a direct revenue generator, they should be saving you money by improving efficiencies in your practice. Support them, educate them, show interest, and help them grow personally and professionally. You may even consider flexible staffing and help them eliminate time wasting activities.
6. Create an Efficient Billing/Collection System: Whether you are an insurance or cash-based practice, billing and collections (for insurance, in particular) must be completed efficiently. Collect cash payments up front. And, don’t be afraid to set strict team parameters for timeliness of entering charges, following up on claims and late payments. You can also streamline within your EMR or point of sale system a way for patients to pre-pay for services and products.
7. Streamline Your Personalized Patient Care: Your patients like efficiency and knowing what to expect. Utilize online resources and implement various forms of efficient communication such as HIPAA compliant text and e-mail. Patient portals and various apps make this easier than ever. In addition, review your appointment scheduling process to ensure it is efficient for the practitioner and the patients.
8. Communicate with Transparency: Your team needs to know when things are going well and when there are issues that need to be addressed. Nearly every team appreciates transparent communication to the degree warranted and can/will be a creative problem-solving asset when put to the task.
9. Don’t Be Afraid to Ask for Help/Guidance: When you are on a high and ready for more growth or when you are frustrated and not sure what to do, you always have resources. Your internal team, your external team (attorney/accountants/investors), colleagues and bariatric specific service providers/coaches can effectively help you navigate the situation.
Utilize these strategies and enjoy the benefits of a maximized margin that helps to ensure long term profitability in your weight loss practice with less chaos and uncertainty.