The truth is that uncertainties have severely impacted many medical practices in California.
However, a business being profitable is what attracts buyers, so taking your business from unprofitable to profitable is essential to improve business valuation and increase the chances that your business will sell.
Insurance and Business Interruption Coverage
Did you know that you can have insurance coverage for business interruption, whether that is due to natural disasters or other uncontrollable events? You can, and if you don’t have it already, it’s a good thing to use to plan for the future. While this might not help you in this crisis, it can help you “recession-proof” your business.
You may already have this as part of your business insurance, without even realizing it. Contact your agent or insurance company to confirm. If you don’t have this coverage currently, add it as soon as possible.
Government Assistance
A recent survey by Medical Economics reveals that 86% of physicians have seen a significant drop in revenue since the onset of COVID-19. Over 96% are concerned that patients are forgoing regular checkups and minor treatments because they are afraid of contracting the virus.
This means a couple of things: as restrictions ease in various states, patients will still need to overcome personal fears, but once they do, medical practices may be overwhelmed with “catch-up” appointments. If you can keep your practice afloat until things return to a “new normal,” you may be in an excellent position.
Second, government assistance is available in the form of PPP loans and other programs. These include local, state, and private grants that vary by area and qualification requirements. Research and apply for whatever help you can. Grants generally don’t have to be repaid, and PPP loans can be forgiven if they are used for the right expenses.
Just know that a PPP loan comes to you, and you may not be able to transfer that debt as part of a business sale, so if you plan to sell, consult a business broker before you take out any loans.
Keep Obligations Flexible
Most creditors, vendors, and even landlords understand the difficulties businesses are having at this time. The key is communication. Reach out, negotiate with them, and try to keep obligations flexible. Negotiate later due dates for rent and other items, suspend recurring fees and auto-ship agreements, and keep only essential subscriptions.
It is easier to reactivate a service or software if you are in good standing with the company and have a history of working with them than if you haven’t. Try to keep obligations flexible, and keep up to date with those you cannot.
Automate Your California Medical Practice Where Possible
You may think now is not the time to automate and change software systems, but often the right ERP, coupled with the right CRM, can automate many of the processes in a medical practice. In the long run, this can save you thousands in labor, and setting things up now while things are slower for you can ease the transition.
Some things require a human touch, but having the option of an automated calendar and appointment system, records management, appointment reminders, and others can not only improve your patient experience but also lower personnel costs.
It’s often hard to let employees go, but in these extraordinary times, it can be the difference between a profitable California medical practice and a failed one.
Clean Up Financials
Now is not the time for perks and other discretionary expenses. You may have to suspend some items until your medical practice is profitable. For instance, if you pay for gym memberships for your employees, and once gyms reopen for business, you may have to suspend that perk or put a hold on vacation days or other expenses.
Try to offer other lower-cost perks in the meantime or have a “make-up” plan when things are profitable again. If you plan to sell your medical practice, make a commitment to yourself to reward those who stuck with you through the hard times.
Diversify Your California Medical Practice
It’s often said that the riches are in the niches,” and this is often true of medical practices. It is typically much easier for a plastic surgery practice to be profitable than a general practice. However, with elective surgeries canceled and delayed, as well as other obstacles, the impact on all medical practices has been significant.
Those who are doing well have diversified and are embracing new technologies, such as telemedicine, to find new ways to interact with patients and set themselves up for a more diverse practice in the long term.
To increase the profitability of your California medical practice, you may need to do the same.
Create a Capital Base (Cashflow)
One of the primary reasons businesses fail is a lack of understanding regarding cash flow. This is never clearer than during a crisis. Every business should have a capital base, essentially an emergency fund to replace income when needed. This is one of the fundamental principles of cash flow.
Essentially, it means being proactive rather than reactive. You know that times of low income will come, and you plan for them, even developing contingency plans for Black Swan events. No one could have anticipated the length and impact of a global pandemic, but those practices with a strong capital base and a deep understanding of cash flow will weather the crisis better than those that don’t.
If you don’t have an emergency capital base, work to create one as soon as possible. This will help your practice endure through any future catastrophic events. You should also:
- Audit your books every year.
- Have professional management accounts for your business.
- Perform frequent cash flow projections and regularly compare performance to those projections.
- Monitor both costs and sales closely.
- Monitor both debtors and creditors.
The closer you watch your finances, the stronger your financial foundation will be, and the more profitable your practice will be.
Establish a Team of Recession Experts
You have heard the saying that it takes a village to raise a child. Well, it takes a team to run a business, and it takes a team to navigate economic storms. What does that look like? There are a few elements to any recession expert team.
Understand that you don’t have to employ all of these people. They can be a part of your personal network, or you can consult with them as needed, although some will become a constant part of your business team.
- Your Accountant: A good accountant is about more than just numbers, but also about how to improve those numbers, handle taxes, and handle other conditions in a recession. Having an accountant with experience in recessionary periods and knowledge is invaluable.
- Your Attorney: The same is true with attorneys. During times like this, you have certain legal rights and other legal obligations. A reasonable attorney can help you work with these delicate issues without finding yourself in legal jeopardy.
- A Business Broker: The only way to effectively run a medical practice or any business, for that matter, is if it is always for sale. That means regular business valuations, equipment valuations, and accounting audits. You can obtain regular business and equipment valuations from a business broker, who can also help you understand the market as it evolves.
- A listening ear: This can be nearly anyone, but the Medical Economics study showed that over 67% of physicians are experiencing higher levels of anxiety and stress at this time. You need someone you can share those stresses with, brainstorm with, and who can just be an empathetic ear. This can be a network of other physicians who are experiencing the same things you are.
A good team can offer you ideas and advice when you need it most during a crisis.
The key to selling any Business in California
The business has to be profitable and preferably growing. That’s what attracts a buyer. Should you increase your California medical practice’s profitability before selling? Yes, you should.
That may take some time, but with the right help and a bit of patience, you can get there. Need a business valuation to get you started, so you know where you are now?
Contact us here at Rogerson Business Services. We’d love to help you get started on the journey to sell your California medical practice by determining its current value and outlining the steps you need to take to ensure it remains profitable and attractive to buyers.