Adam Lueken
If you are considering selling or transitioning your practice, taking the time to analyze and benchmark your practice can help you both position it for sale and find the right partner/buyer. It’s beneficial to have a clear understanding of your practice’s strengths and opportunities, and how you can leverage its strengths to take advantage of your opportunities.
Even if you don’t proceed with a sale, this process can still have a profound impact on your business moving forward. It will provide a better understanding of your competitive advantage and how it’s derived, as well as a roadmap for your strategic plan.
To analyze and benchmark your practice, start by collecting as much data as possible, such as:
Reviewing your financial statements, available services, source of patients, etc.
Reviewing and analyzing review sites
Analyzing payor contracts
Evaluating your referral sources
Defining the services your practice provides
Establishing and reviewing the clinical and operational processes used in your office
Distinguishing your addressable market and practice demographics
Identifying competitive locations, services, and market position as it relates to your practice
When you’ve collected your data, it’s time to analyze it. One of the best tools to do that is a SWOT analysis, which is a popular organizational planning tool. Its popularity comes from its ease of use and the critical insights it can produce. SWOT stands for strengths, weaknesses, opportunities and threats. The strengths and weaknesses are internally focused, and come from a thorough analysis of your practice. The opportunities and threats are externally focused, and come from an in-depth analysis of your practice’s external environment. When conducting a SWOT analysis, it’s easy to lose objectivity, especially when considering the strengths and weaknesses of your practice.
Strengths and Weaknesses
A practice’s strengths and weaknesses are determined by analyzing its resources. Resources are broken down into tangible assets, intangible assets and organizational capabilities. Tangible assets are assets that are material in nature and recorded on your practice’s balance sheet. They may include your real estate, practice, equipment and working capital. Strengths and weaknesses of tangible assets include the location of your practice, the aesthetic of your office, technology or equipment, the strength of your balance sheet, etc. For example, your practice may be located in a part of town that gives you access to a middle-aged, affluent patient population. You might have limited or no competition and have the only Mohs surgeon within 20 miles. However, your practice is on a busy street, not easily accessible and is not particularly attractive.
Intangible assets are resources that lack physical substance and are challenging to measure and evaluate, but they are often your most valuable possessions. Strengths and weaknesses from intangible assets may come from your practice’s reputation, your brand equity, unique skills or services you offer in your market, the quality and tenure of your team, etc. For example, your team has been together for 10 years and has all gone through extensive customer service training. You are the only dermatologist in the area with extensive training with fillers, and your Mohs surgeon has built up an excellent reputation with the primary care physicians in the surrounding market. However, your branding is outdated, and your team lacks the training to successfully create a treatment plan and convert patients to your most profitable services.
Organizational capabilities are the complex combination of assets, people, and processes that are used to deliver exceptional service to your patients. These capabilities are built over an extended period of time, and it’s difficult for competitors to replicate. For example, your practice has a highly skilled Mohs surgeon, and a successful patient referral manager that has built up excellent relationships with the largest primary care groups in the area, adheres to running efficient workflows and offers superior service to your patients. Your marketing team regularly works with your Mohs surgeon to conduct lunch-and-learns with community organizations and hosts online webinars to continue generating patient flow. It’s the combination of all these skilled people and processes that provide for a competitive advantage.
Conversely, a year ago you made the decision to expand into cosmetic dermatology. You’ve acquired some high-priced assets. However, you’re still developing your skills, training your team, and working out processes in the office to create an efficient workflow. You’re also still building key provider referral relationships, and trying to secure marketing talent to build your brand and generate more awareness of the service.
Opportunities and Threats
To assess your practice opportunities and threats, Here are some questions you might consider as you analyze different types of opportunities and threats:
The Threat of Substitutes
Is there an emergence of new substitutes (for example, Walgreen’s new telehealth services for dermatology)? Are patients or payors willing to substitute (do they consider the use of primary care)? What are the switching costs for patients? Do substitutes perform better, or are they cheaper?
The Threat of New Entrants
Is your market underserved? How strong is your brand equity and that of your competitors? Does government regulation limit the number of new entrants? How easy is it for new entrants to obtain access to patients and payors? What are the switching costs for patients? What are the capital requirements to enter a new market?
Bargaining Power of Customers
Is there a concentration of commercial payors in your market? What kind of power are payors exhibiting at the bargaining table? How important is your patient base to payors? Are payors, like United Healthcare, backwardly integrating into your market? How big is the potential patient population? Is there a shift in the services patients are demanding? Are there new technologies patients are using? What are patients saying about your practice and your competitors’ practices? How price-sensitive are patients?
Bargaining Power of Suppliers
Is there a concentration of key suppliers for hospital services, supplies, equipment, etc.? What kind of power are payors exhibiting at the bargaining table? Are any suppliers, like local hospitals, that are forward integrating? How important is your volume to suppliers? Has there been a surge or decline in the demand for certain supplies and equipment (think PPE)? Has there been an emergence of substitute supplies or equipment? Will changes in technology change suppliers?
The results of your analysis from the previous four threats will help inform your review of the degree of rivalry. Also, consider these additional questions. Is the market for dermatology services growing or shrinking? Is industry consolidation impacting your market? How concentrated and balanced is the competitive landscape? Is the market oversupplied or undersupplied with dermatologists? What is the wait time for a new patient to get a dermatology appointment?
If you are looking for an ideal transition partner, we’d love to talk! Schedule a consultation with one of our practice management experts today!