What’s Wrong With a Practice Fueled Only by Referrals?
Nothing and everything.
Therefore, second, nobody sane will pay top dollar for a practice entirely living on referrals. It lives by a fragility, not a stability. It is undoubtedly highly dependent on the doctor himself and probably one or two key members of the team’s personal influence, personalities, and relationships with the patients. If a buyer removes those one, two, or three drivers of the referrals also the one driver of growth, what might happen? There is very little real equity in the referral driven practice. There can be much, much more in a patient acquisition system-driven practice. The value argument is much stronger because there is a documented, steady, predictable inflow of new patients from multiple media and the methods that the potential buyer can trust, feel reassured by, and can step into and continue operating. They are getting a machine, not an intangible. This is not to suggest you shouldn’t use your own authority, believability, pleasing personality, personal story, case presentation skills. You should, of course. But over-dependence on just you is nonreplicating. At best, I have to sharply discount projections for new patient flow as well as for case sizes and conversion rates when buying the doctor dependent practice. The big question in the mind of a smart buyer should
It is obviously something to celebrate. The positives include higher net margin thanks to nominal, or no advertising spend and that it is testament to the success at caring for and nurturing good relationships with patients. The referral numbers are, in fact, the truest measurement of patient enthusiasm — a much higher standard than patient satisfaction, the bare minimum. Walt enunciated the Disney success secret as “doing what we do so well and so uniquely that our guests can’t resist telling others about us.” The practice as a whole — location, environment, staff, doctors, quality and efficacy of care, on-going communication, and relationships — should hit Walt’s target. The big number to track is number of referrals versus total number of active patients by month and quarter. If that is 1-to-1, you’ll be growing much more than natural attrition, and nearly net doubling year over year over year. It’s
easily arguable that it should be 2, 3, or 4 to 1. But if you investigate your ratios, you’ll probably find you get a fraction of one referral per active patient
per year. Frankly, such a stat should alarm you and inspire constructive action. Why WOULDN’T you get at least -to-1? I can tell you, and may do so in a future month of these articles , but here, for this conversation’s purpose, let’s assume you are doing very well with referrals: at least 1 for 1. What’s wrong with simply relying on that?
be: What reassures me that I will be able to step in here, take the wheel, and seamlessly, smoothly continue experiencing the same (or better) patient attraction, acquisition, case acceptance, and, yes, referral ratios?
Everybody thinks about the operating systems. Fewer think, as they should, about the advertising, marketing,
promotion and patient attraction SYSTEM. You can choose to present for sale just another practice OR a practice with a unique, proprietary, reliable
A lot.
First, it violates the most important caution about business: the worst number, found anywhere in the business, is one. One is a fragile number. Many is an anti-fragile number. Diversity of new patient sources is stability.
growth machine for it.
I have been working with doctors, including dentists, on both proper referral system and results AND a proper
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