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3 GROWTH RATES IN PRIVATE PRACTICE
Hello Breakthrough Owner,
with a strong trajectory. I’ve done the math with the 3 different growth rates: 5%, 10%, and 20%. We’ll get to what this looks like at year 20 and year 30 in a minute - but first a few important points. 1. Youmay have remembered DanHinnerschitz (one of my partners at Madden PT and the Director of our 3rd location) saying: “growing from zero to 100 visits per week is a lot easier than growing 100 to 200 visits per week.” I would say most owners agree - myself included. So is it fair to say an owner could really grow to 100 visits in less than a year OR even faster? Certainly true. Our first clinic did 100+ visits in a week within 6 months of opening. Dan’s clinic in Dauphin? 107 visits within 2 months. Doesn’t that skew the model? If anything, it simply moves it forward, making the difference in growth rates even more pronounced earlier. 2. On a recent podcast interview (“Grow Your Practice” which I had the honor of hosting), Steve Salzer andMike Piekutoski of 8150 Advisors shared “growth rate” is the one of the key factors determining practice value. Anything less than the 6.2% year-over-year averagemay be considered less appeasing - and ultimately less valuable for the buyer. Hopefully the episode is available for you to listen to by the time you’re reading this. 3. When asked, “How fast do you want to grow?” - what do you think most owners say? “5 to 10%” is what I hear most often. There’s not a right or wrong answer. However, realize that whether your personal answer is 5, 10 or 20%… the business questions you ask yourself and your team - and your resulting strategies - are going to be affected significantly. I view this answer as a choice; and hope you do the same. Alright, so back to our 3 Owners. At 20 years into our private practice journey, here’s where the 3 Owners are at in weekly visits: Owner C has surpassed the 100 visit/week mark and is at 126 visits/week. Owner B is at 306 visits/week. Owner A? 1597 visits/week and $7,000,000+ in annual revenue. This is now likely a nice sized multi-location practice with 32 FTE clinicians. At 30 years in the disparity is even more pronounced: Owner C is doing 206 visits/week and nearly $1,000,000 in annual revenue. Owner B is at 793 visits/week and roughly $3,500,000 in annual revenue. Owner A is at an astounding 9,891 visits/week and ~ $45,000,000 in annual revenue with 198 clinicians. What do you want to build? Chad PS - If you have not read about the 20 Mile March, Google it and enjoy. Look for the 1911 story of the two teams who raced to the South Pole.
For 5 minutes, forget about 2020… 3 Private Practices open their doors on the same date.
Within one year, each practice has achieved an average of 50 visits per week. (If you think about visits in terms of per month - this would be ~215 visits/ month. Per year - 2,500 visits/year). Owner C does not want to get too big too fast (loving friends and family members who had his best interest at heart and didn’t want to see him get hurt encouraged him not to grow too quickly). Practice C aims to grow at 5% year-over-year. Owner B knows PT is growing at an average of 6.2% per year - and wants to be above average, she decides to aim for 10% growth year-over-year. Owner A is the most ambitious. She took a risk opening her own practice - the same as Owner B & Owner C. However, she has big dreams and a vision of how she can make a huge impact in a growing area over the course of her private practice journey. She aims for a whopping 20% year-over-year practice growth. With the same starting point, considering the different growth trajectories, at the end of the first 10 years in Private Practice, where do you think each owner is? Let’s look at Owner C first. Where do you think Owner C is at in terms of average visits per week?
A. 258 visits/week B. 118 visits/week C. 78 visits/week D. 53 visits/week
Answer: sea (I didn’t want you to cheat yourself. Sea = C).
So not bad, right? Probably still a 1.5-2 FTE PT clinic. ~ 4,000 visits per year. Maybe $350,000 - $400,000 in annual revenue. Keep the expenses low. Don’t get hurt…How do you think Owner B & Owner A have fared? Owner B - and her 10% above-the-industry-average growth rate? She’s at 118 visits per week. (Answer B above). This is likely ~ 6,000 visits per year. 2-3 FTE PTs. $540,000 - $600,000 in annual revenue. Owner A? That’s right - Owner A surpassed 100 visits per week 5 years ago - in Year 5. With her steady 20 mile march - in good weather and bad - A’s Practice is at 258 visits/week. This is just short of 13,000 visits per year. Likely 5 going on 6 FTE PTs. Annual revenue greater than $1,000,0000. This is a Million Dollar Practice
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