Four Questions to Ask Before Launching a New Niche

Determine if that new idea is right for your practice

By Emily Bagby

Have you ever suffered from fear of missing out (FOMO)? Private practice owners can be susceptible to it when it comes to innovative niche practices and alternative streams of revenue.

One catalyst for the generation of new ideas is the APTA Private Practice Annual Conference. An oasis of recharging, learning, and networking, the Annual Conference leaves owners energized and ready to reengage their practices. However, owners might leave the conference hearing about “all the cool stuff” other owners are doing. The Annual Conference provides an opportunity to meet physical therapists who run successful pelvic floor practices, recently launched a wellness program, provide on-site services to employers, or celebrate additional revenue from a fitness center. The result of hearing about all these cool things? FOMO! Don’t misunderstand my point — there are many awesome niche practices, service lines, and alternative streams of revenue. But before jumping into any of these headfirst, it is wise to pause and determine what new idea, if any, is right for YOU by answering four key questions:

1. DOES THE MARKET WANT THE SERVICE?

The first step in launching a niche practice or alternative revenue stream is to take time to listen to what is important to prospective customers. Before spending hours creating an impressive new program, stop to find out what challenges and barriers prospective customers face from their point of view. Where are the gaps in treatment options leaving patients underserved? Which conditions and diagnoses are limiting the quality of customers’ lives despite traditional treatment options? What alternative treatment options are prospective customers currently using? What experiences do prospective customers have with physical therapists? What concerns might they have about scheduling, cost, insurance coverage, and the possible need for a referral?

The best way to find out the answers to these questions is to ask. Be sure to listen objectively, squashing the emotions that can accompany FOMO. Recognize the risk of confirmation bias and hearing what you want to hear from prospective customers. Only asking a small sliver of the market likely to agree with the idea is risky as well. A great place to start is loyal, repeat patients who are already in the practice and are more likely to give trusted and transparent input. Expand your data points by including key members in the community who may benefit from your service, as well as like-minded organizations who may offer similar services without directly competing. If physicians are a prospective referral source for the new service, dig into their perspectives on the benefits of a new niche treatment area. This is an opportunity to reap the benefits of years of relationship-building and get past superficial responses that elevate the risk of confirmation bias and lukewarm buy-in. If everyone thinks the idea is flawless, widen your sample size to identify potential barriers.

2. IS THE SERVICE SUSTAINABLE AND SCALABLE?

Start with who your organization is and what it does well. How does launching a new service line align with goals for practice growth, staff professional development, and even ownership exit strategies? The twinkle of a shiny object can distract owners from their long-term goals. For example, a practice owner who intends to sell the practice in the next five years should learn how prospective buyers will value a niche practice. Cash-based services will be viewed differently than traditional physical therapy reimbursed by insurance. Prospective buyers are likely to have different perspectives on the value of a wellness program or sports performance team, depending on their own strategic goals. Owners who intend to sell their practice internally to current employees may find interest and passion in the niche concepts, while owners who intend to sell their practices externally may find mixed responses regarding nontraditional services from larger buyers.

Determining the sustainability and scalability is an extension of question ¹. If the market wants the new service, how big is the market? How much of the market is available? Who will provide the service? Does the practice need to add additional providers and/or physical space to accommodate new service? Consider the creation of a great golf-specific program. Even if the idea and the program content are amazing, there needs to be a viable market to sustain and scale the program. If the community and surrounding area has a population of 25,000 people and 10% of them golf, the potential market is 2,500 customers. Assuming 5% of the target population will actually utilize the new golf program, the potential market is 125 customers. But note the word “potential.” For any speculative scenario, you need to keep all potential variables in mind. In this instance, about 8% of the U.S. population played at least one round of golf last year,¹ but just because someone played one round of golf doesn’t mean they will invest in improving their golf game, regardless of how great your new program is. Also consider the lifetime value of each customer. Are people likely to sign on as long-term paying customers year after year, or are they more likely to pay for an episode of services once a year or once every few years?

To determine the scalability and sustainability of a new program, also consider who will deliver the services. It’s one thing to have an amazing product the market wants and another thing to have a product the market wants and a person on your team who is passionate in the same area. This is a dynamite combination. Research shows that employees who feel a degree of autonomy in pursuing their passion (as well as developing mastery in their passion and fulfilling a greater purpose) are significant drivers of employee motivation and retention.2 Coercing a therapist not interested in treating vestibular patients to lead the company’s vestibular program is a recipe for long-term disappointment.

3. DOES THIS NEW IDEA MAKE GOOD BUSINESS SENSE?

Perhaps this should be the first question! Before investing significant resources, the viability of the new niche needs to be evaluated. Start with the end in mind. Who will be paying for the services? Will this be cash-based or covered by insurance? If it’s cash-based, what is the price point the market is willing to pay for this service? Evaluating the price points of comparable services or programs in the same geographical area with the same target customer can be helpful. Create a pro forma based on prospective payment from the estimated available market determined in question ². Be sure to include both conservative and aggressive revenue estimates to keep reality in check.

Next, determine how the service will be delivered. Physical therapy is a people business. Is current staff interested in the service, and do they have the requisite expertise for it? Consider investments in potential training and recruiting that may be necessary. Outline the estimated start-up investment, including training, space, and equipment needs, and take into account the opportunity cost of lost revenue while the program is ramping up. A simple return on investment (ROI) calculation can help determine how you can spend the right amount of money in the right places. Is $50,000 too much to invest? The answer depends on the expected ROI.

See Figure 1 (page 31) for a simple break-even analysis for year one of a new service.

Consider the nuances of a niche practice. Assume a private practice specializes in serving an outpatient orthopedic population. A pelvic floor therapist could be a great service to add, but owners should approach any new niche with eyes wide open. Pelvic floor patients might require privacy and easier access to restrooms. Therapists treating pelvic floor patients may request longer time slots and modifications to scheduling frequency, which will influence key performance indicators such as clinic efficiency (visits per hour), revenue per visit, and visits per new patient.

An objective assessment of ROI can also help offset FOMO, because though an alternative stream of revenue sounds appealing, it also runs the risk of distracting an organization from its profitable core business. Compare investing $10,000 the new equipment required to launch a program with limited ability to scale to investing the same $10,000 in recruiting the next two rock star therapists who will generate predictable revenue doing what the company already does well. Ultimately a practice should stick to its purpose and values and make an objective decision about new services.

4. HOW WILL THE TARGET AUDIENCE BE PERSUADED TO BECOME CUSTOMERS?

Ensuring practices match the right message to the right audience is as important as the first three questions. Before determining the most effective pitch for a new service, a savvy owner will understand what is most important to its target audience and how to most effectively connect with them. If healthcare decision-makers and households are primarily women, create messaging focused on what matters most to women aged 25 to 55. Recruiting and retaining loyal customers does not begin with determining what to say. It begins with deeply understanding the audience and how to connect. Who are they, and what is most important to them? How can new services be easily accessed and common barriers overcome?

One of the greatest mistakes in marketing is assuming communication has occurred. Just because you said it doesn’t mean they understood it. Just because they said it doesn’t mean you understood it. Successful marketing just like any other form of communication — requires common understanding. Physical therapists are musculoskeletal experts but may or may not be message experts. Match the message to your audience and speak in the language of the target customer. For example, rather than promoting “direct access,” refine the message in layman’s terms by letting patients know there is “no referral necessary” to get started.

Physical therapy is an amazing and diverse profession creating opportunities for numerous niche practices. To determine if an alternate revenue stream is right for your practice, start by finding out what the market wants, if your idea makes good business sense, if the idea is sustainable and scalable, and how it will be marketed to increase the likelihood of success. 

References:

¹Pink D. Drive: The Surprising Truth About What Motivates Us. Riverhead Books; 2011.

²National Golf Federation. Golf industry facts. https://www.ngf.org/golf-industry-research/

Emily Bagby is the founder of Mill Creek Consulting and can be reached at ebagby@millcreek.consulting.