Growing Pains: Overcoming Barriers to Practice Growth
Revenue barriers, while natural, are predictable
By Mike Osler, PT, DPT
According to a recent APTA Private Practice Section survey, 74% of members worked in practices with one or two locations.1
This brings up an interesting question: Do most practice owners intentionally decide to keep their practices small, or are there other factors influencing the size of most practices? Sure, some owners may decide to stick with one or two locations for good reasons. But a similar trend appears in other industries as well. In the United States, 85% of all companies have fewer than 10 employees. Only 1% reach $10 million in revenue. The reason? Natural barriers to growth occur for most businesses at predictable sizes starting at $1 million in revenue.2 Because these barriers are predictable, private practice owners can work intentionally to overcome them if they desire to grow.
Barriers at $1 Million in Revenue
Ask private practice owners why they started their practice, and the story often goes like this: They were excellent clinicians and wanted to serve their communities with a better option for physical therapy. The next chapter in the story typically sounds like this: Therapists and patients alike were attracted to the high-quality care and personal touch of their small private practice. After a few years of success breeding more success, the person who started as an excellent clinician finds themself in an entirely different position — that of attempting to run a substantial business.
The barrier that prevents many practices from surpassing $1 million in revenue is quite simply that the founder cannot do everything. A practice with $1 million in revenue most likely employs four or five physical therapists. At some point the owner finds herself attempting to be the CEO, CFO, head of marketing, chief recruiter, director of staff development, contract negotiator, clinic director, IT specialist, and compliance officer. To overcome this barrier, founders must delegate. A founder attempting to do everything struggles to do anything with excellence. As hard as this may be to hear, the lid on practice growth is typically the owner themself. While some owners may add a business partner at this stage, many talented people are attracted to organizations for the opportunity to grow personally and professionally, regardless of the potential to be an owner. Outsourcing functions such as billing, payroll, and bookkeeping can also free up resources, add expertise, and keep owners doing what they are passionate about.
So why don’t owners delegate more? The core issue often revolves around trust and a desire to be in control. After all, the owner has put blood, sweat, and tears into the practice to reach this point. Trusting someone to make decisions for the practice is like trusting a babysitter the first time a child is left at home. It can be scary! Underlying the desire for control is usually a concern that others will not do things the way the owner did it. Creating clear expectations, including company values, can outline how an owner wants roles to be completed. Effective values are more than words printed on a piece of paper or displayed on the wall. Values should translate into daily behaviors, telling employees how to interact with patients, referral sources, and one another.
Leadership Pearls to Surpass $1 Million in Revenue
Successful delegation involves delegating results, not tasks. Simply handing your to-do list to another employee is not the type of delegation necessary to keep a practice growing. Start with why what is being delegated matters and describe the impact of the ideal outcome on the practice. Clearly outline the desired result, and be intentional about parameters for quality, timelines, and resources. Connect the person’s actions to the overall purpose and values of the organization. Provide the right amount of engagement — avoid micromanaging yet check in at mutually agreed upon touch points to offer support and accountability. For an organization to continue growing, the next level of leaders needs to be empowered and given the autonomy to make decisions in the best interest of the practice.3
Barriers at $3-5 Million in Revenue
Practice owners who successfully reach $3-$5 million in revenue should be proud of their work. Instead of being able to relax after taking a moment to celebrate overcoming barriers, owners find new barriers waiting for them. The primary barrier to surpassing $3-$5 million in revenue is lacking a solid foundation on which to scale the practice. Constructing new rooms on a house with cracks in the foundation is a recipe for trouble. In the same way, attempting to scale a business on a shaky foundation will lead to dysfunction and possibly collapse. A solid foundation starts with clear expectations for staff and implementing systems and processes to create consistent quality results. Developing leaders (including middle managers who are not the owner) who are themselves capable of developing and coaching others creates alignment in compensation structure, providing feedback on performance, and holding teams accountable to expectations.
Practices need to be objective when assessing key areas of the business to continue growing.4 Systems for data collection, reporting, and analysis are necessary. Simple tools, such as provider dashboards, allow key performance indicators (KPIs) to be reviewed consistently to drive quality care. If any area of the foundation is lacking, you need to delay or slow your plans for growth until it has been addressed. If limited progress is made on building the foundation, revisit team leadership. Be sure the right people are on the team. Use tools such as the DiSC (Dominance, influence, Steadiness, Conscientiousness) profile or the Asher APQ Sales Assessment to get the right people in the right seats. Continue to build the leadership team by adding team members who not only add expertise and bandwidth but also enhance culture and further ignite passion for the practice.
Leadership Pearls to Surpass $3-5 Million in Revenue
Around $3-$5 million in revenue is a great time to ask for help. My wife and I find ourselves asking other couples for parenting advice. One drawback to asking neighbors who are about our age with similar-aged kids is that our experiences are so similar, we think alike. We are striving for the same goals (responsible children who become responsible adults!) but not quite sure what will work most effectively. What is most beneficial are couples with kids a few years older than ours. They have “been there, done that” with kids and offer invaluable insight, strategies, and encouragement. The same is true in private practice. Seeking outside help from a senior mentor, business coach, or consultant can bring an objective, external perspective to the practice. The results are the same — insight, strategies, and encouragement from someone who overcame the same barrier currently standing in an owner’s path to growth.
Barriers Beyond $5 Million in Revenue
As companies continue to grow, barriers do not disappear; they simply appear in different forms. The primary barriers restricting growth beyond $5 million in revenue are some combination of lacking strategy, lacking alignment, and lacking execution. Practices should pause to determine their strategic posture, which is to say that they need to decide how they will operate in their markets.5 Leaders can select an intentional strategy, whether that includes offering new services in current markets, offering current services in new markets, or leveraging market differentiators to scale locally. The rate of growth can be enhanced by opening new locations, acquiring other physical therapy practices, or leveraging strategic relationships. Determine what strategies make the most sense for the practice.
Once these key strategy decisions are thoughtfully made, leadership throughout the organization should align decision-making and actions with the strategy. Practices beyond $5 million in revenue will likely have 20-plus full-time providers, and in such a case, it becomes even more important for everyone to be pulling on the same rope in the same direction. Even with a solid strategy and strong alignment, practices must execute to stay afloat. Thomas Edison is credited with saying, “Strategy without execution is hallucination.” Practices must have reliable processes and systems in place to consistently move ideas and words into actions and results.
Leadership Pearls Beyond $5 Million in Revenue
As practices grow larger, there are more and more internal experts on the leadership team. Creating an effective cadence of meetings with the right people at the right time focused on the right outcomes will allow the leadership team to thrive. While detailed meeting models are beyond the scope of this article, executive leaders and middle managers must determine which meetings are needed and which are not.6 Once a meeting is deemed necessary, meaning it cannot be handled effectively through a more efficient method, clear purposes for each meeting should be determined (brainstorming, decision-making, KPI performance review, and so on). Predetermined ground rules and written agendas created in advance can keep meetings on track and directed toward action steps. Well-run meetings provide senior leadership with an opportunity to further instill company values and culture — hopefully starting and ending on a high note!
A practice with one or two locations may be the right size for a physical therapy practice for many reasons. But if owners are committed to growing practices beyond four or five clinicians, they will do so by taking intentional action to overcome predictable barriers standing in the way. Enjoy the journey!
References:
1APTA Private Practice. “Member Survey.” Published 2018.
2Alampi J. Great to Excellent: It’s the Execution! Alampi; 2013.
3Gallo A. “The Seven Imperatives to Keeping Meetings on Track.” Harvard Business Review. Published December 20, 2013. https://hbr.org/2013/12/the-seven-imperatives-to-keeping-meetings-on-track
4Ginter P, Duncan W, Swayne L. Strategic Management of Health Care Organizations. Wiley and Sons; 2018.
5Leonard R. “Planning for Success: Identifying Top Metrics to Monitor in Your Strategic Plan.” APTA Private Practice. Published November 2021. https://www.ppsimpact.org/planning-for-success/
6Sostrin J. “To be a Great Leader, You Have to Learn to Delegate Well.” Harvard Business Review. Published October 10, 2017. https://hbr.org/2017/10/to-be-a-great-leader-you-have-to-learn-how-to-delegate-well
Mike Osler is an active PPS member and serves as the director of business coaching at 8150 Advisors. Mike can be reached at mikeo@8150advisors.com.