Size Matters

Using data to drive growth.

By Michael Connors, PT, DPT, PhD

A successful practice is a blessing but can also present a myriad of challenges ranging from insufficient staff to inadequate space.

The decision to expand a practice is a difficult one as more space typically results in higher expenses. When contemplating whether to increase the size of your clinic space, a number of things need to be considered to ensure the long-term viability and profitability of the practice is not sacrificed.

You’ve reached the point where you are ready to grow and are now contemplating the next steps, or you are considering opening a new or satellite location and are struggling with the optimal size of the new space. While buildouts and renovations are expensive, unneeded space can also present an undue expense burden to the practice. There is no magic formula for determining the optimal space for a clinic, but a number of factors should be considered. With some deliberate planning on the front end, you can save yourself and your practice from making the costly mistake of acquiring too much space.

First, you should have a good handle on your revenue and expenses per square foot. A simple analysis can calculate the revenue you are generating with your current space as compared to the expenses required to generate that income in that specific square footage. Once you have calculated that information, you can then take that dollar per square foot figure and apply it to different size spaces. Keep in mind that as space increases, expenses typically increase as well. While rent definitely increases as space increases, utilities such as electricity also tend to go up. With an increase in clinic size, you will also need to account for all other possible increases in expenses.

With a good handle on your revenue and expenses as they relate to space, you can make informed decisions on the optimal clinic space to maximize the profitability of your business. We all envision a situation where we open a 10,000-square-foot clinic filled with state-of-the-art equipment. That is a great dream until you wake up and realize that all of that overhead is a considerable expense to cover from a revenue-generating perspective. You can always build your business and subsequently your space over time as the success of your practice grows.

Next, you need to develop a solid plan on how you will drive increased volume to help maintain or improve your revenue per square foot. Without a subsequent increase in volume and revenue, expenses will exceed revenue in the larger space. As we all know, this is a less than ideal situation. Develop a comprehensive, realistic marketing plan aimed at driving more volume into the larger space. Now is also a good time to look at industry trends with service lines and equipment to discern if the addition of one of those in the new space would be a driver of volume and revenue.

Be brutally honest with your plan. We all have moments where we get caught up in the idea that a large space will drive patients to your facility by sheer appearance, but you need to face the reality that there is a lot of competition in most markets for therapy services. A realistic plan based on historical referral data and a solid comprehension of your client demographics can set the stage for a higher likelihood of success when contemplating the future growth of your clinic space. You also need to have an intimate awareness of the health care market around you to include knowledge about potential referral sources, referral source prior allegiances, and health care networks. Since all of these variables can have a direct impact on volume and thus revenue, it is imperative to have an achievable plan to ensure the decision to increase clinic size is a positive and profitable one.

While increasing clinic size can be a difficult decision, the choice can be made less burdensome with some careful planning and deliberation on the front end.

Mike Connors, PT, DPT, PhD, is a PPS member and regional director of therapy for Greater Therapy Centers in Bedford, Texas. He can be reached at mconnors@gtc-pt.com and @mconnorspt.