As an industry, rehabilitation practices continue to be challenged with shrinking reimbursements, physicians taking rehab in-house and regulatory pressures. Yet many rehabilitation practices continue to grow…why not you?
Rehab business growth strategies typically include start-ups, acquisitions or contacts. If you have a great clinical product, have shown the ability to recruit and retain physical therapists and have strong operations, this may be a time to look at adding new clinics to your current business.
Start-ups are an excellent rehab business growth strategy as they require minimal capital. If done properly, a start-up clinic should be cash flow positive in 6-9 months, and provide a positive return on investment in 18-24 months.
Rehab businesses that have the greatest track record of success with start-up clinics follow these six basic steps:
Step One – Physician and Patient Zip Code Analysis
Using your current referral and patient lists, map where your current referral sources are located and where your current patients are coming from. A good free mapping tool is Google Maps.
This exercise will provide you with a clear picture of where you should place your next clinic. Look for key physicians located just slightly outside of your current service area. This will more than likely lead you to the market or town where your next clinic should be situated.
Step Two – Choose Market Areas, Analyze Demographics, and Competition
Once you have identified two to three new potential market areas, study the demographics in those market areas. What is the population by age group? Where is the competition? What is the potential number of referrals based on the demographic information? These are the key data points to defining whether this could be a successful market. This data can be found on the Web on US Census Bureau sites, Yellow Pages, and state Workers’ Compensation injury statistics.
Step Three – Go and live in the Markets
Literally, go to the market and live there for at least a week. Meet with physicians, visit the competition, go to the local high schools, colleges, and fitness clubs. This will enable you to build a list of physicians and determine how many referrals per week, month, and year you can count on. It will also give you key information about your competition.
Step Four – Create an Operations and Financial Budget
Now it’s time to take the information that you have gathered from the market research that you have done, and put it into the form of an operations and financial budget. In addition, you need to carefully analyze the cash flow, as that will determine how much capital will be required to fund the business until it becomes a break-even.
Step Five – Space and Equipment
Become creative in deciding how to best accommodate the business in the least amount and most cost-effective space. With adequate fit-out, you can efficiently handle and treat a full patient caseload with a 1,000 to 1,500 square-foot facility.
Consider a month-to-month lease or taking a one-year commitment. A short-term lease will decrease your financial risk. Another low-cost option is renting space from a fitness facility because you could save considerably on rent expense and equipment. But don’t depend on referrals from a fitness club. They must come from physicians.
As for equipment, you can perform adequate patient care with as little as $12,000 to $15,000 of start-up equipment. This includes treatment tables, basic modalities and one or two pieces of aerobic and/or exercise equipment.
Step Six – Staff For Success
First, look at your current staff to see if someone is ready to take on the challenge of a new clinic. If you have to hire from the outside, be extremely careful, as this is the most important position for a growing company.
We certainly understand that there are other elements to a start-up including attaining the proper financing, integrating your current systems, marketing, etc., but we have found that companies that follow the six steps provided are successful at the start-up game!
Martin Healthcare Advisors assists rehabilitation business with growth strategies, profit-building consulting and mergers & acquisition advisory services. Contact us for a no-obligation consultation today.