What is imperative for a successful unbundling strategy?
Unbundling has been a hot topic on the agenda for a while, should we, could we, will we? It is a question that may well be taken out of our collective hands. New entrants into the market may well follow it as a strategy and then traditional business models may well have to react.
If in fact we are faced with such a scenario, what do you as a Practice owner need to consider? In order for unbundling to be a viable business option you need to understand the cost of running your Practice. You need to be intimately aware of the cost per hour of providing your hearing healthcare services.
Once you are aware of the real cost of running your Practice you can then set an hourly rate for labour that covers those costs and provides a healthy profit margin. But what are the costs that you need to assess, think everything:
Wages costs including contributions and benefits
Utilities
Insurance costs
Professional fees
Marketing budget
Cost of Patient acquisition
Continuing education fees
Fleet costs
Rent and rates
Equipment costs factoring in maintenance and replacement
Consumables used
Don’t forget those hidden costs, tubing tips, filters, batteries, ear hooks etc. Those costs add up and mount up quickly and do affect your bottom line. Once you have those figures on a monthly, quarterly or yearly basis, it is a simple calculation to assess your hourly cost of Practice. Divide your costs by man hours and you are left with cost per hour.
It is important that you remember that your hours are opening hours multiplied by members of staff. Do not forget that members of staff will fluctuate because of holidays. It is imperative that you factor in every cost to your business, my list isn’t exhaustive. You will know your Practice and it’s costs, ensure that you have factored in everything. Once done you can add a reasonable profit margin.
But what is a reasonable profit margin? most businesses would consider 30% true profit as a reasonable return. That is not to say that you would see it as reasonable, your chosen profit margin is personal. This calculation is purely to apprise you of your true labour costs. It will allow you to set a base rate for your services.
The actual rate for your services may well change, will a hearing instrument fitting be charged at the same rate as an audiological work up? What about tinnitus therapy sessions or rehabilitation sessions? This is up to you to decide, but once you have your base rate it is an easier decision.
You also need to consider retail pricing of goods, again you need to look at your true costs of goods. Factor in delivery costs, handling costs and price of goods. Add consumable and acoustic fitting costs (molds, tubes, tips), your chosen profit margin and you have a retail price for all of your products.
This exercise should be undertaken whether you are considering unbundling or not. It is a worthwhile exercise to understand the projected profitability of your business over a given year. It is also an imperative to be prepared for any eventuality in business. That is the core need of any business, the status quo, as much as we would like it to, may not remain constant.
We live in exponential times, at no time in human history has change been more rapid or more wide spread. I sometimes sit in wonder at the changes that have taken place in society and technology over just the last ten years. That is why future proof planning is a core need for your business. History is full of failed businesses that failed because they were unable or unwilling to change. Don’t be one of them.
Regards
Geoff