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Private Duty Today
Welcome to Private Duty Today,
the bi-weekly electronic newsletter for Private Duty Home Care Leaders
from Leading Home Care ...a Tweed Jeffries company. In this issue, we
bring you ideas, information, and insights to help you grow your Private
Duty Home Care business.
Private Duty Today is a permission-based
newsletter. It is only sent to our recent customers and those individuals
who have requested it, or who have given permission for their address to
be included on our list of subscribers.
I'm Jason Tweed, Director of Business Development for
Leading Home Care, and Editor of Private
Duty Today.
Private Duty Today is published every
other Wednesday, and currently goes to over 6000 subscribers.
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Many small private duty home care companies have had a
scary experience. They started small with an administrative
assistant, a scheduler and if they're lucky, a salesperson. The
owner believed that eventually they would reach critical mass in terms
of numbers of service hours, and at that scale would become profitable.
Unfortunately
it doesn't always work that way. As the hours increase your staff
gets busier, management becomes tougher, and turnover starts to affect
the bottom line. Your employees are working harder, not smarter.
Now
you're a medium-sized private duty home care company, but your profits
are still the same, or worse yet they may have evaporated.
When
this happens, the profitability pillar becomes your limiting factor.
When
we talk about "taking your business to the next level" the
profitability pillar is absolutely critical. It's my feeling
that, generally speaking, every private duty home care company with $1
million or more in revenue should be profitable. As you grow you
should become more efficient, not less.
Let's
take a look at these pie charts. In this sample a $2 million
company spends $1.4 million on caregivers, or 70%. They are also
spending $500,000, or 25%, on office staff and other overhead
expenses. Profits/owner's income are slim at $100,000.
The next pie demonstrates a 20% improvement in efficiency. Costs
of providing care are stable at 70%, but overhead expenses have dropped
from 25% to 20%. The owner's income has increased to 10% of
revenues.
The key is not to slash spending, it's to improve
productivity. In this example the total company can grow to $2.4
million (because existing staff is more efficient), creating a 10%
profit margin of $240,000. The owner's income has increased a
whopping 140%. The additional profits can also be reinvested in
the company for accelerated growth, or saved for future capital
reinvestment or acquisition.
The
Profitability Pillar is critical if you're interested in taking your $2
million a year company and turning it into a $5 million a year
enterprise.
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#1 Tip for Increasing
Profitability
Profitability is about efficiency and processes.
Profitability is about systems and tracking.
Tip
#1: Create a Strategic Scorecard -- The most common
mistake CEOs and owners make is not tracking the right data. They
keep balance sheets and profit statements, but these are the
destination, not the course. Tracking other data and making
course correction will help you arrive at the destination you desire.
If
you're not tracking the following numbers, you should be:
- Dollars of
Revenue per client
- Dollars of
Profit per unit of service
- Total units
of service
- Marketing
expenses per unit of service
- Recruiting
expenses per unit of service
- Recruiting
expenses per new hire
- Overhead
(scheduling, billing, payroll, rent, utilities, equipment, etc.)
per unit of service
- Profit margin
- Revenue days
of Accounts Receivable
Create
a strategic scorecard for
your company that collects key data on a single page. Tracking
these critical numbers over time will help you get a handle on your
profitability.
Why am I calling this Tip #1? I'm glad you
asked. In the next issue of Private Duty Today we will be looking
at Tip #2 - #7.
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 Steve Everhart is the
president and founder of The Senior's Choice,
the largest membership organization of private duty companies.
Recently, I sat down with Steve to talk about the challenges of growing
a private duty company and what he and his organization do to help
these companies make the transition from the start-up phase to next
level growth, all the way to generating multi-million dollar annual
revenues.
Jason: Steve, we both know that
private duty companies face a host of challenges throughout their
business "lifecycle". In the beginning they just want to beat
the odds of staying in business and are trying to establish a solid
foundation of clients and revenue upon which their business can firmly
take root. Later on as their business matures they face growth and
profitability challenges that keep them from reaching the next level.
What are some of the specific challenges they face and how do you help
them break through each of these barriers?
Steve: Jason my friend, in the last nine
plus years we've helped hundreds of private duty companies get started.
But the ones that grew the quickest or the largest or the most
successful all have one thing in common with each other: they
implemented and followed specific operating systems that give structure
to their organization and are fundamental to any private duty company's
success.
Jason: Explain what kind of systems you are
referring to and why they are significant to a company's growth and
development.
Steve: When I refer to systems
I'm talking about the integration of specific steps, policies and
procedures that a company has in place to manage all the key tactical
and strategic tasks that they must fulfill. I'll use marketing your
business as an example of a basic, yet fundamental, task that every
private duty company deals with daily.
I've coached a lot of private duty professionals with just
a few years of experience under their belt and most of them have a
common predicament: how to increase their lead flow and grow their
business. The problem they face is that they have no marketing plan in
place. For them, marketing is going out occasionally and talking to a
few referral sources that they already know. On top of that they might
run an ad here or there or send out a direct mail piece. But there is
no structure to what they do. They have no plan for increasing their
lead flow. They focus on one pillar of lead generation instead of
building many, and they have no system for tracking and measuring their
ads or direct mail pieces, so they're not even sure if they're working
or not. This is not how you grow a business.
Our start-up members have the advantage of going through
what I refer to as "basic training". During these four days,
and then again during our ongoing coaching sessions, we instill in them
the fundamentals of developing multiple pillars of lead generation,
provide them with blueprints on who and where to market to, as well as
frequency, and how to track and measure their progress so they know
what areas need improvement and what areas are producing for them.
Basically, we teach them the philosophy behind our systems so they buy
into them and adopt them, and then give them the tools, the checklists
and templates or the road map for them to follow.
The systems we have in place have been developed over the
past ten plus years and are modeled after the best practices of our
most successful members who helped us in creating them. They are battle
tested and work. Our members who have the most success are those who
implemented these systems from the get go. Conversely, the ones that
struggled are the free thinkers who try and do it their own way. Let me
tell you, we've had more than a few members who have come back to us
hat in hand and admit that they should have done things the way we
taught them to the first time around because it would have saved them a
lot of time and money.
Jason: I guess as private duty professional
you and I take a lot of these things for granted, when they are really
things that must be learned. What other systems has The Senior's Choice
developed?
Steve: Several years ago we put
together our Executive Operating Systems Manuals. It's like a private
duty bible for our members and contains every system they need for
their business, from: leadership, management, hiring and organizational
development to marketing, client fulfillment, staff accountability,
managing cash flow and budgeting. Of all the tools we've developed over
the years, which are many, I'd have to say this is the one our members
couldn't live without.
Learn more about The Senior's Choice.
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Private Duty Insider, inside
the June issue
The June issue of Stephen Tweed's Private Duty Insider
is arriving in mail boxes this week.
Subsrcibers will read about:
- The 2008
Caregiver Recruiting Survey Results
- Implementing
Your Marketing Plan
- Developing
an Exit Strategy
- Creating
Great Speeches
- Innovative
Brochures
If
you aren't yet a subscriber you can still get the June issue by
subscribing before June 1st to Stephen Tweed's Private Duty
Insider by calling Decision Health at 1-877-602-3835.
Tell them you saw them in Private Duty Today!
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Private Duty Academy in
Maryland TODAY!
Are you ready to take your company to $5 million?
Participants at the Academy for Private Duty Home Care are
getting ready right now!
We'd like to thank the Maryland National Capital Home Care
Association for sponsoring the full day Academy in Columbia,
Maryland today.
Nationwide, private duty companies are screaming for their local home
care associations to provide more private duty specific
programming. Even Medicare certified agencies are involved,
because over half of them now have private duty divisions.
If you'd like to see more programming for private duty, call your state
home care association and ask them to call Julie at
502-339-0653 and sponsor an Academy in your state.
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