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PDT
#141 -- Measure Your Success
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Track the
Numbers
April 22, 2009
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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.
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 7000 subscribers.
Private Duty Today is
a permission-based newsletter.
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Stephen Tweed's mantra is "Before we can do good, we
must do well." He believes in this industry of caring.
He has seen firsthand the positive influence of home care in his life
and that of his son. But he also recognizes that this industry of
caring must be focused on profitability, sustainability, and viability
to continue to do these good works.
Doing well means more than just black on the bottom line of your
balance sheets and profit statements. It means creating a company
where, as executive decision maker, you can influence that bottom
line. It means that you can monitor the factors that lead to
profitability, improved customer service, growth, and employee
retention.
Over the next few issues we're going to examine some of these Critical
Measures of Success, the data points that can be monitored and compared
to growth, profitability and much, much more.
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I'm always amazed at how many executives don't know their
census. They know their revenue dollars, and they usually know
the number of hours served, but a surprising number don't know their
current and year to date customers being served.
Revenue Dollars per Customer is one of the most important Critical
Measures of Success in my opinion. The more money each individual
customer spends with you, whether it's private pay, Medicaid or trust
fund money, is a strong indicator of profitability as well as customer
satisfaction.
Ironically, it's also one of the easiest numbers to track. Simply
take monthly client revenue and divide it by the number of unique
clients. You may argue that not all clients are created equal,
because not all of them are on your service for an entire month, but in
reality this ratio, as long as it's measured consistently, is highly
valid.
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Three Reasons to Track
Dollars per Customer
There are three pieces of information you can extrapolate
when you look at revenue dollars per customer tracked over time.
1. Increasing revenue dollars per customer should increase
profitability. Each customer requires a base amount of time and
money for scheduling, intake, and case management. The efficiency
of these overhead expenses is critical to profitability, and therefore
customers who purchase more service generally are more profitable.
2. Sales and marketing effectiveness. Your marketing ROI
(return on investment) should improve as revenue dollars per customer
improve. Two factors lead to this. Customers are always
easier to sell than prospects. By focusing some of your marketing
efforts on existing customers you should be able to see a greater
return. Additionally, if your marketing team is focused on
improving revenue dollars per customer then they will begin to target
these high-value prospects.
3. Customers vote with their dollars. Generally when
customers buy more product it's because they were happy with previous
purchases. Families who are served well will be much more willing
to increase hours. Dollars per revenue can be an indicator of
improving customer service and client satisfaction.
But ... what happens if dollars per customer are stagnant or even
shrinking?
A shrinking ratio can indicate three potential problems.
1. You're likely spending more money on overhead per hour or
service. This leads directly to reduced profitability.
2. Your salespeople are focused too much on quantity rather than
quality.
3. Your referral sources or your customers are choosing to use
your agency less frequently.
The biggest value here is that the CEO can identify problems before
they become crises. Almost weekly I get a call from a CEO who has
continued to grow their company with double-digit revenue increases
over a decade, then suddenly realizes that their once highly profitable
company is now losing money. Invariably the CEO would have
recognized the downward trend earlier had they been tracking the right
data points. Typically we can identify a critical measure of
success that dipped as a prelude to dropping profits. One of the
most common is Revenue Dollars per Customer.
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A technique we use with our consulting clients is to
develop a Strategic Scorecard. The concept is simple. Create
a single sheet of paper that summarizes the Critical Measures of
Success tracked over time. Most commonly our clients choose to
track data monthly for this summary sheet. This scorecard gives
executive decision makers the ability to identify trends before they
affect the bottom line. Additionally, it creates a set of clear
benchmarks for improvement for your executive team.
When working with clients we customize their Strategic Scorecard.
We begin with a template created in Microsoft Excel and then add or
remove company specific critical measures.
Our Private Duty Strategic Scorecard
is available for download on our website. This Excel file comes
with complete instructions for tracking meaningful data, and you can
customize it for your company.
How much does it cost you to get smarter about your company? 49 bucks!
I encourage you to purchase the Private Duty Strategic Scorecard
and start getting smarter today.
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We'll
be in Columbia, Maryland for our Private Duty Business Builders
Strategy RetreatTM
 We hope to see you on Wednesday, June 3, 2009 in
Columbia, Maryland as we join with Maryland National Capital Home Care
Association for a one day focused strategy session to help you develop
a business growth plan for your company.
We'll share with you the best practices and proven
techniques to grow your private pay business. We'll show you how to
recruit and select the caregivers you need to take on more clients. And
we'll give you specific tips to increase the profitability of your
business.
Join with America's leading expert on Private Duty Home
Care, Stephen Tweed, to learn about the 27 elements of a
successful private duty business, and have an opportunity to focus
on those elements that are most important to you. See you there!
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