And yet, a phrase Jon coined nearly a decade ago, “It’s not THE economy, it’s YOUR economy,” rings true. Jobs reports and the stock market may improve, but there is always a cross-section of the industry’s small and large businesses that fail. The recent buzz regarding the at-least-temporary cessation of future business by Lifestyle Lift, a giant in the facial plastics industry, who at one time purportedly eclipsed the $200 million annual revenue level, shows this reality in literal terms. Many impressive board certified facial plastic surgeons, as well as superb employees, are unemployed, and a gap is found in the market.
While we wanted to discuss some broad lessons about running a practice well, we will not be waxing poetic on Lifestyle Lift’s potential mistakes, nor outlining the keys they might have selected to ameliorate the situation. Rather, as most of our readership consists of small practices, we thought it would make sense to list 3 lessons to ensure you keep growing YOUR ECONOMY regardless of how THE ECONOMY is performing at any given time:
- Shoot Bullets, then Cannons – Jim Collins said “Shoot bullets, then cannons,” referring to his recommendation that in business, leaders need to take reasonable risks, before major risks. This rings very true in practice management. YellowTelescope believes that there are hundreds of opportunities for investment every year, all of which may be profitable or may fail. By selecting new investments that will not irreparably harm the business, the practice owner can safely grow and take on reasonable risk. For example, we do not believe a practice achieving $500,000 in revenue should purchase a $100,000 laser – the risk is too great, even if the upside is enormous. It might, however, decide to try 3 or 4 small advertising campaigns on Facebook, google ad words, and one or two small local magazines. It is unlikely all will succeed, but once the tests are complete, you can then shoot a real cannon and invest more in what works.
- Massive Margin – Our company President once ran a $9 million dollar division of a company which had 3% margins. Even a small shift in profitability could mean catastrophe. It’s one reason that most sectors of medicine are great businesses in which to be, as most frugal practice owners can maintain margins in the 30-50% range depending on a number of factors. With any additive investment you should see a clear and realistic path to at least 100%, and ideally 200% or more return on investment over the long haul as there are inevitably other costs that will arise associated with the investment. For example, YellowTelescope long-term clients typically invest the equivalent of about a half a procedure per month and get a return of, on average, 200% to 3000% in 95% of cases. While 200% is only “ok” it ensures our clients have a 95%+ chance of having a successful “bullet” shot with very large probabilities of monster, massive margin should things go well.
- Pay Your People – The highest ranked salesperson at Lifestyle Lift a few years ago left to join a practice we now help manage, in part because there was an opportunity to make over double the income. The salesperson was selling millions for Lifestyle Lift which likely could have retained the person by creating a more compelling bonus program. Now, the person earns about double the pay, but also sells more than almost any person in the country. And the practice owners could not be happier with their decision. Think outside the box and don’t be afraid to pay more than market average for super people. Here at YellowTelescope our average employee makes over 6 figures, but we have never had a person leave or quit the business other than summer interns. Yes, there is more to a job than money, but being on par or better than market average does matter. Another example occurred last week when a top rep from an injectable filler company called us seeing if she could find a job with a practice we run – as much as she was tired of the travel associated with her current role and not being home with her children earlier, she was superb at her job, was earning over $200,000/year and ultimately decided she wanted to stick with the current role at least a few more years. If she left, her territory would lose more than her annual salary in sales in just a month or two. We would argue her company is paying just right to retain its great employee.