DR. ACE GOERIG
OWNER & CO-FOUNDER
It is common for many doctors to spend the first decade of their career getting their practice set up, growing their referral base, and becoming profitable enough to fund the essentials of family life.
And then something strange often happens. As their income stabilizes, the urgency and focus they once had to ensure the practice continues to grow starts to fade, and doctors enter a comfort zone where growth slows to a crawl or stops.
Inside that comfort zone, two troubling things happen. First, doctors settle around a level of predictable income and start to believe their practice has reached its expected potential. Second, team members settle around a daily routine that only maintains the status quo without new goals to drive forward progress.
The key question is how long do doctors sit in that comfort zone and what is the impact?
The cost of sitting still
Almost anyone who has a financial investment has heard of the Rule of 72, which states that the amount of time (in years) that it takes to double your money is approximately 72 divided by the rate of return. For example, if you are getting 8% investment return, then it will take about 72 ÷ 8 = 9 years to double your money.
What most people don’t realize is that the Rule of 72 also applies to negative return rates and tells you how many years it takes to cut your money in half. The negative return rate that we all experience is inflation, which historically has been about 3%. So, the Rule of 72 tells us that doing nothing to grow your income will erode its value by half in about 72 ÷ 3 = 24 years.
Most doctors are not going to wait 24 years to do something. But it is surprising how quickly sitting in the comfort zone starts to affect you. 5 years without growth (which is quite common for comfort zone doctors) is almost a 15% hit on economic value. 10 years is over 25%, and that’s certainly going to feel like a squeeze.
The cost of sitting still eventually becomes a concern for anyone. If not acted on, then it becomes even bigger and more stressful problem. A good example is a doctor in his mid-40s waking up one day and realizing they are still in debt, haven’t saved enough for retirement, and are still making financial trade-offs in their lifestyle and family goals. This happens in a time of their life when they had expected all their financial pressures would be long behind them.
Bringing back the focus on growth
If a practice isn’t measurably growing, you can be sure that its value is inevitably shrinking. Every business needs to have top-line revenue growth in its annual plan and goals.
At a minimum, you must keep your head above inflation waters. That’s one reason why you need to raise your fees every year. I usually recommend 1 or 2 percent higher than the inflation rate. In a typical year, I would raise my fees by 5% annually.
But just keeping up with inflation through fee increases is not enough. That doesn’t count as true growth because it doesn’t improve your life in any way. In my view, a practice should have annual revenue growth of 10% or more (5% of that is fee increases) in order to be healthy.
10%+ growth ensures the practice has goals that require consistent focus on improved teamwork, marketing and productivity. The team doesn’t get complacent, and doctors stay well out of the comfort zone trap.
So, where are you at if 10% annual growth is the recommended minimum benchmark for a financially healthy practice? To give more context, 10% growth per year compounds to 61% growth over a 5-year period. Are your revenues 60% higher today than they were 5 years ago? If not, what’s your plan to get back on track?