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BLOG: $10 million club: Solving problems on the way to becoming a much larger practice, part 3
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It almost inevitably happens in larger settings that the partners, particularly the cost-sensitive younger and older partners, develop a preference for optimizing near-term doctor take-home pay rather than long-term success. This conservative bias halts the growth of large practices in its tracks, although the partners may feel for several quarters or even a few years that cost-containment is working. After that, parsimony in areas like marketing, development of the management team and ongoing facility maintenance catches up and claws every dollar back from the partners in successive years. With continued short-term focus, practice profits slide even lower than they were before someone got the bright idea to fire the gardener, let the techs go without a supervisor and allow a junior clerk to take over a half-million dollar marketing program.
By the time big practices get big, they’ve had a chance to experiment deeply with centralization vs. decentralization and with outsourcing vs. insourcing. They may have found out that it’s better to centralize billing but decentralize phone pickup in a practice with many office locations. They’ve rationalized down about as many costs as they dare, which is always a frustrating state to reach for the most cost-conscious partners. And even when they do find costs to shave, they’re often small in the context of a $10+ million budget. Long gone are the heady days of being a loosely run $5 million company and finding a way to bring $50,000 to the bottom line with just one change in IOL vendors. On the revenue side, large practices have the “Procter & Gamble problem” — you can’t drive a large company at high percentile grow rates. Even a huge success is a relatively small addition to revenue. This takes some of the excitement out of the game for entrepreneurial doctors who remember the profit pop when they first added refractive surgery or an ASC. Entrepreneurial doctors who are forced into mere stewardship over what they’ve built often get lax about the details, and their inattention can send their practices back down to where they started.
Most practice owners in enterprises at this scale have to be comfortable with the transition to an era of fine-tuning and polishing — sanding with 500-grit paper and waxing — rather than changing, wholesale, the shape of the company.