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Understanding Client Profitability: A Key to Sustainable Practice Growth

conversations profitwithoutpills Mar 07, 2023

The concept of client profitability, is crucial in understanding the financial health of a practice. It involves analysing which clients, contract, products, or services are generating profits and which ones are causing losses. By identifying areas of unprofitability, businesses can make informed decisions to improve their overall profitability and sustainability.

In the context of clinical care, customer profitability can be measured by evaluating the profitability of each contract, patient or clinician. This analysis helps clinics understand which activities generate profits and which ones result in losses. With this knowledge, clinics can take appropriate actions to improve profitability.

In a chat with Richard Stone, we discuss the following:

● The key importance of customer profitability in businesses with focus on the areas of healthcare.
● How to build a system when the prices change.
● The reasons to knowing your customers.
● How to effectively manage the low sides of business.

Managing customer profitability requires clarity on the financial data of the business. It involves understanding not only the gross profit but also the contribution of each customer or service to the overhead costs of the business. Sometimes, even if a client or service is not highly profitable, it may still contribute to covering the overhead costs, and eliminating it completely could worsen the overall financial situation. Therefore, a careful evaluation is necessary to determine the best course of action.

Measuring profitability can also be extended to other factors, such as product profitability or utilisation of resources. For example, in a retail business, it may be more relevant to track profitability by product, while in a service industry like a clinic, measuring the utilisation of clinicians' time can be a valuable metric.  Remember every team member should have a positive impact on the bottom line!

Ultimately, the goal is to have a deep understanding of where the practice is making or losing money and to make strategic decisions based on that information. By focusing on customer profitability and managing areas of unprofitability, practice can improve their financial performance and ensure long-term sustainability.

REMEMBER: Profitability enables your practice it continue serving you, your family, team and community for the long run.


The Health-prenuers Guide

Coming Soon!

I'm on an exciting journey with my book, taking it back to the good old days when books were served up in newspapers, piece by piece. I'm crafting circa 500 words a day and sharing it with all of you.

Now, this book is for you if you've ever had a brilliant idea or a vision for your own healthcare business or perhaps you want to revitalise your existing service, but you're stuck, not sure how to confirm if there's a market for your idea or how to bring your vision to life.

Let's embark on this journey together