Preparing Your Private-Pay Practice for the Next Recession
According to a Business Insider article, 72% of economists surveyed by the National Association for Business Economics expect a recession to occur by the end of 2021. More than half of those economists expect the downturn in 2020. This is bad news especially for private-pay-only therapy practices, as client traffic will probably slow when the economy contracts, the outlook is gloomy, people get laid off, and wages stagnate or even drop.
My work with therapists shows that rent is typically their largest ongoing expense, or close to it. This has therapists make significant decisions regarding their practice based to a great extent on the rent they’d have to pay. One therapist I heard of actually shut down his practice because his revenue wasn’t (yet) enough to cover the rent. Covering rent becomes even more challenging and anxiety-provoking when the economy slows and client traffic drops as a result.
But what if I could suggest a simple and free way for you to reach more prospective clients than you do now, perhaps twice as many?
Does this Method Fit You?
Here’s a checklist of the characteristics of a therapist for whom this would work:
- You own a solo practice with most or all private-pay clients
- You own or rent office space full-time (best if not in your home)
- You have capacity for more clients than your current caseload, or you expect this to happen in a downturn
- You know, or can find, trusted colleagues providing services complementary to yours who have full-time office space about 30- to 45-minute drive from your office (and not too far to commute from your home)
How It Works
Most clients have a certain radius they’re willing to drive to see a therapist. This radius isn’t huge, possibly as small as a 15- to 20-minute drive (probably longer in under-served rural areas). This means that the geographic reach of your current office is mostly limited to that distance. Yes, if you’re well known as a great therapist, people will drive longer distances to see you, and if you’re world-renowned, they might even fly in from around the globe. If that’s your situation, I suspect you “fail” the third criterion in the above list. For everyone else, the radius is probably close to what I state above. This is why many doctors, dentists, and law firms open multiple offices, to cover a wider customer base.
The problem is that for a solo therapist, paying for full time office space in two locations, or even full-time rent in one location and part-time rent elsewhere is likely prohibitive, or at least hard to justify. However, if you have or can find a colleague as described in the fourth item above, you can agree to swap offices one or two days a week with neither having to pay for the privilege.
Why this Works
Since you’re doing a one-for-one swap, this doesn’t cost either one of you anything. Since your services are complementary, you don’t compete for the same clients. In fact, you can become great referral sources for each other, and referred clients wouldn't have to travel to a new location since you'd see them in the swapped office. Finally, and most important, this gives you access to a population living outside your current geographic reach. If the new area is comparable to your current one, you basically double the number of prospective clients you can reach, at minimal or no extra cost. The only caveat is that you may need to increase your marketing efforts and/or spending to cover the new area too.
What You Should Do Now
Here are your action steps to prepare for the downturn, since it’s a matter of when, not if, it happens.
- Make a list of colleagues you’d trust enough to refer your clients to, who have a solo practice, whose office is 30 to 40 minutes away from yours, and who provide services complementary to yours
- If you have more than one such colleague, order the list by descending preference of where you’d like to practice one or two days of the week; considerations can include ease and length of travel from your home, a more affluent area (where residents would likely be impacted less by a downturn in the economy), and a more pleasant office
- Reach out to colleagues in your list one by one until you find one who likes the office-swapping idea
- Read your lease agreement (unless you own your space) to see if you’d need your landlord’s approval to allow others to use your office; if you do, contact your landlord to get such approval; recommend to your office-swapping colleague that she do the same
- Draft a reciprocal office-swapping agreement (getting an attorney’s support is best)
- Check with your malpractice and general liability insurance carrier(s) to make sure you’d be protected when seeing clients at the other location, as well as when your colleague sees clients in your space; again, recommend to your office-swapping colleague that she do the same
- If you can already use access to more clients now, before a downturn hits, initiate the office swap as soon as you’ve covered all the other bases above
- Modify your marketing to cover the new area and, if needed, increase the ad budget
The Bottom Line
Especially when expecting a significant economic decline in the next year or two, the above is a free way of more or less doubling your reach, giving you access to twice as many prospective clients to counteract the expected slowdown in client traffic.
In my financial strategy practice, I offer this and many other recommendations for professionals in private practice looking to improve how they run their practice, and align their practice with their personal and family financial goals. If this sounds interesting, email me to set up a free, no-strings-attached call to explore if this would be helpful to you.