When to Hire an Associate
One of the questions I am commonly asked is “should I hire an associate?”. Well, tell me tell you some of the reasons not to hire an associate!
3 Reasons NOT to hire an associate
So here goes the 3 reasons NOT to hire.
Reason 1: I am too busy.
Perhaps you are busy, but are you efficient? In most cases OD’s can increase their productivity through increased delegation, improved patient flow, and placing better systems in place. Before you hire another doctor, review some basic metrics. Look at your revenue per exam (total collected receipts divided by the number of routine exams) and number of exams per OD hour (total number of routine exams divided by number of doctor hours worked).
According to the Management and Business Academy (MBA), the median values are $306 revenue per exam, and 1.10 exams per doctor hour. If you are below those numbers, there is room for improvement, and you’re not ready to hire another doctor yet. As a rule of thumb, $800,000 gross is probably a minimum to consider hiring an extra OD.
Reason 2: I want to increase my gross
While in some cases (rare) you might find an OD out there who will have patients knocking the doors down, more typically a new associate will “cannibalize” your existing patients. Unlike Kevin Costner’s Field of Dreams, just because you build it (add a new Doctor) does not mean they will come! Eventually, of course, the new OD will begin to increase the number of patients coming to the office, but most likely that will take 3-5 years.
Reason 3: I want a higher net
Not so fast! See reason 2. Without increased revenues, all that you are doing is splitting the proverbial “profit pot” two ways instead of one! When will the new OD “break even”? In other words, at what point will he bring in enough new patients (and revenue!) to pay for himself? A rule of thumb: take the associate’s salary and triple it – that is approximately the amount of additional revenue the practice must bring in. If he makes $100,000 per year, he “breaks even” at $300,000 additional practice revenue.
When To Hire An Associate
OK, so when should you hire an associate?
The two best reasons are: 1) You want to take more time off. Of course you’ll most likely reduce your income, but depending on your circumstances, you can enjoy more leisure time, or step away from seeing patients while devoting time to being the CEO of your practice. 2) You are hiring the associate as part of your exit strategy. While in the short run you will most likely reduce your personal income, you will gain a possible buyer for the practice you have spent your lifetime building.
Have any other questions? Contact us for a free consultation!