With the country facing a recession that financial analysts predict will continue throughout 2009 and perhaps extend into 2010, staying competitive in the business world can seem daunting for many companies. By implementing and embracing some basic strategies, companies can develop a business plan to help them stay competitive, weather the current downturn and even position themselves favorably for when the economy recovers.
Reassess business plan regularly
In the current economic climate, both large and small businesses alike must assess their budget or annual plan and make revisions accordingly. This process is similar to the actions individuals take when looking at their own personal expenses.
“If a business has a budget or an annual plan, it is prudent to revisit that plan and make course corrections based on the current economic climate for your particular business,” Mike George, vice president of operations for Hanger Prosthetics & Orthotics, said. “The factors that you may have anticipated occurring in this year may not now be the case, and you cannot continue to operate the same way.”
For instance, a downturn in sales or an increase in expenses will require a business to examine its sales volume and then determine what expenses it can afford to undertake while still meeting its objectives for profit. In an uncertain business climate, this process will need to be performed more regularly.
“If you are not looking at it monthly, then you probably need to revisit your plan, look at your expenses and make sure that you are not overspending on some of the discretionary things, like advertising, promotional items, office supplies and even your own inventory,” George said. “All of those things will help reduce your cash outflow in an unsteady economic time, particularly when we do not really know what effect the economy is going to have on our ability to get referrals from the entities that refer business to us.”
Small businesses also need to be sure they do not overextend themselves from a credit perspective. George noted that just as individuals have to watch what they put on their credit cards, businesses have to watch what they borrow against because at some point of time in the future, that credit will need to be paid back.
Expand business model
During an uncertain economy, businesses need to continue looking for growth opportunities to expand and promote their companies. This strategy can help to not only sustain a company through tough times but also provide a direction for the future when the economy picks up.
For the O&P market, ancillary services can represent an area for expansion and a way to grasp more revenue. Ancillary products and services in a tough economic climate can push a company to the front of the line, Brad Mattear, general manager of O&P1 said.
“People are trying to find different ways to create revenue and to expand their business model so that they are not just the O&P market any more,” Mattear said. “I see more and more orthotic and prosthetic companies expanding their business model into mastectomy fitting, into diabetic shoes, into everything diabetic from socks to pumps to wound care to bone stimulators.”
However, for the O&P business, expanding into ancillary services must be undertaken with care and planning, and can be limited somewhat by existing employees’ skill levels. Moreover, companies need to be certain those ancillary services will bring in enough revenue to offset any added costs.
“Taking mastectomy as an example, there are a lot of payers who would like to see an O&P business provide mastectomy services,” George said. “If you do not have a mastectomy fitter on staff, then you really have to be careful and make sure that if you are going to add a mastectomy fitter, you have got some kind of a pipeline to referrals.”
George noted payers may be able to help an O&P business identify ancillary services. Establishing a good communication line with payers can pave the way to discussing what other types of businesses and patients they have available.
To successfully expand their business model, companies also need to stay upbeat and be on the forefront. For a small business, being complacent in today’s uncertain economy “is not an option,” Mattear said. Instead, companies need to become an industry leader to move forward.
“Now is not the time to cut back on marketing; now is not the time to cut back on growth. Now is the time to put forward,” Mattear said. “Do not stop demonstrating your company’s value, the stability of your company, and do that at every opportunity. When all is said and done, it is a difficult climate, but if you do not do that, somebody else will, and somebody else will garner that revenue.”
Having a solid infrastructure also is critical for companies to successfully expand their business model. In addition, adopting a forward or progressive thinking approach is crucial for growth.
“Too many businesses are still operating the way they did 20 or even 10 years ago, and that certainly is not going to transition into future success or profitability,” Eileen Levis, chief executive officer and president of Orthologix, said. “In today’s environment, you need to shore up the foundation. You need to make sure you have a solid infrastructure, and then from there you need to focus on paced growth.”
Target marketing efforts carefully
In an uncertain economy, businesses need to be careful about the money they spend on their marketing activities and ensure that dollars spent are worth every cent. Previous efforts should be examined to determine whether any future expenditures can be downsized and still yield similar results.
“The best thing to do is to take a look back at the productivity and the results that you got from your previous marketing expenditures and determine what the best avenues are,” George said. “For instance, maybe you advertise in the yellow pages just because you always have. But if you look back and you find out that you do not typically get much business from the yellow pages, you may consider either not advertising in the yellow pages or reducing the size of your ad.”
Precision target marketing is one strategy that can help companies get the most bang for their buck. Precision target marketing plans will differ depending on whether the business is an O&P clinical practice, a supplier or manufacturer or a central fabrication company. For a clinical practice, the marketing plan may target a specific group of hospitals, doctors or patients, with the quantitative results of that marketing effort measured not just on a monetary basis but also on the volume of results and feedback that is generated.
“From a clinical practice perspective, when you look at value, it is anything that is going to add to the success of your practice,” Levis said. “The value of your marketing effort can come in many ways. It can come in positive feedback from patients or referral sources that enable you to make changes within your practice. It can come with increased referrals. There is a variety of ways you look at the result of that effort, and then you measure how the effort impacts you.”
Monitor and evaluate
Although monitoring and evaluating activity in the business world is routine for most businesses, doing so becomes even more important in an uncertain economic climate.
“Always monitor the activity in your sector and always look at what your competition is doing,” Mattear said. “Gauge the quality and keep track of the results.”
By monitoring progress and using objective growth measurements, businesses can explain and identify areas where growth is occurring. This information then can be used to modify their course of action if needed.
“When I go to my president and say ‘Hey, we are up 68% over last quarter,’ that does not mean much to him, other than he is happy that we are up 68%,” Mattear said. “What I can tell him is we are up 68% and this is how. What we have done is this, this, and this, so we know this works. Well, this and this may not have worked, but this works, so let us either continue doing this or tweak the other one that did not work and find out if maybe a different viewpoint or option is available to make it work.”
Monitoring expenses regularly can help identify areas where costs fluctuate. In some cases, contracts with outside vendors may need to be revisited. For instance, the steep increase in gas prices last summer prompted freight carriers to add fuel surcharges to their shipping fees, resulting in a substantial increase in the cost of goods for O&P businesses. When the price of gas dropped last fall, the surcharges were no longer applicable. However, some shipping companies were slower to react to the downturn in gas prices and did not always remove or reduce those fuel surcharges.
“It behooves us as business operators to challenge those businesses that we buy products from and make sure that those fuel surcharges are appropriate now,” George said. “Obviously, the larger the business, the more leverage you have with a supplier, but the reality is that it is front of the mind awareness to make sure that they know we are watching what they are charging us.”
Evaluating all aspects of a business also will identify areas ripe for change and help businesses modify less profitable or unprofitable practices.
“You have got to evaluate every part of your business, and the rule is simple. If it does not yield a profit, get rid of it or scale it down. Remove your company from the areas that are not going to grow,” Mattear said. “Everything that leaves an O&P clinic needs to create revenue because if it is not, you are wasting money.”
In addition to monitoring and evaluating, staying focused can give businesses an edge during an uncertain business climate.
“Competitive is one thing, but losing focus is another, and I think there is a huge difference,” Mattear said. “People try to stay competitive, but if they do not have focus on their product or focus on their field, then competitiveness is out of touch because they are going to lose focus.”
Companies that embrace the challenges of today as opportunities and redefine their processes will succeed and still be in business in 5 years, Levis said. Continued process improvement can only be attained by using quantitative measures to monitor and evaluate those processes.
“Practitioners need to buy in and be part of the philosophy in the companies that they work for, and I think that everybody has to work together. I think it has got to be a team approach toward surviving the next few years,” Levis said. “It is very uncertain with any business right now with what is going on in the economy. You really have to work smart these days, and you really have to focus on your business.”
Tap into professional organizations
One resource O&P businesses can turn to for information is professional organizations such as the American Orthotic and Prosthetic Association (AOPA). An ongoing service that AOPA provides for members is help with coding.
“In the larger overall downturn, it is more important than ever that people make sure they get that code correct and get compensated,” Steven Rybicki, communications coordinator for AOPA, said. “There is even more of an imperative behind that when there is more anxiety in the overall economy.”
Members can seek coding advice by accessing AOPA’s “Ask the O&P Experts” program by telephone or e-mail. In addition, AOPA has developed a Web site, LCodeSearch.com, for members to look up L codes.
As president of Pennsylvania Orthotic and Prosthetic Society, Levis understands the value of organizations to O&P businesses.
“Professional organizations play a key role in disseminating vital information to O&P businesses. From legislative news, to regulatory updates and continued education our organizations have been key to enhancing the quality of the industry. Through accreditation and coding and billing workshops, organizations enable our individual voices to be heard as one.” Levis said. “Business owners should be involved at all levels.”
The organization also has implemented some programs for both the immediate and long term. In the intermediate term, AOPA is sponsoring a Policy Forum to be held April 22-23 in Washington, D.C. The forum presents an opportunity for members to interact with O&P lobbyists and congressional representatives to learn what is going on with Medicare and the overall challenges the industry will be facing, as well as to have the opportunity to influence the outcome of legislative changes that will impact the field.
“This year, it looks like there is a high likelihood that health care is going to be a major legislative issue,” Rybicki said. “The policy forum is an opportunity for AOPA members to come on out and to eventually get face-to-face time with congressional representatives.”
The second intermediate program AOPA recently started is a new monthly business report survey. The online survey contains a series of questions regarding costs, staffing, revenues and projections. The findings are published in AOPA’s biweekly electronic newsletter, AOPA in Advance.
“We want to know where our members are, and how their businesses are doing. That is what we are here for – to help protect and encourage their businesses,” Rybicki said. “Now more than ever, that feedback is very helpful. We want to know what is going on with them and hopefully be able to respond in case there is something very negative or something that we know that our members should also be aware of.”
In the longer term, AOPA introduced 11 Strategic Initiatives at its 2008 National Assembly in Chicago. The initiatives are grouped under three different umbrella topics: Protect, Provide and Promote. One of the initiatives being developed under the provide umbrella is to encourage O&P businesses to look into different business models, with the objective being to develop a list of alternative revenue-generating models, Rybicki said. (Read more about the AOPA Initiatives on page 22.)
Plan for the future
Businesses always need to look to the future and plan ahead. A typical 5-year plan might now include 12-month benchmarks.
“I think a focus on short-term sustained growth with plenty of flexibility in terms of redefining processes is the way to go,” Levis said.
Levis also recommends business outsourcing and investigating emerging technologies both on the product side and on the business operations side. This will save time, reduce expenses and increase profits.
“There are many aspects of your business that can be outsourced. Human resources, payroll, billing, central fabrication,” Levis said. “Utilizing these specialists enables a business owner to focus on managing the business as a whole and empower clinical staff to focus on patient care management. This, I believe, is how we will survive.”
Finally, businesses that take the time and effort to make course corrections to accommodate an economic downturn will be better prepared for the economic upturn.
“If you streamline your cost structure, you have become more productive and efficient in a slow economy,” George said. “You are in a much better position to take advantage of what happens when the economy turns up because you have already gone through and established a methodology that allows you to move up or down depending on what happens with the business.”