I love it when members ask our expert panel about problems they are struggling with or things that keep them up at night.
Recently, one of my members asked: “I’m ready to expand and add a second location but don’t know where to start, can you help?”
Meet Mr Clinic Owner from the Greater Toronto Area. Mr Clinic Owner has a 3500+ sf multi-disciplinary health clinic that has a big focus on sports medicine and rehabilitation. The clinic offers everything from physiotherapists, chiropractors, massage therapists, nutritionists, acupuncturists and personal trainers. What I am particularly impressed with is how awesome their gym area is. And, how they have personal trainers and sports conditioning specialists providing one on one and group fitness classes.
With such diversity and great service offerings, I can see why Mr Clinic Owner is considering expanding the enterprise.
When your clinic is this awesome, you see your competitors adding new locations in new areas and you are tempted to expand, too. Or, it may be that a great opportunity presents itself that feels too good to give up. For example, a bunch of new doctors in your area or a new recreation center opportunity.
The ultimate question is how do you identify when to open a second location? Or if it’s worth opening a second location at all? Just because you own one successful location doesn’t necessarily mean you will be successful with owning two.
Here’s the thing, I’ve owned one successful location and then expanded it into a successful multi location enterprise - from 1 to 105 clinics in less than 6 years. One client I coach has spent over 10 years to build an incredible brand and now we are working to automate his business processes and to clone his brand to multiple sites. Another client I have has built 2 clinics from scratch in less than 2 years and has been struggling with exhaustion and lack of time, so now we are working to automate and make his business systematic and predictable.
Note a couple of things I’ve already highlighted here: business processes and automation. We’ll be exploring why these are essential to successful expansion.
There are many different cogs in the machine to have a well oiled, functioning multi clinic enterprise. So today I want to share my success (and mistakes) and what I’ve personally learned from owning (and from coaching others) one location to multiple locations in a region.
Before making any rash decisions, carefully consider all of the things I’m about to share. Here are the 5 golden secrets to successfully expanding into a second location.
1) Know why you want to expand
Here are some questions to consider:
- Is your currently location maxed out for growth (space limitations or marketing limitations) or profit potential?
- Is there a really good opportunity you can’t give up?
- Do you want to have multiple locations so you don’t have to do hands on treatment and can focus on management because you love it so much?
- Is it to make more money or to have more locations?
Generally a driving goal is to make more money, inevitably that’s what many of us want. But, having additional locations doesn’t automatically mean you will make more money because your business processes must be truly scalable in order for this to happen.
What I’ve seen happen to most clinic owners is when they start their second location, their first location will slow down and stop growing because all their effort is put into the second location. This clearly indicates that the right businesses processes aren’t in place to make it easily scalable, and therein lies the problem.
Let’s look at an example:
Clinic Owner A: 1 big clinic growing 15% annually doing over $2M annually in sales and making 25%, $500k ebidta.
Clinic Owner B: 2 medium clinics growing 10% annually doing a combined sales of $2M annually and making 20%, $400k ebidta.
Which would you rather own? If we put it like this it makes sense that option A is the clear answer.
One thing to keep in mind is if you focus 100% of your energy to drive sales at your current location, your profit margin will increase because some of your costs are fixed (i.e. rent, admin wages etc).
On the other hand, if you do have a scalable business model and marketing machine, opening multiple locations is very attractive for your exit strategy - the ultimate goal to build your physiotherapy clinics for sale. Again, I emphasize a scalable business model that includes streamlined business processes - something most people fail to have in place when they are considering expansion.
If on the other hand multiple locations were part of your well designed plan it definitely makes sense. For example, if you own 5 locations and cover all the corners of your city and they are all making a lot of money, you will be able to get a good premium from an investor or a national physiotherapy company that wants to buy all 5 locations versus you selling it individually to your superstar clinicians who don’t want to pay a lot for those clinics or who would rather start a clinic of their own.
There is a mindset difference and there is also a different business model and processes in place, depending on what you want to do.
So ask yourself, why you really want to expand, what your exit strategy is and how many years it is likely to take to get there?
2) What does your management team look like?
Here are some questions to consider:
- How much time do you plan to be a clinician versus management?
- Do you plan to treat between both locations?
- What does your team look like?
- Who is going to train and hire all your admin staff?
- Who is going to train new clinical staff and have monthly performance chats with your clinical team?
- How is the performance of your team going to be measured?
- If you set monthly or quarterly goals, can they execute the plan and hit them?
- Or do they make up excuses on why they can’t get it done?
- Who is going to make decisions at the clinic when you are not there or on holidays?
These are all things that need to be part of your decision process and believe me I’ve tried them all.
I had an office manager try to manage the clinic but they couldn’t inspire and lead the clinical staff. So, I had my superstar physiotherapist become a partner and we focused on growing the clinic together. This works great as long as they stay motivated and have the ability to lead both the clinical and admin staff.
Having a clinical partner anchored to the clinic worked the best for me, especially from a growth and profit margin perspective.
If you want to consider having an anchor clinician become a partner in your business, a few things to consider are:
- What % to give them to keep them motivated
- Having a good shareholder agreement so when things don’t turn out, you can buy them out at a specified price
Another thing to consider when having partners is it’s harder on your exit plan because they likely won’t want to sell when you want to sell, especially when you have multiple partners. One way to get around this is in your shareholder agreement, make sure it includes a buyout or shotgun clause at a specified price.
3) Your new patient marketing machine
Here are some questions to consider:
- Who does your marketing?
- Do you do it on the weekends or weeknights when you have time?
- Are you 100% optimized on your digital marketing?
- Are you consistently pushing your marketing forward?
- Are you utilizing community marketing or doctor marketing for your current location?
- How many competitors do you have in the neighbourhood?
Back in the olden days when I was buying clinics, I use to use the ratio of 10,000 people to 1 clinic. Anything above that number was a good number for me because it indicated there wasn’t a lot of competition - 1 clinic is anybody where there is 3 clinicians or more. You have to really know your numbers.
- If you open your second location, will you hit the ground running with profitability because you have a predictable marketing machine that tells you how many assessments you will have in month one?
- Or are you opening a second location and hoping the referrals will come in because of the busy gym next stop or a new medical clinic opening up?
Ideally what you want is to have a super strong digital marketing strategy that tells you how many new patients you’re missing out on over the phone. Digital software and the right digital marketing strategy can track data and tell you that you’re missing out on booking these new patients because you don’t have a second location in that neighbourhood. That’s when you know you can expand.
I help clinic owners implement these systems and strategies in my Clinic Accelerator Program.
People simply aren’t using paper guides like the Yellow Pages to search for businesses anymore. They search on Google and have a mini computer fully charged and ready for search 24/7 - their smart phones.
What this means is that the patient journey starts with your website (and make sure it’s mobile friendly). Most clinic owners I know have a terrible website and no digital marketing strategy in place - not an ideal situation for moving forward.
Here is a simple exercise you can do to test the demand yourself.
Setup a google adwords campaign in the neighbourhood you want to start your second location. Test the demand on how many people will call your phone number on that Google ad. This is a cheap test you can run before spending over $300K on a hunch that new patients will be lining up on first day.
Minimize your financial risk and secure your new patients before you start a second location.
4) Your business processes and systems
Here are some questions to consider:
- What metrics do you look at weekly and monthly?
- Do you know who your top staff performers are?
- Do you know which members require a performance review?
- Do you have a compensation plan that inspires growth and productivity?
- Do you have KPIs (key performance indicators) that measure leading behaviour (booked to plan ratios, % of calls converted into appointment) and lagging results (revenue or new patients)?
- Do you have a scoreboard in place that measures success?
- Do you have a culture of fun and accountability?
- Do you measure patient satisfaction score and identify areas that cause friction between your clinic and your patients?
- Do you use your monthly financial statements as a benchmark for success?
- Do you look at monthly profit loss statements and review with your management team?
- Do you have a dashboard of metrics to see how you are currently doing versus last month or last year?
- Or half way through the month, do you know how you will close at the end of the month?
Having business processes and systems in place is one of the most important things to successfully opening a second location.
You need financial and operations predictability. You need the ability to test and measure new business processes and what impact it will have on the numbers.
Without the systems, you will be running around in a frenzy between both your locations and sooner or later your staff will be frustrated and they will leave you - not to mention it’s just a poor way to go about things.
Without systems, you’ll also find that you won’t have enough time and constantly be in firefighting mode - putting out the continuous blazes that seem to keep on popping up. Running without systems will lead to burnout for you, frustrations for staff and patients, and an unsuccessful clinic in the long run.
All businesses have fire blazing moments. But every firefighting moment should be an opportunity to optimize your business processes and give you the opportunity to create KPI that measure these bottle necks so they don’t happen again.
5) Make sure you have time
I have a holistic approach to my life - my business, personal, and family life all overlap with each other. I can’t separate each of them because they are so intertwined with each other.
Since joining EO Vancouver, I stopped using “work life balance” because in my world as an entrepreneur, that doesn’t exist. It’s all the same. If something at my business troubles me, I can’t sleep at night and it affects my personal life.
When my business life troubles me or takes a lot of my time, it will impact both my personal and family life. In all honesty, I haven’t yet figure out the magic bullet for this. But I acknowledge that it does take time and I strive to create systems and processes to automate as much as possible.
If you want to open a second location, the truth of the matter is it will take a lot more of your time. It will suck up a lot of your financial, emotional and physical resources, especially at first. It will also likely mean you’ll see less of your family and you’ll be having more late nights.
And if you’re not super smart and organized, your first location is likely going to suffer and will end up being less profitable or growing at a reduced rate because you are spending less time there. This is the reality for most people - that is, if you’re not smart and organized.
The good news is there is light at the end of the tunnel, especially if you want to outsmart your competitors. By creating systems and processes to scale your operations, marketing, and management team you can see an investment in your second location payoff. With good systems in place, in year 2 or year 3, both locations will be growing at record paces and you will have more free time with your family and be enjoying life a little more, too.
Taking risks and expanding your clinic locations can definitely work. Just make sure you ask yourself the tough questions first. Get your current business in optimal operational function first. Streamline everything with good systems and processes. And then you’ll be ready to move forward with less risk and less frustration.
If you're looking for coaching to help grow your business, implement processes and systems and achieve more automation and revenue, join my Clinic Accelerator Program.
The distance from where you are not to where you want to go is much shorter when you have a mentor who has already done what you want to do!