Owners of healthcare companies are accustomed to creating financial value for their businesses by focusing on the traditional areas of scope of services, client/patient capacity, and revenue streams via reimbursement yield and patient volume.
While revenue growth and operational efficiency are key value drivers for a healthcare company, neither addresses a critical value factor known as company-specific risk (CSR). CSR, also referred to as unsystematic risk, can be understood as risk unique to a company or industry. Differences in CSR are one of the most significant reasons some healthcare firms get top dollar when sold, while others receive a fraction of their potential sale price.
Let’s look at five ways healthcare business owners can increase their financial value by decreasing their CSR.
1. Create a fully developed, written business plan
Few small to medium-sized healthcare businesses create a business plan once they are no longer early-stage companies. Instead, they tend to rely on an informal, ad-hoc approach to planning that relies extensively, if not exclusively, on the activities of the business owner(s).
Taking the time to develop a written business plan at various stages of a company’s history provides owners and employees the ability to discuss and create a roadmap that supports the owners’ business strategy. A detailed business plan also decreases CSR by addressing issues such as:
- Where is the business headed?
- How will we get the business there?
- How much will it cost us to get the business there?
- What are competitors doing to keep us from getting there?
2. Establish an independent and engaged board of directors
Since most healthcare company owners are healthcare professionals who have learned how to be businesspeople through trial and error, they are often not accustomed to seeking advice from seasoned business professionals. That explains why some healthcare business owners believe that assembling a board or directors or advisory board will diminish their independence. However, board members can deliver significant value to business owners by sharing competitive insight, acting as a sounding board for new ideas, enhancing access to growth capital, strengthening company credibility, suggesting alliances, and more.
Company boards reduce CSR by providing strategy guidance, thought leadership, and hands-on experience. Viable businesses often have the support of a group of seasoned business professionals who have a genuine interest in the success of the company.
