Business 101 - Return On Investment
Business 101 - Return On Investment
I don't believe it is news to any of us that most mental health professionals don't have a strong business background. This is not surprising considering the topic is rarely even brushed against in our graduate level coursework. For many reasons, counselors and therapists also tend to be frugal. This can be of great benefit when trying to keep overhead low so that you can keep as much of your earnings as possible. All too often, however, I have seen the mix of frugality and lack of business experience become a barrier to business growth. The component so many fail to consider in their purchases is the potential Return On Investment (ROI).
ROI typically is defined as an evaluation of marketing or investment expenditures. It is a way to determine if paying for certain kinds of advertising or investments was worthwhile (i.e. profitable). There's even a fairly simple mathematical formula that goes along with it. Broken down quite simply: ROI is about determining if you will get more out of something than you put in; will a specific expenditure ultimately be profitable or provide some form of costs savings. In today's business world, it's used in discussions about virtually any kind of investment from new software to creation of a web site to hiring of employees. The key here is that it allows a company to be frugal, while still spending money, by looking at both short and long-term results of a spending choice. Surprisingly, many people do these kinds of evaluations every day in their personal lives, yet neglect the consideration in their business decisions.
Let's use shopping for a Cloud-Based Practice Management System as an example. I've asked many mental health professionals about this and found that, on average, they spend at least 6-10 hours researching before choosing a system to use. Even then, often they find they missed something important, like a feature they really need. In any case, imagine taking 6-10 hours viewing demos, creating trial accounts and trying out several of the multitude of options available. At the low end, mental health professionals in private practice earn $60 per hour. Therefore, they have an earning potential during those 6-10 hours of $360-$600. Now, let's say a choice is made to invest in our Cloud Based EHR Practice Management System Feature Match Report. Spending $165 on this report shows a positive ROI because they are able to spend that time seeing paying clients instead. Investing that $165 saves a practitioner hours that can be turned into a larger sum of money. Even at the low end, $360-$165 = $195 in increased earnings. In addition, this person now has a 4-5 page report from someone with both a counseling and technology background outlining which specific application or two best meet the features they are looking for. All that will be left for them , at most, will be testing one or two applications to make sure the fit is right. And this doesn't account for the increased efficiency and overall return they are likely to get from the software itself.
I encourage all to do this kind of evaluation on any purchase that you make. Here is just a small sampling of situations where evaluating ROI should be an important part of the decision making process:
- Web Sites
- Secure Contact Forms
- Continuing Education
- Attending Conferences
- Hiring Billing Services
- Bringing on Other Therapists as Employees or Contractors
- Taking Credit Cards
- Hiring a Consultant
- Charging Late Cancellation Fees
- Utilizing Encrypted Email Services
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Rob Reinhardt, LPC, PA
Rob is a Licensed Professional Counselor in private practice and
owner of Tame Your Practice, which provides comprehensive
consulting to mental health and wellness professionals.
©2015 Rob Reinhardt, LPC, PA www.tameyourpractice.com