Recession-Proof Your Practice

Review, recommit, rebrand, reinvest

Magazine Issue
March/April 2009
Recession-Proof Your Practice

During a recession, hiring a business coach may seem extravagant, but when Dina left a message on my voicemail, she sounded too desperate to care: “Lynn, you don’t know me, but I have one of your books. It sits by my bed, and I’ve been reading it when I wake up anxious at night. As you might imagine, it’s bad here in Michigan. A lot of my clients have lost their jobs and can’t afford to see me, so my client count is way down. I’m trying to stay calm, but if I can’t shore up my practice soon, I don’t think I can keep going. Please help me!”

According to a national survey in the October 2008 issue of Psychology Today, 55 percent of 1,500 clinicians polled say the declining economy has hurt their practice. With more than 2.6 million people in this country having lost their jobs in 2008, according to the United States Department of Labor, and disposable income shrinking, many therapists have lost clients who no longer can pay for therapy. According to national surveys, this economic downturn deepens a decline in therapists’ incomes that began in 2005. Inevitably as the recession worsens, some private practitioners will close their doors.

Other practitioners will thrive. Businesses often get better at what they do only during bad economic times, and recessions offer unexpected opportunities for those who know where to look. Today’s economic climate exposes not only vulnerabilities, but also unrecognized resources. The therapists I coach learn to analyze the bare bones of their practices and scan the horizon of the marketplace for hidden possibilities. In the process, they unearth their own resilience, creativity, and leadership.

At our first phone-coaching session, Dina told me she’d been working as a marriage and family therapist and seeing individuals for 17 years. “I take some insurance and used to work a caseload of about 25 client-hours a week. But this week, I saw only 11 clients, and last week, 8. I’m really worried,” she sighed. “I need help yesterday!”

I explained to her that engineering a turnaround in her practice would take time, but if she could commit herself to business coaching every other week for the next four months, I felt confident that she could greatly improve her practice. My coaching plan for her included four distinct phases: Review, Recommit, Rebrand, Reinvest.

Review: Taking an Honest Inventory

During the review process, we needed to assess Dina’s practice quickly. I asked about her overall profit picture: gross income, expenses, net profit. What was her biggest expense each month and why? Which services were the most profitable? Which the least? How long did the average client stay with her? What was her average fee per hour? How much time did she spend on unpaid tasks (answering phone calls, doing administrative work, taking notes)? What was the breakdown in profits between those who paid with managed care or insurance and those who paid out-of-pocket? Dina’s initial response was what I expected: she didn’t know.

“I really don’t track these things, Lynn. I wait until tax season for my bookkeeper to tell me the bad news,” she joked.

This was her first piece of homework, I said: to get to know her practice inside-out. I requested that she use any type of system that made it easy for her to produce an overview of her practice—software-generated reports, paper-and-pen analysis, a spreadsheet—so she could learn where her practice stood today and track the progress of our work during the next four months.

I likened her disregard of this practice information as a form of dissociation: “Dina, you won’t be comfortable taking action if you feel you don’t have enough information to make the right choices.” She promised to have the analysis completed by our next session and put a positive spin on the work required: “It’ll keep me busy when I have no clients to see.”

I knew from experience that this first step—setting up a process for tracking her practice, even as she felt it was falling apart—would be both informational and motivational. A therapist I was already coaching had just reported that tracking clients on a spreadsheet allowed her to see, in black and white, that she’d been shifting the balance away from managed-care clients, toward private-pay clients. Without keeping track, she’d have been too anxious to follow a plan that might cost her any clients, especially during the early months, when the ratio between managed care and private pay was barely moving.

At Dina’s next session, she reported her financial news, much of which proved distressing. Her income, client count, and referral base were all seriously down. I saw the full picture of her problems, but I needed to help her define her business strengths. As with most therapists, she protested that she had none: “I’m awful in business, and I hate marketing! Please don’t ask me to make any cold calls.”

I quickly put her at ease. “Great! I’m glad you told me that. Please don’t do anything that gets you out of your comfort zone. Let’s just look at what you’re good at, in regard to your business.”

With questioning from me about a range of ordinary business activities, Dina began to identify strengths. She liked to have her office clean and well-organized, enjoyed tidying her desk, and took pleasure in paying attention to detail with her calendar and files. “I’ve written thank-you notes to every referral source over the past 10 years and kept track of them all,” she added. Aha! I thought, an untapped resource we’ll use later! By the end of our second session, we had a clear snapshot of her challenges and strengths as a business owner. We were ready for the next step: developing a custom-designed turnaround plan to which she could commit herself.

Recommit: Formulating a Turnaround Plan

Before playing with the nuts and bolts of the plan, I wanted to be sure Dina had the energy and commitment to execute it. Clearly, she was exhausted: she’d been working for more than 17 years and had just come through a discouraging year. Was she really up to carrying out a comprehensive business-turnaround plan? or would it be better to find another career? Before we ended the second session, I asked, bluntly: “Why do you want to be in private practice at this point? Is it for the money? your clients? your mission? or fear of doing anything else?”

“Lynn, I’ve always loved having my own practice because it’s mine, and I really love the work I do as a counselor,” she said. “Being my own boss allows me to work directly with my clients. I wish I didn’t need to accept managed care, because that gets in the way of my work, but at least I can be in charge of whom I see, why and how I work with them, and what direction the counseling will take.”

“What’s it worth to you to stay autonomous?” I pressed. Dina paused for a full minute, and I could hear her breathing quietly. “It’s worth everything to me,” she said. We both heard the commitment in that statement.

During the next few months, I’d find myself returning to this statement several times to remind her of what was at stake and help her keep going when she felt lonely, drained, or burned out. As a business coach, I try to work within a partnership model, rather than adopting the authoritative attitude of a business consultant.

At our next session, starting the second month of our coaching, I wanted Dina to take ownership of any plan we created: “After last month’s review, how would you identify the major source of weakness in your practice?” Dina said that after studying her finances, the spreadsheets, and the clients she saw, she thought the major problem was how complicated her practice was—how many different services she offered. She was spread too thin; she wasn’t well-enough known as an expert in one or two areas for people to think of her for specific kinds of work. Also, she said, there were things she loved doing—weekend, personal-growth workshops, body-psychotherapy training—but they took up time and energy, and made almost no profit.

My research on the psychotherapy market has shown that the services that seem most profitable today are ones that clients consider essential:

Psychological services for children. ADD, learning/emotional disabilities, sensory integration, autism spectrum disorders, educational psychological assessments, high-risk teens, anorexia and other eating disorders.

Marriage savers. Premarital counseling, divorce prevention, financial counseling, parenting classes.

Career savers. Court-referred therapy, anger management, outpatient addiction treatment (including Internet or sex addiction).

Health-related services. Cancer counseling, wellness, stress or anxiety reduction, depression.

Dina’s most profitable services—parenting consultations and couples counseling—fit into this list. Over the past decade, she’d developed a reputation in her community as a couples counselor. To help her focus on services that were profitable and for which she was best known, I asked her to keep more open slots available for couples counseling, while dropping the weekend growth seminars and body psychotherapy, which were time-consuming, unprofitable, and distractions from her “brand.” I suggested she continue to make time for one unprofitable service that fit her new focus. She chose to keep up the parenting classes she was teaching each semester at her local county recreation center. When we discussed the rebranding stage, I’d show her how to make these classes a better marketing tool for enrolling new clients.

With her focus on services in place, we planned her budget. Looking at her past expenses, I asked her to defend each expense as necessary to the practice or eliminate it. We examined and wrote down all the small and large changes she needed to make, with a timeline for implementing them. We looked at her systems to see which she could automate to reduce her administrative time. Small businesses have advantages over large companies in that they can turn on a dime, making decisions and changes quickly without having to pierce layers of bureaucracy. I asked Dina which areas of her practice were flexible enough to change in ways that would provide better “customer service” and more choices to clients, and she identified four:

Payment. She received payment from three insurance panels, but half of her clients paid out of pocket. For those clients, she added the capacity to take credit cards and, for those who paid for three months of therapy upfront, she created a discount payment package.

Services. The usual couples session was 90 minutes. She added a 60-minute option for a reduced price.

Frequency. Sessions could be as often as once a week, or spread out to once a month.

Location. Since Dina’s office was in a suburban area, she sublet space in a downtown office on one evening a week, so that instead of asking clients to come to her, she could go to them.

These steps provided the appeal of consumer-based choices to potential clients.

Dina liked this plan and was eager to implement it. She agreed to track the finances and other measurable aspects of her practice so she could see the progress she was making. To offer emotional support, I set up a series of weekly check-ins by e-mail between our coaching sessions so she could, as she said, “feel that she had her coach at her back.”

Rebrand: Marketing a Unique Selling Point

Now it was time to develop a marketing plan to promote the business model. Dina needed to increase income quickly and attract the most profitable clients to her retooled practice. But again some preparation was required. I asked her to sum up, in a sentence or two, who she was and what she offered. This simple piece of articulation, which I call a “basic message,” is at the core of branding. It’s the most difficult task for therapists and others who sell invisible, intangible services. In her message, I needed Dina to define her USP—her Unique Selling Point. What about her services made her different from the competition?

After much thought, Dina e-mailed me her basic message: I offer short-term counseling for couples with long-term results. Whether couples want help fixing their marriage or better parenting their children, we move forward on their goals quickly. I complimented her on the clarity of this message and the USP of brief, goal-oriented therapy, but I suggested she include a sentence highlighting the flexibility of her practice. She added: My practice offers a variety of services, pricing packages, and locations in which I can see you. I strive to stay flexible so we can work together successfully, even during these tough economic times.

Now she needed low-cost business materials to emphasize her message. She highlighted the phrase “short-term counseling for couples with long-term results” as the slogan beneath her name on her business cards and brochure, which she produced within a day on, an online do-it-yourself printer.

Next it was time to utilize one of Dina’s untapped resources: the referral sources to which she’d sent thank-you notes but never contacted further. I asked her to list each source, when each had last sent her a client, and the results of her work with the client. Then she drafted a letter to each source, to be followed up with a phone call. I helped her write a script for each call to reconnect with the source, ending with a request for business: “I have some openings in my practice right now and prefer to fill them with clients who come from referral sources I trust, such as yours.”

Dina set a goal of 10 letters and follow-up phone calls each week. She was nervous and hesitant, but I reminded her of her commitment and what she’d said—that her practice was “worth everything” to her. My job was to hold her accountable, and she reported to me each week by e-mail about how the calls were going. It was hard and awkward the first week and better the second week, and she got one “great” response the third week—a potential affiliation with a law office to train their staff about difficult marital dynamics during custody depositions. By the fifth week, she’d gotten two new clients from referrals.

She then updated her website, using simple optimizing techniques to draw more traffic. I showed her how to “enroll” clients (persuade audience members to become paying clients) when she taught parenting classes—not by promoting herself, but by demonstrating her skills with parents from the front of the room. She’d been playing the role of teacher, but now I encouraged her to act in her true professional role, that of therapist.

Reinvest: Empowering the Business Owner

Even during a recession, a business needs an infusion of money and energy. Administrative, phone, billing, and computer-tracking systems all need continual upgrades. For Dina, the most important area of investment concerned her health and well-being. Like many therapists in private practice, she worked and worried long hours; she suffered from compassion fatigue—a lack of physical and psychological self-care that’s common among caregivers. She was isolated as a solo entrepreneur and had little collegial business support.

I asked her to select each week an item from a self-care checklist (see sidebar) to accomplish as a way of maintaining her emotional and physical resilience. I also asked her to let go of nonessential activities—resign from volunteer positions, for example—while we worked together. Building a practice is hard and time-consuming work, and I wanted her to have some breathing space.

After four months of coaching, much was accomplished, with still more to do. During this period, Dina lost three clients through attrition, but gained eight new clients, all of whom were, in her words, “good clients—couples ready to work and invested in their therapy.” She’d had her first meeting with the law firm about training lawyers to understand and cope with the dynamics of couples in custody battles, and she’d reconnected with three dozen old referral sources. She felt excited and empowered that she was taking clear actions. Because her practice remained less profitable than it needed to be, I encouraged her to begin saving money for a cash reserve to help reduce her financial risk.

Dina was galvanized by the recession to retool her business to survive, but her plan would help her stay profitable, even when economic times improved. She learned how to assess her situation, prioritize her services, find a focus, cut unnecessary expenses, develop better referral sources, and systemize and manage administrative tasks. She took steps to build her brand and her connection within the public and professional community. She managed, with support, to stay calm, resilient, and clearheaded, so she could continue to take action in a planned way, rather than a chaotic one. Most important of all, she felt a new sense of confidence in herself because she now knew that, rather than see her practice wither away, she had the business skills and entrepreneurial mentality to continue building it up, in spite of gloomy economic forecasts. 

Lynn Grodzki

Lynn Grodzki, LCSW, MCC, is a psychotherapist in private practice, a master certified coach, and the author of Therapy with a Coaching Edge: Partnership, Action and Possibility in Every Session and Building Your Ideal Private Practice.