by Lynn Grodzki, LCSW, MCC
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After reading an article by one of my favorite authors, Malcolm Gladwell, in last months New Yorker Magazine (1/18/10), I want to examine an important strategy to consider for these uncertain times.
Gladwell’s article is called “The Sure Thing: How Entrepreneurs Really Succeed” and using research and examples of famous entrepreneurs, such as Ted Turner, he shows that contrary to myth, successful entrepreneurs are not always daring risk-takers.
The most successful business people are actually risk averse; they don’t put their personal or professional assets in harms way to make a profit.
In my new book, Crisis-Proof Your Practice, I wrote about how to evaluate risk in the chapter titled “Protecting Your Practice.”
After reading Gladwell’s article and with the recession still in process in the US and Europe, I want you to consider adopting an essential, risk averse position. Here’s why:
Don’t Be One of the Practices That Will Fail This Year
Building a small business is hard and risky, even in the best of times.
Small business survival rates consistently suggest that even in a health or educational service business, 50-65% will fail during the first five years.
A large percentage of small businesses fail, and the creation of a business built on “intangibles” – services that are hard for the public to define, explain, or measure – adds to the difficulty.
When the market is tough, it’s essential that you evaluate your level of risk. By risk, I mean both what you do and what you don’t do that can threaten the survival of your private practice.
But risk is a two-edged sword.
You may think that curtailing all investment into your practice right now is the best way to avoid the risk of economic failure. But not investing in your private practice, not giving it enough time, money, energy, opportunities, or brainpower –is a way to threaten its survival.
The Top 6 Steps to Reduce Your Risk
Risk reduction is a term that means evaluating the dangers and then minimizing the severity of the loss or potential loss.
For example, one basic method of risk reduction in your home is smoke detectors that will warn you of a potential fire.
Risk reduction in your business includes these 6 steps:
1) A written business, marketing and financial plan that will help you evaluate and track the state of your practice at any given time.
2) A cash reserve to cushion the operating expenses of your practice. Each practice needs a minimum 6 months cash reserve to help you sail through especially tough months and still pay your basic operating expenses.
3) Self care for the business owner so that you as the primary service delivery person don’t get sick, exhausted and unable to work, market and fulfill responsibilities to clients.
4) Complete record keeping by the service professional and written treatment planning. Data counts. Know your limits and strengths with clients. Transfer those who are not a good fit for your strengths.
5) A plan for worst case scenarios. Try to average out losses over time (the bad winter month gets incorporated into the overall profit and loss statement for several months or a full year, to try and amortize the loss.
6) Maintain insurance including malpractice insurance, rental insurance, and life insurance on partners or associates if their income is critical to the operating income of a practice.
The Secrets of Successful Entrepreneurs
Gladwell says that successful entrepreneurs read the market, see the opportunities, take bold action, but don’t take unnecessary risks with their own capital or with their professional positions.
Instead, they pursue the “sure thing.” They look for ways the market is underserved and fill those needs. Writing a business plan is a must, and buying an existing practice may be less risky than starting up a new one. They do their marketing consistently. They compete on value, not just price. The list goes on.
The greatest risk, according to Gladwell, one that unsuccessful entrepreneurs forget, is to prepare adequately or think ahead. Some risks are unavoidable but many can be anticipated and resolved.
Survive and thrive during this recession. Know how to grow and protect your practice today–and in the future. Lynn’s newest book is one you cannot afford to be without! Published by WW Norton, only $21.95. Order today and learn how to be more profitable and purposeful in this uncertain economy!
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Midwest Book Review
“Crisis-Proof Your Practice: How to Survive and Thrive in an Uncertain Economy offers psychotherapists solid business advice on how to build and preserve a private practice during uncertain economic times. From a 4-step process for crisis-proofing a practice, to what to charge and how to save, these guidelines are key to success!”
Lynn Grodzki, LCSW, MCC is a Licensed Clinical Social Worker and a Master Certified Coach. She is a therapist, business coach, speaker and author. Lynn can show you how to start up or rebuild your private practice into a highly successful business. She works with social workers, counselors, coaches, consultants, healers, and service-oriented professionals who own and operate a private practice.
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Will your psychotherapy private practice, coaching or consulting business endure in this economy? Do you know how to find the hidden opportunities that exist right now? With my books, my newsletter, individual coaching, or group coaching by phone, I hope I can support your success, the way I have helped thousands of your colleagues. Take the next step and email or call me today!