As a business owner, there is one golden rule you should always adhere to… don’t lose money.
I’m not talking about that week or month where there was a dip in your revenue when your appointment book had more gaps in it than usual or maybe you lost a few bucks down the drain from an unsuccessful Facebook ad campaign…
Some small financial mistakes are inevitable to an extent when you run your own business.
I’m talking about those big hits that can come right out the blue from unexpected challenges that force you to rethink, restructure and that expose your business and put your livelihood at risk.
Remember the Global Financial Crisis back in 2007? Businesses of all sizes across the globe were hit hard by the effects of the GFC which was triggered by a credit-fuelled housing bubble in the United States.
Not to mention the recent global health crisis of COVID 19 that seriously impacted businesses across Australia and the world, and possibly even changed the face of the healthcare industry as we know it by revealing hidden risks we weren’t even aware of.
Yet I can’t help but feel sometimes looking back on what we have lived through, that maybe some of the signs were there and in hindsight, perhaps there was more that could have been done to protect businesses from risk or at least have the right plans and systems in place to bounce back easier, and quicker.
As dental practice owners, we often focus a lot of our energy on maximising opportunities and growing our practice, but perhaps we should include proactively assessing risk as well?
The bottom line is you want to minimise your exposure to those risks that interrupt your future stream of earnings.
Can your business truly be risk proof? The simple answer is no…because not even the savviest business owner can predict every challenge that life may throw your way.
However, there are some steps you can actively take to better shield your business from any risks that can crop up.
The best way to minimise the impact risk factors can have on your business is to set aside some time every 6 months to sit down and work through these three important risk analysis and management steps:
Step #1: IDENTIFY
Step #2: QUANTIFY
Step #3: MITIGATE
By actively doing some risk analysis and management you will have more chances at de-risking your business, protecting your cash flow and hopefully be more prepared for when the marketplace changes, patient health demographics change, new regulations pass, and new competition moves in down the street.
Let’s take a look at each step in-depth as I walk you through the three strategies you should be doing right now to effectively manage risks now and in the future.
Step #1 Identify
The most important question you should be asking yourself when you are trying to identify risk is this… What don’t I see?
If you want to successfully assess risk and increase efficacy when you analyse risk, you must be brutal with the truth and be committed to peeling back the onion to draw out the ugly bits, the unattractive parts of the business – that’s usually where the most risks are.
If you find it difficult to detach yourself from what you uncover, I find it’s best to take a step back once in a while and get fresh eyes on the situation. Handpick a few trusted colleagues to come in on the conversation and get your team involved because they may uncover hidden risks you don’t see at first.
The next question you should be asking if you want to identify risk is, How would I compete with myself?
In other words, if you were going to launch a dental practice across the street tomorrow, what would you do to beat the competition (i.e you)? How would you approach that?
Putting yourself in an outsider’s shoes can reveal a surprising number of weak spots and probable risks that could affect your future stream of earnings.
You will likely find you have potential risks in a number of categories like personal risk, debt or leverage risks, legal risks, risks around competition and loss of business, risk of fraudulent activity, regulatory risks, and more.
Step #2 Quantify
The next step once you uncover your probable risks in your practice is to now quantify that on some sort of scale of urgency.
This will help you to analyse the likelihood of it happening and assess the potential costs involved from minor to severe. It’s worth noting here that when I speak of the cost of any risk that is not only monetary but also any time lost, reputation or brand risk as well.
When I get to this step I find a risk matrix can help you plot out your risks and give you a clearer picture of what you are dealing with. Take a look at the example below to give you an idea of how this matrix can help.
Once it is all laid out, you can then determine the cost and the degree of control you have over each risk. You will need to ask yourself is this something I can control or manage?
Which now leads me to the final step…
Step #3 Mitigate
Having a risk mitigation plan in place doesn’t mean that your practice will be 100% bulletproof, no one can predict the future and the whole point of these three steps is to help reduce the likelihood, cost and effects of risk and get control of the situation.
Your objective should be to reduce the likelihood of an adverse event, the cost of it should it occur and to increase your level of control over the situation
That’s what mitigation is all about being confident that while it’s impossible to know what lies around the corner, there are some risks you can identify now that are controllable and you can deal with them first.
Out of every challenge and every adversity, from all of the difficulties we have faced and conquered as dentists and practice owners over the years, there are still lessons to be learned about the value of taking a moment to reflect on the probable risks ahead.
The environment in which we operate as practice owners is ever-changing and we need to be alert to the risk implications change brings and be able to assess the possible impact they may have on our business.
But don’t forget, that change also brings opportunity, and where others may flounder when the pressure is on perhaps being more risk-aware and with a great mitigation plan in your arsenal, you will have the advantage you need to ride the storm through and come out the other side smiling.
Do you have any experiences to share with the Savvy Dentist community? We’d love to hear from you about how you identify, quantify and mitigate risks at your practice or anything else you’d like to discuss about risk factors for dentists and practice owners. Please feel free to leave us a comment below. Thanks!
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P.S. Whenever you’re ready …. here are 4 ways I can help you grow your dental practice:
1. Grab a free chapter from my book “Retention – How to Plug the #1 Profit Leak in Your Dental Practice”
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2. Join the Savvy Dentist community and connect with dentists who are scaling their practice too
It’s our Facebook group where clever dentists learn to become commercially smart so that they have more patients, more profit and less stress. – Click Here
3. Attend a Practice Max Intensive live event
Our 2 day immersive events provide access to the latest entrepreneurial thinking and actionable strategies to drive your practice forward. You’ll leave with a game plan to take your results to the next level. If you’d like to join us, just send me a message with the word “Event and I’ll get you all the details! – Click here
4. Work with me and my team privately
If you’d like to work directly with me and my team to take your profit from 6 figures to 7 figures …. just send me a message with the word “Private”… tell me a little about your practice and what you would like to work on together, and I’ll get you all the details! – Click here