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A Look on the Flip Side

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I’m a big advocate of new marketing models that cost little and yield big returns, but I am not naive.  Sometimes you need to invest more than you think to get to where you want to be.  This doesn’t necessarily mean you need to spend more money (although in some cases it might).  It could mean becoming more efficient in order to free up your time to do work that will grow your business, or choosing to spend more time on professional development in anticipation of future rewards.

I’ve spent a full year or so talking about “new marketing” concepts, resources and ideas.  However, if we are to fully explore sales and marketing, it’s good practice to view these concepts from all angles.  Let’s balance things out a bit and take a look at some investment principles from “the other side” that can pay off big for you.

Challenging the “This for That” Model

“An honest days wages for an honest days work.”

We’ve all heard this statement at some point, and it’s worth noting here because in many respects, it is misleading and limiting.  What I am referring to when I analyze the quote above is a traditional one to one business model.  The problem with this approach is that people tend to reach the limits of their earning potential quickly.  There are only so many hours in the day, and there is just so much that the market will bear for your services.  I see a lot of private practitioners struggle as they try to grow their practices under this framework.  It can be a difficult proposition.

Where do you turn once you reach the boundaries of your service delivery model?  I suggest looking for ways to diversify.  Expand your service offerings and/or partner with others in an effort to create multiple streams of income.  When you hear stories of people who move from slow and steady growth to immeasurable success what you find, more often than not, are people who leverage the power of passive income.  They have found a way to generate income with less effort not through smoke and mirrors but by setting up systems to where they can add value in numerous ways.

I understand that the phrase “passive income” elicits all kinds of negative responses. Many people associate it with pyramid like schemes.  But passive income has value if used with purpose and principle.  Consider this example.

When I lived in Washington, DC I knew a psychologist who had a thriving practice with offices in Washington DC, Maryland and Virginia.  She understood the power of systems and built a practice around up and coming therapists in the DC metro region by offering a win-win opportunity.  Talented but inexperienced clinicians received mentoring, supervision, counseling experience and a percentage of earnings while my friend received her own percentage from each practitioner.

This is not a new model for any of you I am sure.  However, what struck me about this approach was the fact that it had a snowball effect that seemed unstoppable.  My friend’s reach within the marketplace was astounding.  She had income coming in simultaneously from numerous clinical groups, individual sessions, trainings and workshops without her having to be present for each and every activity.  As a result, she had more time to focus on other business matters such as networking functions, clinical research, strategic development and writing.  It made her smarter and more marketable within the field.

Free Up Your Time for Work that Really Matters

You don’t need to start a group practice to free up time for yourself.  You simply need to take time to analyze and assess the work you are doing in order to make yourself more efficient.

Prioritize what you do on a daily basis based on your interests and goals.  If you work full-time for a large organization but never have time to grow professionally or to explore new directions then I believe you owe it to yourself to find that space where creativity has a chance to take root.  I’m well aware of the necessity to work and the restrictions that go along with it.  But I am also a big believer in not letting the profession define you, which it most surely will do if you let it.

The need to consistently analyze work flow applies to everyone in the field.  It makes no difference if you work a 9-5 job with a government agency or if you work for yourself.  Either way, I recommend assessing work activities and ranking each activity according to its overall business value.  Are you spending hours and hours a week on clerical tasks?   Paying the bills, making appointment reminder calls and filing claims are critical activities but what is more valuable to you from a profit-generating standpoint – clerical tasks or development time for new service offerings?

Prioritize your work, guarantee yourself time for the most important activities, and if possible, put some of your financial resources into outsourcing activities that will make you more effective, impactful and marketable.

Spending is Not A “Bad Thing” – It is an “Essential Thing”

Joe Bavonese, Ph.D., is a psychologist who has learned the importance of spending wisely on oneself and one’s business.  He learned this years ago while attending a business workshop taught by a man named Jay Abraham.  During the workshop, Mr. Abraham introduced a concept called the Lifetime Value of a Referral.  At its most basic level it assigns value to referrals depending on the average length of time you offer services to your client base.  For example, if you charge $120 for a session and your average length of treatment is eight sessions then your Lifetime Value of a Referral is $960.  According to Mr. Abraham, that dollar amount is what you should be willing to spend to get one new referral.  In other words, you should be thinking of the overall value and importance of a referral and be willing to spend in order to generate additional business. You cannot think of dollars and cents in a vacuum.  You must look at the financial value from a big picture perspective.

The concept also applies to other areas of your business.  If you want true change, you need to take some risks.  This means you must be willing to put in the time, and you must be willing to invest so you do things that are in the best interests of your business or career (e.g., a website done right; a public relations campaign; advertisements). There are situations where spending your money is worth a whole lot more than cutting corners.

Consider website development as an example.  Your initial reaction may be to create a free website or to design one on your own.  You may tell yourself that all you really need is a small presence on the web so potential clients can find you.  The irony of the situation is that your initial efforts at controlling costs will cost you a heck of a lot more in terms of lost business and the time you put in to troubleshoot and manage the site.  This is a good example of the Lifetime Value of a Referral concept in action.  If you have a poorly designed website it will reflect poorly on you in the eyes of visitors.  In addition, you will be missing out on new referrals because you will not be utilizing all that the web offers in terms of outreach.

There is no doubt that new marketing principles which emphasize value, relationship building and community are an important part of business growth both now and in the future.  However, like everything else, it is not an all or nothing proposition.  There is value on the flip side.

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Discussion

  1. Brian K. Sullivan, PsyD  December 16, 2009

    Dave, I really appreciate this particular post.

    Because of our extensive training in ethics and our commitment to non-exploitation of our patients and clients, mental health professionals are often automatically turned off by the idea of “passive income” because it can seem somehow wrong not to work hard, moment-by-moment, with great attention to the task (or person) in front of us. Several other people have pointed this out in other publications as well.

    Thank you for encouraging us to look past our automatic reactions, to see our businesses as worthy of our investments, and to think beyond strictly those particular skills we learned in graduate school.

  2. David  December 16, 2009

    I love how you put it Brian, “to see our businesses as worthy of our investments…” It is an ongoing challenge for me and I’m sure others can relate as well.

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