NEWS AND RESOURCES

General Business News for August 2008

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Time Is Money – Reducing the Number of No-Show Clients
While talking to a therapist friend (Pat) recently, the topic turned to revenue. As a recent entrant into the world of self-employment, she reported that her income was ‘nowhere near’ what she expected.

As we drilled down to the heart of her problem, a pattern all too familiar to those who sell their time began to emerge – too many no-shows. To illustrate what effect a high no-show rate has on a professional practice, let’s take an example. Assume your average hourly rate is $80 and you typically have 32 bookings a week. Based on these numbers, your gross revenue should be approximately $128,000 annually. If you average 30% to 40% in overhead, you would take home between $77,000 and $90,000 a year. Now, let’s assume you lose 15% of your revenue due to clients not giving you proper notice of their appointment cancellation. You still have most of the overhead you had with the higher dollar estimates, so the lost revenue is essentially lost profit, decreasing your income to between $57,000 and $70,000. Put another way, your no-shows cost you about $20,000! Are you beginning to get the picture? The reality is that if you receive a fee for service, you time is equivalent to money. When someone doesn’t show up, you actually lose a little bit of your lifestyle.

While the numbers are easier to illustrate in a fee-for-service setting, anytime you work with the public, no-shows can easily cost you money. If you are spending time selling to another person, every time they fail to show up for an appointment, you lose. If they were going to buy immediately, you lose the sale and the net income it would bring. If the prospect was coming for an initial appointment, their failure to appear means you have that much less time to spend with a paying customer. So what’s the answer? Let’s explore a few options.

The Overload Approach

It should come as no surprise that some professions have found the easiest way to ‘stay busy’ is to book two to three customers in the same time slot. Does this sound ridiculous? Think about your last visit to the doctor. Chances are you waited until your name was called and were promptly weighed and taken to an examination room, one of many. The nurse came in, took your vital signs and asked why you were visiting the office. After that, maybe a nurse practitioner actually performed the examination and determined your course of treatment. Maybe he or she asked if you needed to see the doctor, at which point you probably said you didn’t and were ready to leave.

Does this sound familiar? Perhaps your doctor doesn’t operate that way for now, but this scenario is becoming very common. Since the doctor reviews the work of the nurse practitioner, and the nurse practitioner is highly qualified, this doesn’t really compromise the quality of your healthcare, but it does allow the doctor to serve far more patients. It also helps control the lost revenue from no-shows because chances are at least one, if not all, patients scheduled for the time slot will keep the appointment.

This overload approach can work well when you can essentially farm out some of the work you do, but that’s not as easy for most of us. Those who rely on face-to-face contact with their client to serve that person cannot simply clone themselves. How then, can they maximize their revenue?

Written Reminders

Many practitioners or salespeople send out written reminders of appointments to their clients. Whether in the form of a cute postcard or a form letter, these reminders help jog a client’s memory, but they do have their drawbacks.

If you send out the reminder too early, you run the risk of the client forgetting about the appointment in the time between the letter receipt and the appointment date. If you send the card too late, you risk reminding the client of the appointment after it occurs. Additionally, the cost in your time, or a staff person’s time, plus the cost of supplies and postage can add up. This is a relatively costly way to remind your customer without any certainty the message is received.

Telephone Reminders

Some offices or salespersons make personal contact with their scheduled appointments the day before they are to occur. This can be very effective and provide a greater degree of certainty that the message is received. Additionally, it adds a personal touch that some people appreciate.

The biggest drawback to telephone reminders is that they take time. Someone has to make the call. That salesperson, practitioner or staff member’s time costs something. If the cost is already part of overhead, the practitioner loses nothing and saves supply and postage costs. Well, this is not technically true: to determine the true cost, one would have to determine what he or she would do if there was someone else making the reminder calls. Perhaps, the practitioner could fit in another appointment or the staff person could make more collection calls in order to increase cash flow.

If you are the practitioner or salesperson, all is not lost if you determine the time commitment is too high. There are services that will actually make the reminder calls for you. As a test, I used the calculator provided on one of these services websites. Assuming average client bookings of 20 per week at $65 per hour, a 15% no-show rate and $17.33 per hour cost of labor, a decrease in the no-show rate to 11% would add approximately $435 per month for a cost of around $50 per month. This represents a significant revenue increase to a small practitioner. With the proliferation of cell phones, some practitioners now use services that send text messages to their clients’ phones.

The Teddy Roosevelt Approach

Teddy Roosevelt said, “Walk softly and carry a big stick.” There are, unfortunately some clients who respond only to this approach - that’s why many healthcare practitioners charge for missed appointments. Generally, the client is required to provide 24 hours notice or pay a fee for missing the appointment. This requirement is explained to the client at the time the appointment is made and is really quite fair since the practitioner loses revenue they might have replaced if proper notice had been given.

Sometimes, one is left with no choice except to “fire” a client or customer who is habitually late. While drastic, this may be the only way to shock a client into understanding that they must keep their commitments.

Conclusion

There are many ways to remind clients of their appointments. Some are more effective than others and a combination can produce dramatic results. If you are facing substantial revenue loss due to high no-show rates, give us a call. Let’s work together to devise a plan to increase your revenue.

Happy August!

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