New Revenue: Remove the Emotion
Creating new revenue sources to attract new patients and to better serve existing patients is critical for the growth of any company. As the saying goes: If you are not growing, you are dying. So grow, baby, grow! Dr. Reynolds points out in his post “3 Keys to Revenue Success,” that there are only three ways to increase revenue:
- Increase the number of customers,
- Increase the price per customer, and
- Increase the number of times a customer returns.
There is another way to achieve increased revenue, though: contracting with a vendor to provide services. For example, you could work with an allergy testing company or DME vendor. This is a good way to provide a new line of service with minimal investment on your part.
In the excitement of discovering a new revenue source, it’s easy for us to pay less attention to the contract. A good salesperson knows they must gain your trust for you to become a client.! The vendor can promise anything, but what are they obligated to deliver? That question is answered in the service agreement or contract. Remember, the vendor also wants to increase their revenue and growth, so don’t get caught in the emotion of the sale. You want this to be a good deal on your part, too.
Read and ask questions about the agreement until you understand it completely. Here are some of the critical questions you need to understand before signing the agreement:
What is the initial term of the agreement?
In my experience, they will ask for multiple years for the initial term. It is understandable why the vendor would request multiple years (3, 5, or more). It is in the interest of the vendor for multiple year initial terms. They are investing time and money in your account and want to have you as a client for number of years. A multiyear initial term may not be of concern to you because you have confidence in the vendor and their services. Ask yourself, if the level of service and the quality of the product do not meet your expectations you are willing to accept remaining with the vendor for the initial teem. If you answer no, then a multiyear initial term is not in your best interest.
How can you term the agreement?
It is not uncommon for the vendor to tell you termination without cause is 90 days. The terms sound acceptable, but what isn’t said is the agreement states that notice must be provided prior to 180 days of the agreement’s anniversary date. If you do not provide notice of intention to term within the first 6 months of the anniversary date, you are obligated to provide services until the next window opens.
Is there non-compete language?
Many of the vendor agreements stipulate a term of non-competition (for example: 2 years). If you have attracted a substantial number of new customers and you decide to terminate the agreement with the vendor, your clients must seek services from another provider. Failure to comply with the non-compete provision, may result in substances damages owned by your company.
These are just a few of the questions you should be asking when you negotiating an agreement. Medical Practice Success is here to assist in any way we can to help make your practice more successful!