Practice management - Task 3 - General feedback
David McQuillan
Hi all,
I was pretty happy overall with the answers you all gave to this assessment, considering that I thought it was reasonably tricky.
There were a few things that many people missed that I’d like to pick up on.
1. Clientbase drop-off.
2. Capital investment
3. Purchasing a business – cashflows to use
4. Thinking laterally.
Clientbase drop-off
Only one person thought to reduce the number of clients from the time of the move to Opoho. With any change of business process or location, you should expect to lose some %age of your clientelle.
Capital investment
Many people forgot to include the $15,000 that was to be invested in the move to Opoho in their final analysis.
Purchasing a business – cashflows to use
There is a difference between purchasing a business which will be run as it is, and one which will be assimilated within your own existing business. If you are going to assimilated the clients within your own practice, then you should not be including operating expenses/fixed expenses (e.g. rent, housing maintenance, internet access, etc.) within your calculations. These should generally not increase with an increased client load. Most people took NPBT as the cashflow which was used in the example. I recommended that you use massage income. The best estimation is probably in the middle really (NPBT + Operating expenses).
Use NPBT when you’re planning to continue running the business from it’s current location.
Thinking laterally
It was good seeing a few people thinking a little wider than what was written in the assessment. This is what you need to do in reality, so I thought I’d include a few quotes/paraphrases to give you an idea.
1. When thinking about the potential move to Opoho
a. “Over the next two years other practices could open in Opoho, and practices could close in St Clair.”
b. “I think it would be a better option to invest the capital outlay that was to be used on the Opoho practice, or the money that would be saved by not shifting to Opoho and investing the money into my existing business, by spending it on, promotions, marketing, advertising, more staff etc with the aim of increasing the client base by 20% per quarter.”
c. Several people noted that a few years down the track the move to Opoho would be much more profitable (assuming that the projections are accurate)
2. Thinking about purchasing a business
a. “Is the current owner going to stay on and have anything to do with the business ? If so that may influence what the business is worth”
Well done everyone.
Kind regards
David McQuillan
Programme coordinator - Massage therapy, Otago Polytechnic
Education group - Massage New Zealand
skype: david_mcquillan
Contact: (03) 477-3014 ext - 8378