Are You at Risk?

by Lynn Grodzki, LCSW, MCC

Published in the Private Practice Success Newsletter, August 2011 Edition

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Most economists agree that we are living in risky economic times.  On both a macro and micro level, the financial future is uncertain and worrisome.

What can a small business owner do to prepare for a possible extended downturn?

This month, I will walk you through a clear plan to minimize business risk, so you know how to protect your practice.

Practice-Building in Hard Times

Building a small business is hard and risky, even in the best of times. A large percentage of small businesses fail, and the creation of a business built on “intangibles” – services that are hard for the public to define, explain, or measure – adds to the difficulty.

Because you have so much of yourself, your skills, and your finances tied up in your practice, it is important to evaluate risk. When the market is tough, it’s essential that you evaluate any business vulnerabilities.

Understanding Risk

By risk, I mean both what you do and what you don’t do that can threaten the survival of your private practice.

But risk avoidance is a two-edged sword. You may think that curtailing all investment into your practice right now is the best way to avoid the risk of economic failure.

But not investing in your private practice or giving it enough time, money, energy, opportunities, or brainpower is a way to threaten its survival.

In my newest book about practice building in hard times, Crisis-Proof Your Practice: How to Survive and Thrive in an Uncertain Economy, I explain several ways to manage your business risks. Here are three strategies you need to think about and take action on now.

Risk Reduction

Risk reduction is a way to evaluate the dangers to your practice and then minimize the severity of the loss or potential loss. For example, one basic method of risk reduction in your home is having smoke detectors to warn you of a potential fire.

Risk reduction (think “smoke detector”) for your business includes:

• A written business, marketing and financial plan, backed by your own data, that will help you evaluate and track the state of your practice at any given time.

• A cash reserve to cushion the operating expenses of your practice. (Each practice needs a minimum 6 months reserve to help you get through especially tough months and still pay your basic operating expenses.)

• Regular self care for the business owner so that you as the primary service delivery person don’t get sick, exhausted and unable to work, market and fulfill responsibilities to clients.

• Completing your records and keeping files updated.

• Developing a brain trust of advisers for professional support to help you strategize your next steps, especially when you are tense or anxious.

I know, for many readers, this list may feel overwhelming. If so, think about it this way: This kind of business planning is difficult for many, especially if you were not trained in business. Not surprisingly, a lot of the individual business coaching I do right now focuses on protection. Small steps can have huge results. I see, repeatedly, that anxious professionals can become much calmer business owners by taking the right actions.     

And there is more to consider on this topic.  Here are 2 more strategies:

Risk Retention

Risk retention means having a way to accept and survive a business loss if and when it occurs.

Let’s say that you have a private practice in a cold climate, and an unusual series of snow and ice storms put you out of business for a month. This risk of weather is one that can’t be avoided, reduced or transferred and is “retained” by you, by default.

Risk retention (think “bad weather”) requires that you:

•   Plan for worst case scenarios and then try to average out losses over time (the bad winter month gets incorporated into the overall profit and loss statement for several months or a full year, to try and amortize the loss.

•  Anticipate slowdowns and losses as a normal part of the ups and downs of doing business and keep a reserve of clients (waiting list), cash (savings) or opportunities (networking or marketing possibilities) so that you have more than enough to keep you busy in slow times.

•  Focus on staying flexible in how you deliver service; if clients can’t come into your office when their child is ill or weather is bad, can you do the session by email, by phone or send them an audio tape or written report that you have created specifically for them during the session time to substitute?

Risk Transfer

Risk transfer means that you transfer a loss to another party, by contractually having agreed to the risk. In this way, the risk doesn’t fall entirely on your small practice, but is either shared or taken on by someone else.

Risk transfer (think “sharing”) includes:

•  Enforcing cancellation policies that you and your client have agreed to. If the current policy is too harsh, set one that you can live with and enforce without discomfort.

•  Negotiate with landlords or other vendors for a reduction in price or payment terms when circumstances cause a loss of income. Often a landlord, credit card company, training company, or other vendor is willing to work out some temporary terms of payment rather than lose your business altogether or see you go bankrupt.

•  Maintain insurance including malpractice insurance, rental insurance, and life insurance on partners or associates, if their income is critical to the operating income of a practice.

OK, do you need help  securing your practice against risk?

Let’s work together on this. Schedule an intro session today to see how business coaching can help you cope with a difficult economy by clicking here.

Essential Connections

Private Practice Success Newsletter, August 2010

by Lynn Grodzki, LCSW, MCC

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The Storm

Late Sunday afternoon, after two weeks of a record heat wave, we had a violent thunderstorm. The bad news: electricity went out and 400,000 homes and businesses went dark. The good news: once the storm passed, the sun came out and so did the neighborhood.

I get so busy with my life, it seems it takes an act of nature to remind me that I have a neighborhood of people I appreciate. I sat on my deck for hours as the afternoon waned and the sun set, and waved to people as they walked by, people I hadn’t seen in years.

I reflected on the topic of community and its importance.

During this time of economic uncertainty, I am reminded each day of the scarcity of resources.

But the resource of connection — with community — is free. Having a strong professional community can build your practice, but sometimes attending a professional group feels like a waste of precious time.

So I wondered: What is the best strategy to finding or creating a community that really supports your life and your work?

Communities of Practice

Since time and energy are precious resources,  I only join communities that offer me meaningful opportunity and learning. This type of community is defined as a Communities of Practice (CoP.)

According to cognitive anthropologists Jean Lave and Etienne Wenger, a Community of Practice is a group made up of like-minded individuals who share an interest, a craft, and/or a profession. Key to the success of these communities is the process of sharing information, learning, and developing opportunities.

In order to be a CoP, the group needs to accomplish the three criteria. (If you have been attending a professional group or association that feels like a poor use of time and energy, chances are one of these criterion is missing.)

1.    Commitment

A CoP requires commitment from its members. This devotion and willingness to show up is based on a deep interest in the topic or experience delivered at each meeting.

When a CoP is focused around  an area of passion or intense interest, it  provides value for all. As members develop a deep connection to the group and get a lot, they give a lot in return — sharing their thoughts, ideas, and even talents with each other.

Too often, we belong to professional groups that are superficially interesting or we think should be important, and then end up disappointed and bored.  The  group lacks dedication, or the topic is not one we feel passionate about, and too little learning and sharing occurs.  CoPs are exciting and inspiring to attend.

2.    Competence

CoPs are groups of equals who are skillful and talented. They have something to offer each other. You join to learn, help, and share — not to compete. As a result, the members often develop longterm relationships that matter.

While members of a CoP do not necessarily work together on a daily basis, when they do meet it is often memorable: They discuss, challenge, wonder, argue and usually laugh together.

A classic example of a CoP might be Parisian artists in 1870’s, the Impressionists, who formed loose associations of café communities to talk, share, learn from, paint with, and inspire each other.

3.    Practice

CoPs are places of learning because the members are implementing ideas, not just ruminating about concepts.

As Wenger explains, “A CoP is not merely a community of people who like certain kinds of movies, for instance. Members of a community of practice are practitioners. They develop a shared repertoire of resources: experiences, stories, tools, ways of addressing recurring problems—in short a shared practice. This takes time and sustained interaction.

“A good conversation with a stranger on an airplane may give you all sorts of interesting insights, but it does not in itself make for a community of practice.”

(http://www.ewenger.com/theory)

CoPs in My Life

If you would like to find or create a CoP, you might use this article as a blueprint to create a group that meets this definition. Let me offer you a few examples of CoPs to which I belong, so you can understand how they work for a me — and can be a resource for you, too.

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One CoP I attend is the faculty forum of a coach training organization.  (Some CoPs exist within associations and organizations.) We (the faculty) meet by phone for an hour, once a month. The group is led by our creative training director who is explicit in her respect and appreciation of the faculty who call from around the globe.

Each month she poses a different, thoughtful, open-ended question for us to consider and discuss. This group has been meeting for years and I am continually motivated and engaged. It keeps my coaching skills on the cutting edge and gives me a virtual connection to a group of very accomplished colleagues.

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Another CoP is one I helped create years ago – a group of women therapists who met monthly for 8 years. Our sharing was intimate and supportive, often more personal than professional, but always fascinating. It generated longterm  friendship, shared collegiality, new ideas, and of course, the occasional referral.

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A third CoP I eagerly await each month, is an intuition study group. A half-dozen doctors, healers, and therapists meet for 2 hours a month, in person, to work together in our pursuit of better understanding and utilizing the way we apply intuition in our practices. We experiment, do blind readings, practice, read and research — sharing our results and questions. We have met for years and each meeting is inspiring, has benefited me personally, and enhanced my professional work on many levels (including becoming a rich resource of referrals for all involved.)

Where to begin

If you are looking to create a Community of Practice, here are some tips:

•    Start with a clear area of personal or professional need (What would you love to learn, practice and share with a special group of others?)
•    Start small and grow over time (it’s easier to manage)
•    Define clear goals and boundaries for the CoP
•    Invite others who can commit to its success
•    Celebrate contributions and appreciate each other regularly
•    Be prepared to adjust the group and goals as you develop and learn