I love analyzing physical therapy markets. Taking what everyone else sees, and drilling down to a level of understanding that no one else sees is an exciting and insightful exercise, and I believe it to be a key to a good physical therapy business strategy.
If you look at the stock market like most (myself included), you might see endless patterns, fluctuations, and variables that make little or no sense to you. However, sector analysts that truly understand the patterns, fluctuations, and variables, might see vast opportunities in the same. Of course, it is the analyst who will then be able to capitalize on the opportunity, as they are the only ones to have recognized it.
The same applies to knowing your local physical therapy market through sound market analysis. Now, the techniques are a bit different than in the stock market, but this is actually a good thing. You don’t have to get super-technical in order to spot opportunities in your market, and some techniques can be done on the back of an envelope while yielding enough accuracy for sound decision-making.
Here are 3 techniques that can be used to elicit information about your market and your competition that can be helpful for decision making around the business startup, program development, or practice expansion.
1. Estimate the size of your market
This can be done a number of different ways, but a good starting point is to research a utilization rate for your PT service, and multiply this by the population within driving distance from your practice. Using this number, you can get a gross idea of how many patient visits take place in your market, which can be valuable in determining whether or not to start a specialty practice, or launch a new service or program.
2. Estimate your market share
If you’ve already estimated the size of your market, this part is easy (as long as you have good, average volume numbers for your practice). Just take your current volumes and divide by your estimated market size, and voila! You’ve got an estimated market share for your physical therapy business.
3. Estimate your competition’s volume
This can get tricky, but any number of techniques can be used to get these numbers. One way is to use industry benchmarks for patient throughput or patient volume per square foot, and multiply by an estimated square footage for competitor practices. Another way, and perhaps a bit less reliable, is to use publicly available market research that will provide gross revenues based on credit information. One can “back into” volume by using industry available pricing information on the services provided.
These techniques aren’t terribly scientific, but they can yield good information about your market, at a cost far less than that required for more sophisticated analysis. Now, these “down and dirty” techniques will not drill into sufficient detail for decisions that require large investments, or big swings in overall business strategy. For projects where significant money or reputation is at risk, more refined techniques should be solicited in order to yield a higher level of confidence in the results.
Treating your practice as a business is important for long-term success. Using good techniques and ethically obtained information about your market and competition is a sound business practice and will do good by your clinic and your community.