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2016 HME Business Playbook Snapshot: Rationalize Costs, Maximize Profitability

Posted on in Growth Strategies

2016 HME Business Playbook Snapshot: Rationalize Costs, Maximize Profitability

Simply put, your cost structure must be aligned with the gross margin dollars generated in your business model. Broadly speaking, HME businesses historically operated with the benefit of relatively high gross margins. Naturally, relatively high cost structures evolved as providers competed mainly on service. Declining reimbursements have changed this dynamic. Accordingly, providers must re-evaluate their operations and, in most cases, reduce certain elements of their cost structures in order to optimize profitability.

Know and Track Your Numbers

The owner and the senior managers must know the numbers. You must understand the financial performance metrics of your business. We call these “Key Performance Indicators” (KPIs).

You should:

  • Identify KPIs for your business.
  • Understand the KPI results for your business - past, current, trend and other comparable entities.
  • Base decisions on quantitative data, not just gut feel.
  • Seek out data when assessing and solving a problem, not just anecdotes.
  • Set targets for KPIs, and track progress over time.

Read more on KPIs you should consider and cost reduction opportunities by downloading our free 2016 HME Business Playbook.

 

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