BIGGER IS BETTER

As your organization looks toward 2008, it is a good time to evaluate your performance for 2007 and get ready for next year’s growth. Take the time to review where you stand and plan for the changes your company will need to make to be in a great position to grow your revenue.

There are three strong tools that can be used to evaluate your business: (1) strategic thinking; (2) forecasting; and (3) sales planning and monitoring. These tools will work for a home medical equipment provider of any size, from a very small privately held company to a large public firm.

1. Strategic Thinking Strategic thinking is the process in which you analyze what your organization does well — and what it does not. There are several areas that should be considered:
   • Product Line Concentration Many HME companies are reliant on a few core product lines, including oxygen, sleep apnea, beds, support surfaces and rehabilitation. While these core lines represent a great opportunity, managers need to be cognizant of the degree of diversification that should be maintained in the business. Is your company too reliant on these core lines? Should you think about expansion into other lines? Think about how you want your business to look a year from now. Do you want more or less reliance on oxygen? More or less reliance on sleep apnea?
   • Reimbursement Mix The average mix of reimbursement in the HME industry includes about 40 percent Medicare. But this segment is under siege. Should your organization ramp down its reliance on Medicare? Should it be closer to 20 percent? Or, do you want to continue to bet on this segment at least through 2008 because your geographic area will not be part of competitive bidding? Do you think that you can win a bid?
   • Geographic Coverage Areas Providers need to segment between home deliveries and shipping through common carriers. Not every product needs to show up on the same day. What are those products that need to be delivered and those that can be shipped? Has your company developed the procedures and guidelines for the most cost-effective delivery of products? How far can your drivers go, cost effectively, within your geographic area? Could they go farther than you expect? Do you need to rethink how they stock their vans? Could they be mini-delivery and repairmen? If you have ever had an appliance repaired by a General Electric repairman, you will understand the key elements of distribution and geographic service area coverage. While GE certainly has some issues with its customer service (it is handled out of India), the company’s local repair folks are generally excellent. When they arrive at your home, they have on board the most common parts that may be needed to repair your appliance; your problem has been prescreened via India. If they run into a problem on site, they enter the parts they need into a computer system and, in less than a minute, they can tell where the part is located and whether they can get it here today or if it will arrive via UPS. The repairmen order everything online. It is automatic and painless. Even if you have to wait for parts, they can tell you when those parts will arrive and schedule another visit for installation. When a part is local, they can either meet up with another repairman to get it or have the other repairman show up at your house. This geographic distribution system has been well thought-out. Think like GE.
   • Medical Specialty Mix What is your firm good at? Converting pulmonologists? Managing primary care physicians? Working with pediatricians? Figure out where your firm is strong, then decide whether this is how you would like your business to look in the next year. HME sales reps — and companies — often get into a comfort zone. They build a business base off a few physicians and then do not expand past them. What medical specialties do you want to go into next year?
   • Customer Concentration There is a wide range of customers that refer HME products. These include discharge planners, hospices, dialysis units, skilled nursing facilities, physicians, home health agencies and consumers. Take a look at your customer concentration, especially by sales representative. Determine how you want the business to look, and set parameters for 2008.
   • Forecasting Let’s look at forecasting options. The following are two forecasts for the same HME provider: “I want my business to grow 10 percent next year;” or “We are forecasting a 9 percent net revenue increase in our oxygen product line, a 6 percent net revenue increase in CPAP and masks and an 11 percent net revenue increase in enteral nutrition. We are forecasting an 8 percent increase in business from our satellite store. “We expect our hospital business to decline from 20 percent to 15 percent of our total net revenue, our primary care physician referrals to increase from 50 to 75 percent of our business and our referrals from pediatricians to decline from 30 percent to 10 percent of our business. We will decrease our reliance on Medicare from 45 percent to 32 percent over the course of the coming business year.” The latter is obviously the more detailed forecast. With better detail, managers and sales representatives can forecast their own performance, and you can put important metrics into place so people can see how they are doing. Forecasting is both an art and a science. The science, or math part of the equation, is analyzing where the business has been and forecasting where it will shift. The art is figuring out how realistic that math will be. The next step is dividing up the forecast, not necessarily equally, but realistically, among your sales team. Great forecasting:
     • Establishes operating budgets.
     • Determines company performance in the marketplace.
     • Provides managers with a tool they can use to give raises and bonuses.
     • Gives sales team quota projections.
     • Sales Planning and Monitoring Tools Sales planning tools include individual budgets for each sales team, reporting systems and incentive payout systems. Each of these tools is necessary for sales teams to plan their territories and monitor their performance.

Most salespeople are disorganized. They need tools to help. The typical sales rep starts work Monday morning by visiting his comfort-zone accounts. You know, the ones that love him and give him business. Often, this activity continues throughout the week with perhaps a few cold calls and some time resolving operational problems.

The purpose of a sales manager is to look at the sales reps’ activities and help them get and stay organized during the week. The first tool that is useful for both the sales manager and the sales rep is a territory budget. This budget should include total revenue expectation by product line, reimbursement category, customer type, medical specialty and geographic area.

Ideally, your reps should be able to see how they are doing daily, or at least weekly, in their territory. They need to understand not only the number of referrals that come in each day but also the numbers and types of referrals that are lost “no gos.” Then they can determine the necessary action steps for reducing the number of patients that do not come onto service.

Your reps also need to keep track of the number of patients coming off of service because it is the total census in the business that drives revenue, not just the number of patients who come in the front door. Sales reps need to have a pulse on their business. They need to work closely with the operational teams to make sure they know what the activity is in their territories.

Sales reporting systems are another useful tool. Reps need to use weekly reports to record their activities and results. They also need to plan how they will spend their time during the upcoming week. Have your reps turn in their activity reports each week by the end of the day Friday so you can review these activities each Monday and keep them focused.

Accounts need to have either paper or electronic account records in place. These records should include everything that is necessary to know about a particular account. They should be comprehensive enough so that another rep coming into the territory would know enough about the account to step in and take over. Toss out those old handwritten notebooks that many reps have and go electronic.

The next tool that is important for planning is an “opportunity list.” An opportunity list is a tool where the rep lists the name of the account, the product line opportunity and the strategy for generating business. Your reps should be able to quantify what they are going after. That means they must be able to quantify the business that they have currently and determine how they will get more business into their territory.

These lists should be running tools for your sales reps; they should turn these in each week, and you should review them with your reps to make sure they are focused on their business. The goal of sales management is to minimize the time with current accounts and maximize the time reps spend building business either with current accounts or new accounts.

Keep in mind that sales reps are typically only as good as the tools they have in place. If your reps are chasing around trying to find information, it means they are not spending efficient time in the field. It is possible to turn average sales reps into business managers. Teach reps about the revenue in the business and how they can increase it to meet your growth projections.

Alison Cherney is president of Cherney & Associates Inc., a Brentwood, Tenn.-based marketing and sales consulting firm, and is the producer of Homecare Power Selling, a sales training program for home care sales reps. She can be reached at 615/776-3399 or through www.cherneyandassociates.com.

Example of a Top-Down Forecast

Example of a Bottom-Up Forecast