Being in business for yourself certainly has its perks. You are your own boss, can make your own hours and are generally free from some of the ‘overhead’ minutiae of office life. For example, there are no tedious internal meetings and processes can be more relaxed than at larger firms.
But even if you are a business of one, is it possible to be too informal with your processes and procedures? This article will detail the benefits of having practice management tools in place to help you guide your business forward.
What is Practice Management?
Practice management solutions are systems and processes that a firm sets up for its business. These processes are intended to make life easier for common and repetitive tasks that the business performs. A few examples of these processes include:
Why Does a Solo Practitioner Need Practice Management?
Even though you are a business of one, you still need to run your operations efficiently to maximize profitability. While larger firms have people or departments dedicated to functions such as business development, accounts receivable and information technology, a sole practitioner is responsible for every function themselves. Attacking these functions using manual methods leads to human error and wasted time. Even worse, neglecting these functions altogether will affect the bottom line of your business. As a solo practitioner, you’re limited only to the working hours you have available, meaning you must use them efficiently.
What Are Some of the Benefits of Implementing Practice Management?
Allows You to Measure Against Goals
There are typically two metrics that a solo practitioner will set targets for:
Generally, the number of hours worked directly correlates to the amount of income made. However, it is more complicated than that. Billable rates to clients vary and will impact income. Also important is the split of hours worked between time that is billable to clients versus time spent on administrative tasks (such as invoicing and networking). Without managing your business effectively, these goals are much harder to measure and achieve.
Allows You to Maintain a Steady Pipeline of Work
One of the hardest things to gauge when running a client-based practice is when to bring on new business. All solo practitioners have experienced slow weeks where they fall short of income expectations. Conversely, all professionals have also experienced periods where they are spread too thin, working long hours to meet all client deadlines. Practice management allows the business owner to better schedule work and determine when and how much new business is needed. Because acquiring new clients requires lead time, having visibility into the client pipeline is key to managing your business effectively.
Offers Insights into Profitability
Which clients or project types are the most profitable? It is often difficult to understand if you are maximizing profits when you are ‘in the weeds’ on a daily basis. For a sole proprietor, time is the business's most valuable resource, and it needs to be deployed efficiently and profitably.
Implementing a practice management tool that allows you to compare all clients and all project types to one another can be very valuable. Being able to break down hours billed and rates by project type can provide key insights into the business and direct the sole proprietor to the types of business and clients they should focus on.
Helps Identify the Biggest Gaps
As a sole proprietor, there is always the danger of being spread too thin. Between working on your clients’ projects, touching base with existing clients and drumming up new business, it’s easy to feel like there are not enough hours in the day to accomplish everything. You may be working on several projects of different types each day. We all like to think we are experts in everything. But truth be told, everyone has their strengths and weaknesses.
Better practice management will allow you to identify your strengths and how to apply them to reach your time and income goals. There may be some areas where you spend a lot of time but don’t realize enough income relative to other projects. These are areas where you may be better off outsourcing to an inexpensive contractor while you focus on the projects that bring in the most income per hour.
Helps Automate Administrative Tasks
As if working on client projects wasn’t enough, a sole proprietor is also tasked with completing all the administrative tasks for their business. Functions such as billing, collecting payments, logging time, submitting proposals and touching base with clients all take time out of the day.
Creating standard procedures and templates for repetitive administrative functions will allow you to efficiently complete these tasks. For example, create several proposal templates for each project type that can be easily populated and sent to prospective clients. Automating administrative tasks allows you to spend more time on income-generating activities and less time on office work.
Conclusion
While being a sole proprietor has its advantages, there is also a lot on your plate. Between client work, acquiring new business, networking, and administrative tasks, there is a lot to accomplish each day. By the time you complete all these tasks, there is likely not much time to sit back and analyze your business.
As detailed above, setting up practice management tools can help you in a number of ways, including giving you visibility into your business performance and freeing up time to focus on the functions that are most important to your practice. That is why, despite not being bound by the same structure and requirements of larger firms, it is still worthwhile for a sole proprietor to set up a strong practice management solution.