Finally, and perhaps most importantly, the last step to building and maintaining practice value is maintaining positive cash flow. Nothing will sink your practice value faster than poor cash flow. Cash flow can be defined as total monthly income minus the total cost of operating expenses. A practice with cash flow equaling 40% or more of total income has flexibility to hire new associates, purchase new equipment, and ride out market fluctuations. But practices with cash flow of about 25% of total income may be struggling to meet monthly payments and lack the flexibility to take advantage of new opportunities. Costly salaries, rent, and debt are the biggest contributors to poor cash flow. If your debt is over three years old, consider taking advantage of today’s lower interest rates and refinancing or consolidating debt to improve your cash flow.

Click to read  Maintaining Practice Value Series.