- Published on 19 May 2022
Is your current business model strong enough?In a fast-changing world - irrespective of whether you are positioning for an exit, or still have decades ahead of you at the helm - standing still is not an option for most practice owners.
In this, the first of a series of three articles, hearing business experts at Audiology Business Central look at the combination of emerging disrupters in the hearing market that look set to radically challenge:
How and by whom audiology is delivered across the UK’s private sector;
The conversion rates and average spend per customer for many existing operators;
The way new patients are acquired.
Audiology Business Central is a specialist management consultancy supporting independent hearing care business owners with strategic business development, exit planning and business sales, as well as working with optical companies looking to enter the audiology field.
1. DISRUPTORS FROM OTHER PARALLEL VERTICAL MARKETS
Owners of independent optical businesses are getting better at leveraging their existing patient relationships and delivering profitable audiology. Of particular note [in terms of market penetration], specialist high-end hearcare clinic partnerships are now thriving within the optical sector. This means many who would traditionally have become new patients for specialist independent audiology practices no longer need to set foot outside their optician’s.
Covid brought a significant uptick in the level of mergers and acquisitions within the optical sector, and we are starting to see opticians targeting audiology practices in the same way. If you have not already had one, expect an approach from one of these companies seeking to explore the possibility of buying your business and assimilating it. Some may well be genuine, others may be purely market research exercises benefitting only their own ends.
2. DISRUPTORS FROM WITHIN THE HEARING MARKET
The spate of consolidations in recent years between hearing aid manufacturers has inevitably reduced choice for independents. It has also spawned the growth of audiology groups owned by the manufacturers – Boots, Hidden Hearing, Bloom – against whom independent practices compete on a daily basis. And now we are starting to witness the advent of other smaller specialist players, also funded by the manufacturers, with hybrid models growing organically or by acquisition. The space for independent practices is becoming squeezed and risks further erosion through preferential pricing and business terms from the manufacturers towards the businesses in which they have a vested interest.
3. ECONOMIC DISRUPTORS
Whilst no one can call the timing precisely, the graph right illustrates the entirely predictable pattern of boom and bust that dominates the long-term economic cycle. Few would dispute that right now many of the dials on the dashboard of the UK’s economy are flashing red - inflation is rampant and interest rates are on the rise. These can sometimes seem quite abstract, so just how do they bring disruption to your business?
Inflation feeds into higher operating costs. This means that practice owners will probably have to contend with higher bills across the board, from light and heat through to rent, staff and product costs. Will they be able to pass on the rising costs to their customers and retain profit margins?
Interest rates – loans from manufacturers typically operate on extremely favourable terms, far removed from bank loans - but despite this – or even if your business is debt free - this does not necessarily make your enterprise immune from the effects of higher interest rates.
4. DISRUPTORS FROM DIGITAL DELIVERY
When was the last time you were able to see your GP in the flesh? Covid demonstrated just how quickly delivery of healthcare can change. The unthinkable happened and tele-medicine is now mainstream. For obvious reasons tele-medicine does not pose a direct threat to hearing services, but there is another disruptor lurking on the fringes.
Over-The-Counter (OTC) Hearing Aids – with the US leading the way by creating a category of hearing aids for adults with mild-to-moderate hearing loss – will disrupt customer buying patterns which will transition to online and OTC purchasing. Customers may choose to ‘fit’ the products themselves, controlling and adjusting the devices through improved app technologies. OTC products will inevitably find their way into the UK market, challenging pricing and disrupting the acquisition of first-time hearing aid users by the independent audiologist.
Less imminent, but certainly plausible is the possible entry into the space by one of the global tech giants - what if Apple, Google or Samsung decide to leverage their technological prowess and replace mobile handsets with in-ear “communication devices” which interface with the visible functionality of an Apple or Google watch? Technology upgrades or enhancements would be offered through highly effective online subscription-based business models, allowing upgrading and reprogramming of hearing aids on demand.
5. MICROSUCTION / WAX REMOVAL TRENDS
The influx of new wax customers to independent audiology businesses has had a significant positive impact on income generation. With potentially attractive returns, supported by low barriers to entry (short training periods and low cost of equipment), numerous new entrants have been enticed to set up unregulated ‘boutique’ microsuction stores in direct competition to independent audiologists.
On the plus side, if considering opening another branch, earwax removal can hugely improve cash flow and allow independent practices to break even far sooner than core testing and dispensing services. But more competition may reduce volume and put pressure on margins.
6. PROFIT DISRUPTORS
Even if your business model is largely unaffected by all these and other disruptors, your tax bill is likely to be going up. From March 31, 2023 the current corporation tax rate of 19% will increase to 25% for profits over £50,000.
Fortunately, it is not all doom and gloom if your business is resilient and you have a strategic plan to face these inevitable challenges head on.
In the next article, Audiology Business Central will look at your options to differentiate yourself from the herd and carve out a unique offering that flies in the face of, or even harnesses the threat of these disruptors.
Source: Audio Infos UK 147 March-April 2022